A study by the Institute for Essential Services Reform (IESR) reveals that there are 333 Gigawatts (GW) from 632 locations of utility-scale renewable energy projects in Indonesia that are financially feasible.

The IESR study entitled “Unlocking Indonesia's Renewables Future: The Economic Case of 333 GW of Solar, Wind and Hydro Projects” shows that there are 1,500 locations suitable for the construction of ground-mounted Solar Power Plants (PLTS), onshore Wind Power Plants (PLTB), and Mini and Micro-hydro Power Plants (PLTM), with the total technical potential of renewable energy in the 1,500 locations reaching 548.5 GW.

IESR then calculated the financial feasibility, including calculating the Equity Internal Rate of Return (EIRR) or other financial parameters, which resulted in 333 GW from 632 utility-scale renewable energy project locations that were financially feasible, based on tariff rules and project financing structures commonly used in Indonesia.

The details are the capacity of ground-mounted PLTS of 165.9 GW, onshore PLTB of 167.0 GW and PLTM of 0.7 GW.

IESR Director, Fabby Tumiwa, emphasized that Indonesia has great potential in solar, wind and water energy. However, its utilization is still minimal.

According to him, one of the causes is the assumption of low reliability of solar and wind due to its intermittent nature. In fact, there is a development of battery energy storage system technology, as well as grid forming inverters for solar and wind with a technical potential of 3.4 Terrawatt (TW) that can be the backbone of the energy transition.

Fabby said the energy transition not only reduces emissions but can also support the target of 8 percent economic growth and energy independence making it an economic growth strategy through the growth of solar energy manufacturing under the leadership of President Prabowo Subianto.

"In several countries, the combination of PLTS and PLTB with dispatchable batteries has more competitive electricity prices compared to gas and coal-fired power plants," he said, on Thursday, February 27, 2025.

Financially viable areas

Martha Jesica Mendrofa, IESR's Coordinator of Social, Policy and Economic Research, revealed that there are six leading regions for renewable energy development based on economic feasibility studies. Papua and Kalimantan are the regions with the highest concentration for PLTS development. Maluku, Papua and South Sulawesi are considered optimal for PLTB. Meanwhile, West Sumatra and North Sumatra have the greatest potential for PLTM.

Martha cited that these areas have renewable energy project development locations with high EIRR levels, making them financially viable.

IESR also found that around 61 percent of the 333 GW of potential renewable energy projects, or around 206 GW, have an EIRR level above 10 percent based on the applicable tariff rules and project financing structures used in the study.

This capacity is greater than what Indonesia needs in the National Electricity General Plan (RUKN) which targets around 180 GW of PLTS and PLTB by 2060.

In the future, the potential for financially viable renewable energy projects can continue to increase along with improvements in regulations, infrastructure, and reduced capital expenditure (Capex).

"This great potential can be utilized more optimally with the availability of technological innovation, the development of a more flexible and modern electricity network that is able to support the integration of renewable energy," Martha said.

She emphasized that the government needs to prepare clear regulations with an efficient licensing process. This factor can increase the attractiveness of renewable energy projects for investors.

Pintoko Aji, Research Coordinator of IESR Data and Modeling Group, said that the results of the study produced a number of recommendations for policy makers, state power utility company PLN, financial institutions and renewable energy project developers.

IESR encourages the government to allocate land for renewable energy, simplify licensing and set specific targets for renewable energy.

To accommodate the integration of renewable energy locations with high profit potential, PLN can improve planning and network expansion and reform procurement mechanisms.

Meanwhile, in determining the priority scale for renewable energy development, IESR encourages developers to prioritize projects with high profit potential and optimize design and financial planning.