Renewable Pathway More Cost Effective than Fossil Fuels in Indonesia

Unlocking Indonesia’s untapped renewable energy potential to meet the rising demand is more cost effective than continuing a heavy reliance on domestic and imported fossil fuels, according to a new report by the International Renewable Energy Agency (IRENA).

The joint Indonesia Energy Transition Outlook by IRENA and the Indonesian Ministry of Energy and Mineral Resources provides a comprehensive, renewables-focused, long-term energy pathway for the transition to a cleaner and more sustainable energy system in Indonesia.

“Energy transition is very important for Indonesia, and we are committed to reduce greenhouse gas emissions and has also pledged to reach Net Zero Emissions (NZE) target to be achieved in 2060 or sooner,” said Arifin Tasrif, Minister of Energy and Mineral Resources of Indonesia.

The Outlook shows that Indonesia’s share of renewable energy could reach two-thirds of the country’s total energy mix in 2050, up from just 14 per cent today.

With the country’s population projected to reach 335 million people over the coming three decades, electricity demand is expected to grow at least fivefold to over 1,700 terawatt hours (TWh) from the present levels by mid-century. To meet the rising demand, the report recommends scaling up key renewable power resources such as solar, bioenergy, geothermal and green hydrogen.

“Indonesia’s rising energy demand gives the country the opportunity to untap its huge renewables potential and advance in its pursuit of a just, sustainable, low-carbon economic growth”, said IRENA’s Director-General, Francesco La Camera. “Our Outlook shows that Indonesia can set itself on a pathway to net-zero emissions at lower cost than the alternative, provided the government implements steps as recommended in the Outlook, and gets the international support it needs.”

He added: “Endowed with an abundance of renewable energy resources Indonesia is uniquely positioned to develop a sustainable energy system based on renewable energy that can support its socio-economic development, address climate change, and achieve energy security and resilience.”

The report explores Indonesia's end-use sector electrification, indicating that the power sector will undergo a radical transformation with over 1,000 GW of renewable capacity by 2050, entailing an 85 per cent or higher renewable share in generation.

The report estimates an investment opportunity of USD 332 billion in energy transition technologies and USD 80 billion in grid infrastructure development by 2030. Over the longer term, significant scale-up in energy investment is required, with up to USD 2 420 billion in cumulative investment to 2050 needed across the energy system, from generation, to efficiency and enabling infrastructure.

Despite these significant investments, the cost of the scenario presented in the report is lower than the alternative, resulting in energy cost-saving of between USD 400 – 600 billion cumulatively to 2050, with an additional as much as USD 600 billion in external cost savings from lower air pollution.

Greater regional cooperation with ASEAN Member States is also key to realize the transition not just in Indonesia, but also across Southeast Asia. National and regional interconnection within ASEAN more broadly has many benefits in achieving a lower-cost power system for all by allowing integrated energy supply planning and minimising duplication of both energy and non-energy service provision.

IRENA recommends that Indonesia accelerates its energy transition by building the country’s energy policies based on renewable energy development to drive economic growth and job creation, supported by a predictable long-term energy plan that prioritises clean energy investments consistent with national and regional energy policies.