To stay competitive, Indonesia must prioritize renewables - Institute for Energy Economics and Financial Analysis (IEEFA)
Published December 29, 2025
Indonesia's Competitive Edge: The Need for Renewable Energy Prioritization
According to a recent report from the Institute for Energy Economics and Financial Analysis (IEEFA), Indonesia faces a critical juncture in its energy strategy. The report emphasizes that in order to maintain its competitive standing in the global market, the nation must prioritize the development and implementation of renewable energy sources.
The IEEFA report outlines several key areas where Indonesia can enhance its energy framework, particularly by investing in renewables. With the global shift towards sustainable energy, the need for Indonesia to adapt its energy policies is more pressing than ever.
Current Energy Landscape in Indonesia
Indonesia's energy sector is currently dominated by fossil fuels, which account for a significant portion of its energy consumption. The country is heavily reliant on coal, oil, and natural gas, which not only contribute to environmental degradation but also expose the economy to the volatility of global fossil fuel markets.
As of 2022, coal remains the primary source of energy in Indonesia, making up approximately 60% of the country’s energy mix. This reliance on fossil fuels poses challenges for Indonesia’s energy security and sustainability. The IEEFA report highlights that transitioning to renewable energy sources is essential for reducing greenhouse gas emissions and aligning with international climate commitments.
Renewable Energy Potential
Indonesia is endowed with abundant renewable energy resources, including solar, wind, hydro, and geothermal energy. The country has the potential to generate over 400 gigawatts (GW) of renewable energy, with solar energy alone capable of contributing significantly to this capacity. The IEEFA report indicates that Indonesia could harness up to 207 GW of solar power, given its geographic advantages and favorable climatic conditions.
Geothermal energy is another area where Indonesia excels, being home to the largest reserves globally. The country has the potential to produce around 29 GW of geothermal energy, which could play a crucial role in diversifying its energy mix and reducing dependence on fossil fuels.
Investment and Policy Recommendations
The IEEFA report underscores the necessity for Indonesia to create a conducive environment for renewable energy investments. This includes implementing supportive policies that encourage both domestic and foreign investments in the renewable energy sector. The government is urged to establish clearer regulations and incentives that can attract capital into renewable energy projects.
Furthermore, the report suggests that Indonesia should prioritize grid modernization and infrastructure development to accommodate the integration of renewable energy sources. Upgrading the existing energy infrastructure will be essential for managing the variability of renewable energy generation and ensuring a stable energy supply.
International Collaboration
To facilitate the transition to renewable energy, the IEEFA report advocates for Indonesia to engage in international cooperation. Collaborating with countries that have successfully implemented renewable energy initiatives can provide valuable insights and best practices that Indonesia can adopt.
International partnerships can also open avenues for technology transfer, capacity building, and financial assistance, which are critical for accelerating the deployment of renewable energy projects. The report emphasizes that Indonesia should actively seek partnerships with global renewable energy firms and organizations to leverage their expertise and resources.
Addressing Challenges
While the potential for renewable energy in Indonesia is significant, several challenges remain that must be addressed to ensure a successful transition. The IEEFA report identifies regulatory hurdles, financing difficulties, and a lack of public awareness as key obstacles that need to be overcome.
The government is encouraged to streamline regulatory processes and reduce bureaucratic barriers that hinder the development of renewable energy projects. Additionally, innovative financing mechanisms, such as green bonds and public-private partnerships, should be explored to mobilize the necessary capital for renewable energy investments.
Public awareness and education campaigns are also crucial for fostering a culture of sustainability and encouraging community support for renewable energy initiatives. Engaging local communities and stakeholders in the planning and implementation of renewable energy projects can enhance acceptance and participation.
Conclusion
The IEEFA report presents a clear message: for Indonesia to remain competitive in the evolving global energy landscape, prioritizing renewable energy is imperative. By capitalizing on its abundant renewable resources, fostering investment, and addressing existing challenges, Indonesia can transition towards a more sustainable and resilient energy future.
As the world increasingly moves towards cleaner energy solutions, Indonesia's commitment to renewable energy will not only enhance its economic competitiveness but also contribute to global efforts in combating climate change. The time for action is now, and the path forward lies in embracing the potential of renewable energy.
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