A number of non-governmental organizations in the economy, legal, environment and energy circles have concluded that Indonesia has the strong capital to continue with its energy transition project, especially the early retirement of coal-fired power plants (PLTU).

Muhammad Saleh, Legal Researcher at the Center of Economic and Law Studies (CELIOS), noted at least four policies that can be used as strong capital for energy transition and PLTU closure. First, Presidential Regulation No. 112/2022 which  clearly regulates the types and criteria of PLTUs that must be shut down and encourages the government to realize various financing schemes needed for the closure process.

Second is also the latest regulation, Minister of Finance Regulation (PMK) No 5/2025 which regulates the existence of an energy transition platform as a fiscal tool that supports the acceleration of PLTU closure and termination of the Electricity Sales and Purchase Agreement (PJBL). This means that there is a guarantee from the Ministry of Finance when there is a risk of State power utility PT PLN's business failure and budget allocation from the PLTU closure.

The other two policies are the National Electricity General Plan (RUKN) and the Electricity Supply Business Plan (RUPTL). Although it does not explicitly mention which PLTU must be closed, RUKN reinforces the mandate of the National Energy Policy (KEN) to end PLTU operations and encourage the development of renewable energy. The RUPTL also explicitly encourages diversification of types of power plants.

"These four regulations are sufficient to provide a basis for the government to carry out the energy transition. There is only one mandate of Perpres 112/2022 that has not been implemented by the Ministry of Energy and Mineral Resources (ESDM), namely the PLTU early retirement road map that details the criteria and financing scheme," Saleh said as quoted in a statement on Friday, February 7, 2025. 

Tata Mustasya, Executive Director of SUSTAIN, a foundation focusing on issues of sustainability and energy transition, said there are a number of options that the government can take. 

“The government can gradually increase coal production levies progressively. With this step, Indonesia can collect the coffers needed for the energy transition, not just the closure of PLTU,” he said.

He cited that under various scenarios, Indonesia could obtain financing of up to 170 percent of the US$96.1 billion energy transition requirement in the Just Energy Transition Partnership (JETP) document with progressive levies. In fact, he added, in the smallest scenario, Indonesia can get funds for 35 percent of the JETP needs, which is enough to finance the construction of electricity networks and early retirement of power plants. 

"This shows that if the government has the political will to increase coal levies, Indonesia can actually finance the energy transition," Tata said.

In addition, he continued, the government can implement a carbon tax for PLTU, with the right emission limits and prices. This step is a disincentive for the PLTU business because it will cut profits so as to encourage PLTU owners to switch to the renewable energy business.

"The gap that exists in early retirement is that PLTU still gets a red carpet with various facilities that make the profits still large, so there is no urgency for this retirement. The implementation of carbon tax is a process, but it must be done from now on," Tata said.

The many facilities given to the fossil energy sector, including coal, is said by Martha Maulidia, Energy Policy Researcher at the International Institute for Sustainable Development (IISD), to also hinder the development of renewable energy in Indonesia. With so much investment and facilities provided, the government is reluctant to end PLTU given the amount of funds that have flowed there. 

"Finally, we are locked into a situation of carbon lock-in. Because we already love pouring money there, instead of being stopped, we continue to burn money there. Subsidies to fossil energy need to be removed first, then we can apply carbon tax, so that the state's money does not just move from the right pocket to the left pocket," Martha said.

According to her, the government needs to transform to realize the energy transition, especially so that the growth of renewable energy can increase significantly. Electricity subsidies and compensation in 2022 reached more than IDR 500 trillion. If Indonesia can reduce its dependence on fossil energy, the amount of energy subsidies and compensation can be cut and reallocated to other more important sectors.

"If Indonesia carries out business as usual, there are still many interests in RUKN and RUPTL, meaning that the renewable energy mix will not increase significantly. In addition, there also needs to be policy changes in the industry, fiscal, finance, for example to get around the high cost of funds for renewable energy projects. We can't expect different results from the same effort," Martha concluded.