Indonesia’s plan to expand gas-fired power plants in its 2025–2034 Electricity Supply Business Plan (RUPTL) could burden the state with up to US$60 billion in fiscal costs, according to a new analysis from the Institute for Energy Economics and Financial Analysis (IEEFA).

"The government will need to allocate around US$60 billion from 2025 to 2034 if it continues to rely on fossil fuels instead of aggressively expanding renewables in the energy mix," Mutya Yustika, Energy Finance Analyst at IEEFA, said on Tuesday, June 24, 2025.

IEEFA highlighted that the planned addition of 10.3 gigawatts (GW) of gas-fired capacity would lock Indonesia into volatile fuel prices and mounting financial risks. Based on PLN’s financial reports, gas is already twice as expensive as coal, and continued reliance on it could lead to either sharply rising electricity tariffs or a ballooning subsidy burden.

Currently, the average electricity tariff paid by consumers is Rp1,153 per kilowatt-hour (kWh), thanks to government subsidies. However, the actual generation cost has reached Rp1,732/kWh. The IEEFA analysis warns that the inclusion of more gas capacity could double generation costs by 2034.

In 2024 alone, the government spent Rp177 trillion (approximately US$11 billion) on PLN subsidies and compensation − a 24 percent increase from the previous year.

IEEFA also pointed out that much of Indonesia’s existing gas-fired capacity is underutilized. “Between 2018 and 2024, Indonesia added 6.3 GW of gas plants to replace coal, but they operated at only 30 percent capacity last year due to high costs and limited gas supply,” Mutya said.

In contrast, solar and wind performed more efficiently relative to their installed capacity − solar operated at 20 percent and wind at 44 percent, both outperforming the global averages of 16.2 percent and 36 percent, respectively.

Despite this, the latest RUPTL allocates 12.7 GW (45 percent) of new capacity to fossil fuels between 2025 and 2029, including 9.3 GW to gas.

“Although the RUPTL shows some progress in renewable development, the significant fossil fuel portion raises doubts about Indonesia’s readiness to pivot swiftly toward clean energy in line with its global decarbonization commitments,” Mutya cautioned.

Rather than extending its dependence on coal and gas, Indonesia should prioritize solar and wind, which are scalable and increasingly competitive.

"Global investors and multinational companies seeking clean energy commitments will hesitate to invest in Indonesia if fossil fuel allocation remains high," Mutya warned. "A stronger focus on renewables over the next five years will make Indonesia more competitive in the regional energy market and better positioned in the global energy transition."