Indonesia's Big Green Energy Challenge

Indonesia faces a monumental task: transforming its captive power sector from coal to cleaner energy sources. This shift is crucial for the country's industrial power needs, particularly in nickel processing.

The Current Landscape

• Power Capacity: In 2024, the captive power sector had 25.9 GW of capacity.
• Coal Dominance: Over 75% of this capacity comes from coal, with an additional 11 GW of coal projects in development.

The Transition Plan

The goal is to significantly increase the use of renewable energy by 2030:

• Renewable Energy Target: Renewables could make up 34% of captive generation by 2030, up from 9% in 2024.
• Primary Sources: Solar power and hydropower are expected to lead the transition.
• Gas Integration: Gas will also play a role, enhancing system efficiency and aiding renewable integration.

Financial Challenges

The transition comes with substantial costs:

• 2030 Cost: $31 billion needed.
• 2050 Cost: $92 billion required.

Funding Hurdles

• JETP Withdrawal: The U.S. has pulled out of deals under the Just Energy Transition Partnership (JETP), a funding initiative to help countries reduce carbon emissions.
• Secured Funding: Indonesia has secured over $20 billion under JETP, but funding is not flowing quickly enough.
• Additional Funding Needed: The study emphasizes the need for more funding from various sources.

Broader Context

• Coal Production: Indonesia is a significant coal producer.
• Main Electricity Sector: The main electricity sector also needs decarbonization, estimated to cost $97 billion by 2030.
• Initial Oversight: The captive sector was initially left out of Indonesia's decarbonization plans but is now recognized as a critical component.