Indonesia has made an ambitious pledge to retire its coal power plants, but investment in renenewable energy has been slow. © Kemal Jufri / Greenpeace
Indonesia made an ambitious pledge last year to retire all coal and other fossil fuel plants by 2040 but it has since appeared to backtrack from that target while investment in renewable energy alternatives has been slow.
The picture has been complicated by US president Donald Trump’s decision to pull out of the Just Energy Transition Partnership (JETP) that was agreed between developed and developing countries in 2022, which has targeted US$20bn to help Indonesia cut its emissions.
President Prabowo Subianto announced at the G20 summit last November that Indonesia would build over 75 gigawatts (GW) of renewable energy capacity in the next 15 years to replace coal plants. But in February, after Trump said the US would withdraw from the Paris climate agreement, Indonesia signaled it might follow suit.
The country’s special envoy for energy and climate Hashim Djojohadikusumo, who is also the president’s brother, noted that Indonesia only has less than a quarter of the per capita carbon emissions compared to the the US and said it would be unfair for the rich world to demand it shutter its coal power plants.
Hashim denied that the president ever intended to completely end the country’s reliance on coal, noting that Indonesia will keep building coal-fired plants until a moratorium on new projects takes effect from 2040: “We don’t want to commit economic suicide,” he said.
What is at stake for Indonesia’s energy transition?
Indonesia is the world’s third largest producer of coal after China and India, and 67% of power generation depends on coal, with renewables contributing just 12% in 2023.
It is one of the world’s top 10 emitters of carbon dioxide, not just due to burning fossil fuels but also due to deforestation and peatland degradation. Emissions are set to keep rising due to its growing population and economic development. Climate change is already having a big impact on Indonesia, and the risk of droughts and coastal flooding are only set to increase.
Despite the president’s promise to retire coal plants, the government plans to increase power capacity from coal by 26.8GW in the next seven years. Coal generation is only expected to peak in 2037 at 63% above the current level, according to energy thinktank Ember.
However the Institute for Essential Services Reform (IESR), an energy thinktank, urges Indonesia to stick to its plans to cut emissions.
“Delaying large-scale renewable energy development would weaken Indonesia’s competitiveness in south-east Asia and discourage foreign investment in manufacturing, digital, and advanced industries, which are crucial for Indonesia’s future economic growth,” writes executive director Fabby Tumiwa.
The IESR says Indonesia could save $34.8bn in electricity subsidies and $61.3bn in health-related costs from air pollution, up to four times more than potential losses from stranded assets, decommissioning costs, job transitions and reduced coal-related state revenue.
What needs to happen next?
“Indonesia’s record on following through on previous energy-transition commitments has been weak in some areas, including the progress towards a 2025 target to increase renewable power contribution to 23%: the share stood at 12% in 2023,” according to Fitch Ratings.
If Indonesia is really serious about ending its reliance on coal, it needs to massively ramp up investment in renewable energy, particularly solar power. Ember says a coal phaseout would require boosting renewables to 65% of power production by 2040, integrating battery storage, and retiring 3GW of coal annually.
“We don’t have a thriving renewable energy sector yet so even if the government wants to shut off coal then what’s going to replace it is not that reliable,” said Dinita Setyawati, senior energy analyst at Ember.
Is Trump’s exit from JTEP fatal?
Indonesia said the exit of the US from JTEP would not affect the commitment of nine other countries, with Germany stepping up as co-lead of the fund alongside Japan.
However, progress in raising the targeted $20bn for concrete projects has been slow. The IESR said just $230mn has already been disbursed in grants and technical assistance, plus $1bn in equity investments and loans for approved projects including a geothermal power plant.
Grant Hauber, strategic energy finance advisor for the Institute for Energy Economics and Financial Analysis says the departure of the US from JTEP could actually help the country focus on greener technologies than US-promoted liquid natural gas (LNG).
“The exit of the US, the world’s largest LNG exporter, may instead boost efforts to rapidly scale up renewable energy capacity in JTEP countries by reducing emphasis on a perceived need for imported gas as a ‘transition fuel’ from coal,” Hauber wrote.
“Deploying renewable energy in countries like Indonesia and Vietnam creates a natural hedge against the volatility of global markets and shifting geopolitics by increasingly tying energy supplies to stable, indigenous resources – sun, wind, and water.”
Why is progress so slow on ending Indonesia’s coal dependency?
The personal fortunes of Indonesia’s political elite, including the president and the minister of state-owned enterprises, are dependent on coal mining.
Meanwhile, a cap on the price of coal encourages coal consumption and discourages the integration of renewables into the grid. Attempts in the past to reform or remove fuel subsidies have led to political unrest.
“This glut of cheap coal-powered electricity effectively locks out renewable energy projects in Indonesia,” according to the International Institute for Sustainable Development.
Indonesia’s state electric utility, Perusahaan Listrik Negara (PLN), has a monopoly in power transmission and distribution, and a share of about 62% of total installed generation capacity.
Indonesia currently has an oversupply of power after massive investment in fossil fuel plants in recent years that has led to “poor financial returns and heavy debt burdens” for PLN, the Centre for Research on Energy and Clean Air, an independent research body, has said.
That has made PLN slow to invest in clean energy, according to Elrika Hamdi, deputy head of Indonesia’s JETP secretariat. “They [PLN] have not been procuring,” she said. “The problem is not a lack of financing. It’s the viability of projects.”
Shuang Liu, China finance director of the World Resources Institute (WRI), said there has not yet been enough investment in renewables in Indonesia from the public or the private sector.
“There are not that many bankable projects on renewable energy that can be considered by financial institutions,” she said. “If the public financial institutions are willing to step in first to invest in the early stage to make more projects bankable then private financial institutions will be more confident investing later on, but the coordination is very much needed.”
Tumiwa of IESR said that margins are low on PLN projects, so investors favour countries such as the Philippines, Vietnam and Thailand.
Hamdi at the JTEP secretariat noted that most renewable projects are small because they are spread out across the archipelago, deterring investors, so JETP is trying to bundle projects. She urged more investment in captive power – energy sources that power industrial or commercial facilities like aluminium smelters – rather than grid-based projects.
What are the dynamics in the rest of south-east Asia?
While there might be a lack of domestic political incentives to go green, Indonesia faces increasing pressure from its neighbours to invest in renewables, according to Ember’s Setyawati.
“Countries that consume Indonesia’s coal might be moving to renewables so Indonesia might be losing the export market,” she said.
Liu said energy security was sometimes a better argument than climate change to invest in green projects: “What we can do much better in the region is how to really use the narratives on energy security, local jobs and other non-climate energy narratives to push for the climate agenda.”
Sumatra, one of the largest of Indonesia’s many islands, is collaborating with Singapore to export solar energy and Malaysia is promoting the Asean Power Grid project, which should facilitate renewable energy integration across the region. Meanwhile, China, previously a big investor in coal in Indonesia, pledged in 2021 to stop supporting new coal projects abroad.
The WRI says too little attention has been paid to the costs the Indonesian government could face to compensate investors if it shutters coal plants early. The average age of coal plants in Indonesia and Vietnam is under 11 years, compared to a typical lifespan of around 50 years.
“The estimated remaining value of existing coal plants in Indonesia amounts to nearly $15bn. And the total amount would be higher still when future returns and unpaid interest are added in,” the WRI said.
The Asian Development Bank (ADB) has helped Indonesia agree a framework with investors to retire the Cirebon-1 coal plant early, with grants from Japan and Germany and a refinancing package worth an estimated $325mn. However, NGOs say the ADB is still supporting a range of new coal power projects in the country.
Although there appears to be a consensus that Indonesia’s reliance on coal power must be reduced, it is deeply entwined with the country’s economy and politics. As a result, there are still many hurdles to navigate before a clear path to removing coal from Indonesia’s power grid becomes clear.
This page was last updated July 9, 2025
Written by
Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
