Indonesia Needs Policy Reforms to Attract USD 146B in RE Investments by 2030: IEEFA Report

Indonesia must secure USD 146 billion in private sector investments by 2030 to achieve its renewable energy targets, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

In its latest report, 'Unlocking Indonesia’s Renewable Energy Investment Potential', IEEFA highlights that the country has only attracted USD 1.5 billion in investments, equivalent to 574 MW of additional renewable energy capacity. This significantly lags behind its Southeast Asian neighbours, such as Vietnam, which has a solar capacity of 13,035 MW and wind generation of 6,466 MW.

It may be noted that despite government efforts to promote renewable energy investment, particularly from independent power producers, the measures have been insufficient due to unfavourable policies and weak regulatory implementation. The IEEFA report points out that demanding contractual requirements for solar and wind power projects raise costs and deter private investment. Other significant hurdles include a mandatory partner system, restrictions on the transfer of ownership rights, an unfavourable deliver-or-pay scheme, unattractive ceiling tariffs, stringent local content requirements (LCRs), a lack of carbon credit incentives, and complicated procurement procedures. To address these challenges, the IEEFA recommends that Indonesian authorities review and amend their current planning, procurement, and investment processes to make them more attractive to investors.

The report suggests that private investors would be more inclined to enter the market if there were clear and concise procurement procedures, coupled with consistent and reliable implementation of current regulations.

Mutya Yustika, the report’s author and an Energy Finance Specialist at IEEFA, emphasises the need for a stable and investor-friendly regulatory environment to boost confidence and participation in Indonesia's renewable energy sector. By implementing these policy reforms, Indonesia could significantly enhance its ability to attract the necessary investments to meet its 2030 renewable energy goals.