Indonesia risks losing green investment 

JAKARTA, Indonesia (MNTV) – Indonesia has been navigating a critical crossroads in its energy transition for several years, as the country continues to rely heavily on coal to meet its electricity needs. 

Coal supplies about 68 percent of Indonesia’s power generation and has long underpinned economic growth. However, this dependence has also exposed the country to volatile global fuel markets, mounting fiscal pressure from energy subsidies, and the long-term risks of investing in carbon-intensive assets, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

Indonesia had set an ambitious target to source 23 pc of its energy mix from renewables by 2025. Yet by the first half of the year, renewables accounted for only 16 pc. The government has since revised its National Energy Policy, postponing the 23 pc target to 2030 — a move that underscores persistent structural challenges in planning, procurement, and grid integration.

Concerns have intensified following the government’s decision to cancel the early retirement of the Cirebon-1 coal-fired power plant.

While the move reflects short-term energy security considerations, analysts warn it runs counter to Indonesia’s climate commitments and risks locking the power system into an increasingly expensive and outdated model, particularly as other countries accelerate coal phase-outs.

The economic risks of prolonged coal reliance are already evident.

The Java-Bali power grid is oversupplied, leaving coal plants operating at declining capacity factors. At the same time, fixed payments under long-term power purchase agreements continue to strain the finances of state utility PT Perusahaan Listrik Negara (PLN). 

As electricity demand growth slows, take-or-pay obligations could push system costs higher, potentially leading to increased tariffs or greater subsidy burdens on the state.

Globally, shifting investment trends are highlighting the vulnerabilities of fossil fuels. Volatile coal prices and subsidy pressures have strengthened the case for renewables, which offer long-term price stability and enhanced energy security.

Clean energy stocks surged in 2025, reflecting what analysts describe as structural demand shifts rather than speculative gains. 

Rising electricity demand from data centers — driven in part by artificial intelligence workloads — is further strengthening the investment case for scalable renewable generation backed by grid and storage upgrades.

These trends carry direct implications for Indonesia. Without bankable renewable procurement pathways, Indonesia risks losing high-value industrial and digital investment to regional competitors.

Despite abundant solar, geothermal, and wind resources, renewable deployment in Indonesia remains constrained by regulatory uncertainty, grid bottlenecks, and limited access for private-sector buyers. 

Analysts point to joint transmission network utilization — commonly known as power wheeling — as a potential solution, allowing companies to procure renewable electricity directly using existing transmission infrastructure.

Neighboring countries such as Vietnam, Malaysia, and Thailand have already introduced direct power purchase or open-access schemes, attracting multinational investment.

In contrast, Indonesia has yet to implement similar frameworks, despite earlier regulatory references.

As Indonesia looks ahead to 2026, experts warn that closing the gap between policy ambition and implementation will be decisive. 

Faster renewable procurement, grid access reform, and alignment between power planning and industrial demand could determine whether the country emerges as a regional clean energy leader — or falls further behind in the global race for green investment.