The demand and potential for renewable energy in Indonesia are increasing simultaneously, mainly because it is one of the fastest-growing energy consumers globally. It is not surprising given the solid economic development, the steady trend of population growth, and increasing urbanization over the past decade. It is also the largest in the Association of Southeast Asian Nations (ASEAN).
Indonesia is the fourth-largest coal producer and exporter globally and the largest gas supplier in Southeast Asia. It is also the world’s largest producer of biofuels. This makes state policy an essential factor in the renewable energy transition in the region.
The growth of renewable energy in Indonesia
Energy demand across Indonesia is expected to increase by 80%, while electricity demand will triple from 2015 to 2030.
Recent data show that Indonesia has slightly increased its dependence on conventional fuels, such as domestic coal and imported petroleum products, to meet its energy consumption needs. However, the growth in the use of renewable energy is more prominent. Renewable energy sources have consistently been added to the country’s overall energy mix, reflecting a positive trend for Indonesia’sIndonesia’s transition to green energy in the future.
The potential of renewables in Indonesia
Indonesia is included in the top five countries with the highest share of renewable energy in total final energy consumption in the Asia-Pacific region. The percentage of renewable energy in the electricity mix mainly comes from hydropower plants (about 8 percent) and geothermal plants (5 percent).
Through its national energy policy, Indonesia has plans from the government to have 23 percent of the total primary energy supply generated by modern renewable sources by 2025 and 31 percent by 2050. However, IRENA estimates reveal that the country should achieve its 2050 target 20 years in advance.
The advantages of Indonesia’sIndonesia’s renewable energy policy
The pros of Indonesia’sIndonesia’s progressive national energy policy can be seen from every angle – from an economic, political, and collective welfare perspective.
Renewable sources will also help Indonesia become more independent. Experts project that green energy will reduce the demand for fossil fuels by about 10 percent oil and gas. As a result, Indonesia will be able to reduce imports of petroleum and coal products.
The challenges facing a renewable energy transition
If Indonesia is to achieve its goals, investment in renewable energy needs to accelerate rapidly. But, it’s not just about investing more. It is essential to consider where this investment is directed, which poses some of the crucial challenges facing the power sector and energy end-uses in various sectors of the economy.
For the power sector, challenges include:
- The highly fragmented nature of Indonesia’s grid.
- Operational problems in the off-grid area.
- Local banks and land acquisition issues currently constrain financing opportunities for new projects.
Recent data show that Indonesia has slightly increased its dependence on conventional fuels, such as domestic coal and imported petroleum products, to meet its energy consumption needs. However, the growth in the use of renewable energy is more prominent.