Indonesia's 100 GW Solar Target: Ambitious but a Signal of Commitment

Indonesia's President Prabowo Subianto has set an extremely ambitious target of building 100 GW of solar capacity by 2029. While this goal is widely considered unrealistic, it sends a strong signal that Jakarta is serious about putting more resources toward cleaner energy. Despite the dominance of coal and other fossil fuels in its energy sector and historically slow progress on renewables, the government has been signaling a willingness to pivot towards clean energy. However, this pivot is intended to be on its own terms, avoiding a scenario where state-owned utility PLN is burdened with expensive power purchase agreements from private developers. As a first step, President Prabowo recently unveiled 5.3 GW of solar power projects under development or soon to be opened for bidding. Of this, only eight projects are in advanced stages of development, with the majority still in early phases lacking financing or confirmed developers. Nevertheless, these eight projects offer insights into how clean energy can be built in Indonesia. The announced projects include small off-grid solar facilities to replace diesel generators in remote areas, and larger utility-scale solar and battery storage facilities, often using floating arrays on reservoirs. These projects involve a mix of financial backers, including state-owned infrastructure fund PT Sarana Multi Infrastruktur, development banks, European lenders, and private sector developers like TBS Energi (Indonesia), ACWA Renewables (Saudi Arabia), GCL (China), and Vena Energy (Singapore). A key observation is that in many of these projects, PLN is not just the off-taker but an active equity partner, typically holding a 51 percent ownership stake. This "Cirata model," named after the successful floating solar project in West Java that began operation in 2023, is clearly being replicated for the new wave of solar power projects. Historically, PLN has been reluctant to act as a market-maker for private renewable energy developers, given its large fleet of coal-fired power plants. However, involving PLN as an equity partner provides the utility with a direct incentive to support these projects. While perhaps not the most efficient design from a private developer's perspective, it is a model that appears capable of scaling in Indonesia. It remains to be seen whether state-owned energy firms like PLN and Pertamina can continue to dominate the clean energy landscape as projects grow larger and require more investment. The state-directed model may need to evolve with the changing scale and pace of investment. However, after years of false starts, clean energy is showing signs of gaining traction in Indonesia. The crucial element is that policy efforts move beyond viewing Indonesia simply as a market to be opened up to private investment, and instead seriously consider the interests and incentives of powerful local stakeholders like PLN. Source: The Diplomat Indonesia