Reviewing Strategies to Build the Appeal of Renewable Energy Amid Uncertainty

The energy transition has become part of Indonesia’s national economic development strategy, not merely an agenda for climate change mitigation. Consequently, the government has set an ambitious target of adding 100 gigawatts (GW) of renewable energy capacity as part of efforts to strengthen energy security while achieving Net Zero Emissions (NZE).

However, this grand ambition presents a significant challenge from a financing perspective. The Ministry of Energy and Mineral Resources (ESDM) projects that the investment required to realise the programme will reach approximately Rp 1,140 trillion. With such a substantial sum, the success of the energy transition cannot rely solely on the state budget; it also requires robust support from the financial sector and private investment.

The question remains whether current policies are sufficient to create an attractive investment climate to accelerate the energy transition. Several policy hurdles persist, including substantial domestic fossil fuel subsidies, which are seen as weakening the competitiveness of new and renewable energy (EBT). Furthermore, the implementation of a carbon tax, which has yet to materialise, is hindering the optimal development of the national carbon market.

External pressures also add to the uncertainty, with domestic fiscal resources and the financial system potentially being directed towards other specific government programmes, alongside rising global geopolitical risks and a strengthening US dollar. A synergy between fiscal, monetary, and financial sector policies is therefore crucial to ensure that the energy transition targets can be pursued in tandem with maintaining economic stability.