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As one of the most populous developing nations with more than 280mn people, the world’s third-biggest coal producer and its top source of nickel, Indonesia is a significant part of the world’s energy transition puzzle.

President Prabowo Subianto recently backtracked on some of the controversial policy positions that have spooked investors and helped tank the national stock market. But he’s sticking to his guns on a push for massive expansion of the country’s green power capacity. What’s behind this drive — and what does it say about the global energy picture?

“This is no joke,” Prabowo Subianto said last week as he formally launched a clean energy scheme of eye-watering scale.

The Indonesian president was referring to his pledge that the country will install 100 gigawatts of solar power — 67 times the amount it had at the end of last year, and almost the current capacity of the country’s entire electricity system — in just three years.

The extraordinary ambition of the target tells you something about Prabowo, who has built a reputation in some quarters for reckless policy moves during his nearly two years in office. “Mr Prabowo appears to be insulating himself from reality,” The Economist claimed earlier this year.

But Indonesia’s clean power drive also tells you a good deal about the current state of the world’s shift towards low-carbon energy: the factors driving it forward, and those that threaten to hold it back.

The tailwinds

The biggest driver of clean power growth, in Indonesia as elsewhere, is economic. The cost of solar generation has fallen by about 90 per cent since 2010, to the point that it now offers a cheaper source of electricity than fossil-fuelled power in much of the world. This is true even in countries with big fossil energy resources, such as Indonesia with its huge coalfields.

A new report from the Institute for Energy Economics and Financial Analysis found that the cost of coal-fired generation in Indonesia is between 10 and 15 cents per kilowatt-hour: roughly double the cost for solar.

Indonesia also highlights how this year’s turmoil in the Strait of Hormuz has strengthened governments’ enthusiasm for clean energy investment. Within days of the outbreak of the US-Israeli conflict with Iran, Prabowo had started issuing a series of statements on the need to reduce reliance on imported oil and gas.

“If we still want to be independent, if we still want to survive, we have no choice but to be self-sufficient, and energy is one of the most critical sectors,” he said in April. “One of the measures is to use electrification to reduce our reliance on fossil fuels.”

The turbulence in fossil fuel markets has boosted the government’s interest in electrified transport, and in using combined solar and battery systems to provide 24-hour clean power in many of the smaller Indonesian islands that currently rely on expensive, polluting diesel generation. That’s made possible by the dramatic fall in battery prices that is driving a huge global surge in large-scale power storage investment.

In south-east Asia as a whole, solar power investment in the first half of the year climbed 59 per cent year-on-year to $7.3bn, according to BloombergNEF.

Devil in the details

Unfortunately, Indonesia also showcases some of the less encouraging global dynamics in clean energy. One is the still huge gulf between many governments’ bold pledges and the detailed policies that would turn them into reality. “We’re all waiting to see the concrete steps that the government will take to realise this plan,” says Dinita Setyawati, the Jakarta-based south-east Asia lead for energy think-tank Ember.

Last week Prabowo heralded 14 new solar plants — but only two of these are already in operation, with six under construction and six more still seeking investment. The president’s vision of dramatic solar growth sits awkwardly with the 10-year strategy published last year by PLN, the state-owned company that runs Indonesia’s power grid, which targeted only 6GW of new solar by 2030.

And while that PLN strategy projects that the vast majority of new generating capacity will be renewable, it still calls for an increase in fossil-fuelled generation over the same period. Like many other developing nations — notably India — Indonesia’s rapid energy demand growth, together with its large existing fossil fuel infrastructure, means that a massive clean power boom can still come alongside a continued rise in carbon emissions.

Adding to the problem is the continued growth in dedicated coal stations for plants refining nickel (used heavily in electric vehicle batteries), of which Indonesia is the world’s biggest producer.

Show me the money

In 2022, a high profile international initiative was launched to tackle this problem: a $20bn “Just Energy Transition Partnership”, through which wealthy nations including the US, Japan and European states would finance the early retirement of Indonesian coal plants.

Progress on the scheme had been slow even before the Trump administration abandoned it, with only a small portion of the promised funds so far provided, and Indonesia’s government has cancelled the planned early closure of a coal plant in West Java. “So far, there’s been no impact of the JETP in Indonesia,” says Fabby Tumiwa, executive director of the Institute for Essential Services Reform in Jakarta.

This underscores the limited deployment of international climate finance after years of wrangling at UN climate summits, where wealthy nations have offered support at a level far lower than that requested by poorer ones, and then provided even less. That has compounded the limited access of many developing nations to private-sector capital for clean energy investment — another factor in the slow rollout of Indonesian solar power to date.

At about $73bn, the estimated cost of Indonesia’s proposed solar programme “is a massive undertaking” that the country will “for sure” not be able to finance domestically, says Randi Bachtiar, Indonesia energy finance specialist at IEEFA. “We really need more investment from outside.”

Greater regulatory certainty and policy detail could provide greater investor confidence, he suggests. But the financial gap to be bridged looks intimidating. The total amount invested last year in the entire Indonesian power sector — including all forms of generation, transmission and distribution — was just $4.5bn.

Prabowo’s lofty solar target might seem exactly like the sort of rash, unrealistic policy announcement that his critics accuse him of. Yet it’s also a decent reflection of the scale of investment that will be needed if the world is serious about shifting to low-carbon power, and stabilising the global climate.

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