IESR: Reform and Faster Solar Power Development Needed to Support 8% Growth
Jakarta (ANTARA) – The energy think tank Institute for Essential Services Reform (IESR) said in a study that electricity policy reform and faster development of solar power plants (PLTS) that are competitively priced for industry are needed to support the 8% economic growth target.
The study, conducted by IESR with Indef, SYSTEMIQ and the Energy Transitions Commission, also said that renewable-energy-based electrification, such as solar power, can reduce electricity costs, save on energy subsidies, create jobs and lessen Indonesia’s dependence on fossil fuel imports.
Deon Arinaldo, IESR’s Energy System Transformation Programme Director, said in Jakarta on Tuesday that the speed of construction was one of solar power’s advantages in meeting additional electricity demand.
Solar power plants serving industrial needs can be built in about two to six months, while grid-connected solar plants take around six months to two years to construct. By comparison, a grid-connected coal-fired power plant takes about four to six years to build.
The relatively rapid construction and deployment of solar power plants is needed because Indonesia’s electricity demand is projected to rise significantly alongside economic growth and industrialisation.
Under a business-as-usual scenario, the study estimates that electricity demand will increase from 440 terawatt-hours (TWh) in 2025 to 695 TWh in 2035. Under a high-electrification scenario, demand could reach 855 TWh in 2035, growing by around 7% a year.
Deon cautioned, however, that solar development in Indonesia still faces cost challenges and regulatory obstacles. The study highlighted that the cost of generation from large-scale solar power in Indonesia is between 5 and 10 US cents per kWh, higher than India’s rate of about 3.7 US cents per kWh.
“Land costs, interconnection costs and the permitting process all contribute to this gap. In addition, domestic component level (TKDN) requirements that are not yet aligned with the readiness of industry can raise component costs and impede faster solar development,” Deon said during a presentation of the study, Achieving 8% Economic Growth through the Implementation of 100 GWp of Solar Power and Electrification Programmes.
To address these obstacles, Deon said, the study recommends policy reform focused on four main measures. First, accelerate procurement of strategic solar projects, including the 100 GW solar programme, through competitive, transparent and regular renewable energy auctions, supported by certainty over power purchase agreements.
Second, reform the rooftop solar quota system to give consumers greater scope to participate in renewable energy provision.
Third, simplify land procurement, speed up electricity grid construction, and clarify the procedures and costs for connecting power plants.
Fourth, implement domestic-content requirements in stages so that strengthening national manufacturing goes hand in hand with faster solar deployment.
Abindra Soemali, SYSTEMIQ’s Manager and Lead for Energy, said that consistent policy reform could reduce solar generation costs in Indonesia from around 5–10 US cents per kWh to approximately 3.5–5 US cents per kWh over the long term.
“This reduction can be achieved by increasing the scale of development, simplifying regulations, strengthening domestic supply chains, and improving access to financing and grid infrastructure,” Abindra said.
Meanwhile, Indef estimates that a low-cost electrification scenario could account for around 8–10% of the additional GDP needed to achieve the 8% economic growth target. The scenario could also generate US$20 billion in energy subsidy savings over 2025–2035 and create about 48,000 additional jobs in the electricity sector.
“In addition, greater electrification and the use of renewable energy can reduce the need for oil imports, thereby strengthening energy security and easing pressure on the state budget,” said Imaduddin Abdullah, Director of Indef’s Green Transition Initiative (GTI).