Introduction
The ratification of the Paris Agreement through Law Number 16 of 2016 on the Ratification of the Paris Agreement to the United Nations Framework Convention on Climate Change emphasizes Indonesia’s commitment to supporting global efforts in addressing the impacts of climate change. One of the strategic measures undertaken by the Indonesian government is advancing energy transition by promoting the utilization of New and Renewable Energy (“NRE”) to progressively replace conventional energy sources in meeting the country’s energy needs.

The definition of NRE is stipulated in Law Number 30 of 2007 on Energy (“Energy Law”). Article 1 paragraphs 4 and 5 of the Energy Law define New Energy as energy produced from new energy sources, which are those that can be processed through new technologies, derived from either renewable or non-renewable energy. Examples of these sources include nuclear energy, hydrogen, coal bed methane, liquefied coal, and gasified coal.1 Meanwhile, Renewable Energy is defined in Articles 6 and 7 of the Energy Law as energy derived from renewable resources, which are sources of energy that remain continuously available when managed properly. Examples include geothermal, wind, bioenergy, solar radiation, water flow and falls, as well as ocean movements and temperature differences between ocean layers.2

Furthermore, in the effort to utilize NRE as a national energy source, primarily as one of the primary resources for the electricity sector, Article 6 of Law Number 30 of 2009 on Electricity, as most recently amended by Law Number 6 of 2023 (“Electricity Law”), mandates the optimal utilization of primary energy sources3 following national energy policy to ensure a sustainable electricity supply. This provision prioritizes using new and renewable energy sources.4 This demonstrates that since 2009, the government has set a long-term goal to adopt NRE as a key national energy source. Its potential, regulatory framework, and realization will be discussed further in the following sections.

Discussion
Potential Utilization of New and Renewable Energy
As we know, Indonesia possesses abundant energy resources, including NRE. NRE represents a highly promising resource in Indonesia, yet its potential remains largely underutilized. The total potential of renewable energy for power generation is estimated at 3,687 Giga Watts (“GW”). However, as of 2022, its utilization reached only about 0.3%, or approximately 12.6 GW.5 The potential of various types of renewable energy can be described as follows.

For energy from ocean currents, data from the Directorate General of New, Renewable Energy, and Energy Conservation indicates that Indonesia’s ocean current potential amounts to 63 GW, with the largest potential located in Bali and Maluku at 9 GW each, and in West Nusa Tenggara at 8.1 GW. Additionally, Indonesia has geothermal resources totaling 23 GW, the second-largest in the world. However, only about 10%, or 2.3 GW, of this total potential has been utilized.6

Indonesia’s bioenergy potential reaches 57 Gigawatt electrical (“GWe”), comprising of 52.1 GWe from biomass, 1.3 GWe from Palm Oil Mill Effluent (POME), 1.4 GWe from waste, and 2.3 GWe from biogas. Regarding wind energy, the estimated potential increased from 60.6 GW to 154.9 GW, primarily due to the inclusion of offshore wind potential data, with the largest potential located in Eastern Indonesia, such as Maluku and Papua.7

Hydropower potential also saw an update in 2021, increasing from 75 GW to 95 GW. The largest potential lies in Papua (34.6%) and North Kalimantan (23.3%). Finally, as a tropical country, Indonesia has vast solar energy potential. Based on updated data in 2021, the total solar energy potential is estimated at 3,294.4 GW, with the highest potential located in East Nusa Tenggara (NTT), Riau, and South Sumatra.8

Legal Framework for the Utilization of New and Renewable Energy in Indonesia
The regulation of NRE is further elaborated in the National Energy Policy (Kebijakan Energi Nasional or “KEN”), which governs energy availability, energy development priorities, the utilization of energy resources, and the national energy buffer reserves.9 KEN serves as the basis for the preparation of the National Energy General Plan (Rencana Umum Energi Nasional or “RUEN”), developed by the central government.10 RUEN, in turn, serves as a reference for the preparation of the Regional Energy General Plan (Rencana Umum Energi Daerah or “RUED”), which are formulated by regional governments.11 Both RUEN and RUED are derivatives of KEN, providing detailed elaboration of its vision, mission, objectives, and specific policies to achieve the goals established in KEN.

One of the government’s targets for NRE utilization is stipulated in Article 9 of Government Regulation Number 79 of 2014 concerning the National Energy Policy (“GR 79/2014”). The Indonesian government aims to achieve an optimal primary energy mix, with NRE contributing at least 23% of the energy mix by 2025 and 31% by 2050, provided its economic feasibility.12

Key strategies to achieve these targets are outlined in KEN, including the government’s obligation to implement energy diversification to support energy resource conservation and enhance energy resilience. One of the measures involves accelerating the provision and utilization of various NRE sources.13 Additionally, the government intervenes in energy pricing by setting energy prices based on economically fair value.14

To realize such energy pricing, the government is also required to establish an electricity market through measures such as regulating the prices of certain primary energy sources (e.g., coal, gas, water, and geothermal energy) for electricity generation and implementing progressive electricity tariffs. The government also adopts a feed-in tariff mechanism15 to determine the selling price of renewable energy. Furthermore, the government regulates the renewable energy market by setting minimum quotas for electricity, liquid fuels, and gas derived from renewable energy sources.16

Government support for the development of the NRE ecosystem in Indonesia also includes providing subsidies when the implementation of economically fair pricing is not feasible or when renewable energy is more expensive than unsubsidized fossil fuel-based energy.17 Additionally, the government offers fiscal and non-fiscal incentives to promote energy diversification and the development and utilization of renewable energy, particularly for small-scale projects and remote areas to ensure competitiveness with conventional energy. Incentives are also granted to private entities or individuals innovating in the development of core technologies in the new and renewable energy sector.18

In addition to the regulation mentioned above, to accelerate the use of renewable energy, primarily in the electricity sector, the President of Indonesia issued Presidential Regulation Number 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity Supply (“PR 112/2022”). Article 2 of PR 112/2022 stipulates that PT PLN (Persero), as the state-owned enterprise responsible for electricity management in Indonesia, must prepare the Electricity Supply Business Plan (Rencana Usaha Penyediaan Tenaga Listrik or “RUPTL”) with considerations for:

  1. the development of renewable energy in line with the energy mix target based on the national electricity general plan;
  2. achieving a balance between supply and demand; and
  3. ensuring the economic feasibility of renewable energy power plants.19

In the implementation of the RUPTL, PT PLN (Persero) is also required to prioritize purchasing electricity from power plants that utilize renewable energy sources. Additionally, PLN must operate renewable energy power plants on a continuous basis, adjusting to the characteristics of the power generation source and the readiness of the local electricity system, especially during low-load conditions. PLN is also obligated to develop renewable energy-based power plants.20

In purchasing electricity, PT PLN (Persero) must buy electricity from power plants that utilize renewable energy sources, including:

  1. Geothermal Power Plants;
  2. Hydropower Plants;
  3. Photovoltaic Solar Power Plants;
  4. Wind Power Plants;
  5. Biomass Power Plants;
  6. Biogas Power Plants;
  7. Ocean Energy Power Plants; and
  8. Biofuel Power Plants.21

These renewable energy power plants can be entirely built by private enterprises or wholly or partially by the government. The purchase of electricity from these power plants must adhere to the RUPTL.22

Furthermore, to accelerate the progress of renewable energy use, the Minister of Energy and Mineral Resources is tasked with developing a roadmap to accelerate the closure of coal-fired power plants (“PLTU”), which will be outlined in sectoral planning documents. The roadmap must at least cover the reduction of greenhouse gas emissions from PLTU, strategies for accelerating the closure of PLTU, and alignment with other relevant policies.23

Lastly, incentives are also regulated under this presidential regulation. To develop power plants utilizing renewable energy sources, businesses are entitled to both fiscal and non-fiscal incentives.

Fiscal incentives include income tax facilities in accordance with taxation regulations, exemptions on import levies and/or taxes related to imports, land and building tax facilities, support for geothermal development, and access to financing and/or guarantees through state-owned enterprises appointed by the government. Meanwhile, non-fiscal incentives are provided by the central government and/or local governments in accordance with applicable regulations.24

The Realization of New and Renewable Energy Utilization in Indonesia and the Urgency of the Enactment of the New and Renewable Energy Law
Although Indonesia has set a minimum proportion of 23% NRE in the national energy mix by 2025, the country only managed to achieve a NRE mix of 13.1% in its primary energy supply by 2023.25 This figure falls significantly short of the 23% target stipulated for 2025 under KEN as outlined in GR 79/2014. Despite of that, the energy mix targets established under GR 79/2014 are currently under revision. The NRE mix target for 2025 is planned to be reduced to 17–19%, with an ambitious target of 70% by 2060.26 Given the current difficulties in achieving the 23% target for 2025, the increased target of at least 70% renewable energy in the energy mix by 2060 appears to be an unrealistic long-term goal under present circumstances.

Furthermore, there remains significant dependence on non-renewable energy across various energy-consuming sectors. In 2023, energy consumption in the industrial sector increased by 9%, with coal accounting for 56.9% of energy use, while renewable energy contributed only 6.52%. Emissions in the commercial and household sectors also increasing due to the growing demand for electricity, 80% of which relies on fossil fuels. Overall, fossil fuels dominated 81% of Indonesia’s electricity generation in 2023, producing 287 MtCO2e in emissions.27

Nevertheless, some positive progress has been observed in the development of Regional Energy Plans (Rencana Umum Energi Daerah, or RUED) across 33 provinces, with 45% of provinces targeting at least 23% renewable energy in their energy mix by 2025. However, progress varies significantly between provinces. Provinces like South Sumatra and South Sulawesi have exceeded their targets, while others, such as Aceh and East Nusa Tenggara, face challenges related to authority alignment and fiscal capacity.28 Consequently, effective implementation of the RUED is crucial to support the central government’s renewable energy initiatives at the national level.

To address these challenges, a more comprehensive legal framework is required as a foundation to achieve the renewable energy mix targets for 2025 and 2050. In this regard, the swift enactment of the New and Renewable Energy Law (Rancangan Undang-Undang Energi Baru dan Terbarukan, or “NRE Draft Law”) is of paramount importance. This Draft Law is essential for establishing a strong and comprehensive legal framework, ensuring legal certainty, and supporting the sustainable and equitable development of renewable energy.

Currently, renewable energy regulations are fragmented across various sub-legal instruments, resulting them insufficient as a strong legal basis. The enactment of the NRE Draft Law is also expected to strengthen governance, provide incentives, and create a conducive investment climate. With core provisions encompassing energy transition, roadmaps, licensing, research and technology development, incentives, NRE funds, and public participation, the NRE Draft Law is anticipated to become a comprehensive regulation that supports the sustainable and equitable development of NRE in Indonesia.29

Conclusion
Indonesia has shown its commitment to supporting global efforts in addressing climate change through the ratification of the Paris Agreement, with one of its implementations being the energy transition towards clean and sustainable energy. Despite its massive potential for NRE sources, such as solar energy, geothermal energy, and others, the utilization of NRE remains very limited, with renewable energy usage only reaching approximately 0.3% of the total potential of 3,687 GW as of 2022.

Various regulations have been enacted to promote the utilization of NRE, including the KEN, which targets a 23% energy mix from NRE by 2025 and 31% by 2060, as well as the issuance of PR 112/2022, which accelerates the development of renewable energy in the electricity sector. However, these targets remain challenging to achieve, as the NRE mix in 2023 only reached 13.1%. The proposal to revise the RE mix target to 17–19% by 2025 highlights the need for alternative strategies to address this issue.

To overcome obstacles such as the dominance of conventional energy usage, low investment levels, and regulatory disharmony, concrete actions are needed, including expediting the enactment of the NRE Draft Law. This Law is expected to establish a robust and comprehensive legal framework, provide incentives, strengthen governance, and create a conducive investment climate for the sustainable development of NRE in Indonesia going forward.

Sang Rafi Syuja

References

  • Books
    • Institute for Essential Services Reform. Indonesia’s Energy Transition at the Crossroads: A Pivotal Moment for Redefining the Future. (Jakarta: IESR, 2024).
    • Secretariat General of the National Energy Council. Outlook Energi Indonesia 2023. (Jakarta: Bureau of Energy Policy Facilitation and Trial, Secretariat General of the National Energy Council, 2023).

Sources

  1. Indonesia, Law Number 30 of 2007 on Energy, hereinafter referred to as the Energy Law, Article 1 paragraphs 4 and 5.
  2. Energy Law, Article 1 paragraphs 6 and 7.
  3. Primary Energy is defined in Article 1 paragraph 18 of Government Regulation Number 79 of 2014 on National Energy Policy as energy provided by nature that has not undergone further processing.
  4. Indonesia, Law Number 30 of 2009 on Electricity, as last amended by Law Number 6 of 2023, hereinafter referred to as the Electricity Law, Article 6 paragraphs (1) and (2).
  5. Secretariat General of the National Energy Council, Outlook Energi Indonesia 2023 (Jakarta: Bureau of Energy Policy Facilitation and Trial, Secretariat General of the National Energy Council, 2023), p. 13.
  6. Ibid, p. 13-14.
  7. Ibid, p. 15.
  8. Ibid, p. 16-17.
  9. Energy Law, Article 11 paragraph (1).
  10. Energy Law, Article 17.
  11. Energy Law, Article 18.
  12. Government Regulation Number 79 of 2014 on the National Energy Policy, hereinafter referred to as GR 79/2014, Article 9.
  13. GR 79/2014, Article 18.
  14. GR 79/2014, Article 20 paragraph (1).
  15. According to the Elucidation of Article 20 paragraph (4) Letter c of GR 79/2014, the term “feed-in tariff” in this provision refers to a policy mechanism for the selling price of renewable energy, designed to accelerate investment in renewable energy technology.
  16. GR 79/2014, Article 20 Paragraphs (4) and (5).
  17. GR 79/2014, Article 21.
  18. GR 79/2014, Article 22.
  19. Indonesia, Presidential Regulation Number 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity Supply, hereinafter referred to as PR 112/2022, Article 2 paragraph (1).
  20. PR 112/2022, Article 2 paragraph (3).
  21. PR 112/2022, Article 4 paragraph (2).
  22. PR 112/2022, Article 4 paragraphs (3) and (4).
  23. PR 112/2022, Article 3 paragraphs (1) and (3).
  24. PR 112/2022, Article 22.
  25. Institute for Essential Services Reform, Indonesia’s Energy Transition at the Crossroads: A Pivotal Moment for Redefining the Future, (Jakarta: IESR, 2024), p. 4.
  26. Hukumonline, “Revisi Kebijakan Energi Nasional, Target Bauran Energi Jadi 70% pada Tahun 2060,” available at https://pro.hukumonline.com/legal-intelligence/a/revisi-kebijakan-energi-nasional–target-bauran-energi-jadi-70-persen-pada-tahun-2060-lt6690eaf253bcd/, accessed on 9 December 2024.
  27. Institute for Essential Services Reform, Indonesia’s Energy Transition…, p. 4-5.
  28. Ibid, p. 5-6.
  29. Hukumonline, “Urgensi Pengesahan RUU Energi Baru dan Energi Terbarukan,” available at https://www.hukumonline.com/berita/a/urgensi-pengesahan-ruu-energi-baru-dan-energi-terbarukan-lt673ee1b7b2a1d/?page=2, accessed on 11 December 2024.