Solar Energy

Indonesia’s equatorial location provides it with substantial solar energy potential, with an average daily solar irradiation of 4.8 kWh/m². Despite this potential, solar power remains underutilized, contributing less than 1% to the national energy mix. The government aims to increase solar capacity to 5.5 GW by 2025, creating significant opportunities for international solar energy companies.

Wind Energy

Wind energy potential in Indonesia is estimated at 9.3 GW, primarily concentrated in the eastern regions of the country, including East Nusa Tenggara and South Sulawesi. Current installed wind capacity is minimal, but the government’s renewable energy roadmap targets substantial growth, aiming for 1.8 GW of wind capacity by 2025.

Geothermal Energy

Indonesia is located on the Pacific Ring of Fire, making it one of the world’s leading geothermal energy hotspots. With an estimated potential of 29 GW, Indonesia currently has an installed geothermal capacity of 2.1 GW, making it the second-largest producer of geothermal energy globally. The government plans to increase this capacity to 7.2 GW by 2025.

Hydropower

Indonesia’s vast river systems provide significant hydropower potential, estimated at 75 GW. However, only about 6 GW of this potential has been developed. The government aims to exploit more of this resource, targeting an additional 4 GW by 2025.

Opportunities for International Companies

Government Support and Incentives

The Indonesian government has introduced various incentives to attract foreign investment in the renewable energy sector. These include tax holidays (e.g.-For investments in certain strategic sectors, including renewable energy, a tax holiday of up to 20 years can be granted), import duty exemptions on renewable energy equipment, and feed-in tariffs (FITs) for renewable energy projects. Additionally, the government offers guarantees to reduce risks associated with power purchase agreements (PPAs).

Public-Private Partnerships (PPPs)

Public-Private Partnerships (PPPs) are a strategic approach to financing large-scale renewable energy projects in Indonesia. The government has streamlined the regulatory framework for PPPs, providing opportunities for international companies to collaborate with local entities and the government. his includes simplified licensing processes, clearer guidelines, and government guarantees for project risks (Presidential Regulation No. 38/2015). This approach mitigates risks and leverages local knowledge and expertise.

Technological Advancements

Advancements in renewable energy technologies, such as more efficient solar panels and wind turbines, have made renewable energy projects more viable and cost-effective. International companies specializing in these advanced technologies can find substantial opportunities in the Indonesian market.

Market Demand

Indonesia’s growing economy and increasing energy demand present a robust market for renewable energy. As the country industrializes and urbanizes, the demand for sustainable and reliable energy sources is expected to rise. This creates a favorable environment for international companies to invest in renewable energy projects 

Regulatory Environment

Regulatory Framework

Indonesia’s regulatory framework for renewable energy is governed by the National Energy Policy (KEN) and the National Energy Plan (RUEN). These policies outline the country’s renewable energy targets and provide the legal basis for incentives and support mechanisms. The Ministry of Energy and Mineral Resources (MEMR) is the primary regulatory body overseeing the implementation of these policies 

Licensing and Permits

The process of obtaining licenses and permits for renewable energy projects in Indonesia has been simplified to attract foreign investment. The One-Stop Service (OSS) system facilitates the application process, reducing bureaucratic hurdles and expediting project approvals. However, international companies should still engage with local legal experts to navigate the regulatory landscape effectively.

Environmental Regulations

Renewable energy projects in Indonesia must comply with environmental regulations to ensure sustainability. The government mandates environmental impact assessments (EIA) for large-scale projects to mitigate adverse effects on the environment. International companies must adhere to these regulations to ensure the long-term viability of their investments.

In conclusion, Indonesia’s transition towards renewable energy presents a promising landscape for both domestic and international stakeholders. With its rich array of natural resources—including solar, wind, geothermal, and hydropower—the country is well-positioned to significantly enhance its renewable energy capacity. The Indonesian government has set ambitious targets, aiming to increase the share of renewables in its energy mix, which provides fertile ground for investment opportunities.

ABP, as a market entry firm, can play a crucial role in helping foreign investors navigate the complexities of entering the Indonesian renewable energy sector. By leveraging its in-depth local knowledge and extensive network, ABP can provide valuable insights into the regulatory landscape, streamline the process of obtaining necessary licenses and permits, and identify viable investment opportunities tailored to the investor’s objectives. Additionally, ABP can facilitate connections with local partners and stakeholders, manage risk through strategic advice and due diligence, and offer support in negotiating and structuring deals. This comprehensive approach not only simplifies market entry but also enhances the likelihood of successful and profitable investments in Indonesia’s growing renewable energy market.