Renewable energy opportunities and challenges in Indonesia play a crucial role in determining the success of the country’s energy transition toward its 2060 net-zero emissions target.
With enormous potential in solar, hydropower, wind, and geothermal energy, Indonesia has a significant opportunity to reduce its dependence on fossil fuels, although several obstacles still hinder its development.
As economic growth and energy demand continue to rise, Indonesia needs to accelerate the development of clean energy sources. The government has set a renewable energy mix target of 23% by 2025 as part of its efforts to build a more sustainable energy system.
Various stakeholders, including the private sector, have begun investing in renewable energy projects to support this goal.
Renewable Energy Opportunities and Challenges in Indonesia
Indonesia has one of the largest renewable energy potentials in Southeast Asia.
According to various studies, the country's installed power generation capacity reached approximately 81.2 GW in 2022, while renewable energy development potential is estimated to exceed 3,700 GW.
Currently, most of Indonesia’s electricity is still generated from coal and natural gas. However, the country possesses abundant renewable energy resources distributed across various regions.
1. Solar Energy Represents the Largest Opportunity
One of the most promising energy sources is solar power.
Located along the equator, Indonesia receives relatively stable sunlight throughout the year. This geographical advantage gives the country a significant edge over many nations that experience winters with lower solar intensity.
The potential of solar energy is further supported by advancements in solar panel technology, which is becoming increasingly efficient and accessible.
Today, solar panels can be installed in various forms, ranging from rooftop solar systems for homes and commercial buildings to floating solar power plants that utilize reservoirs and lakes.
In addition, solar power systems are available through several schemes, including:
- Off-grid systems that use batteries to store energy
- On-grid systems connected directly to the electricity network
- Hybrid systems that combine both technologies
With this flexibility, solar energy has the potential to become one of the main pillars of Indonesia’s energy transition in the coming decades.
Read More: The Potential of Hydrogen Energy for Indonesia’s Clean Energy Future
2. Untapped Hydropower Potential
In addition to solar energy, Indonesia possesses abundant water resources. The country’s hydropower potential is estimated at approximately 75 GW, yet much of this capacity remains underutilized.
Indonesia’s geography, with its numerous rivers, dams, and mountainous regions, makes hydropower an especially promising energy source.
Unlike solar and wind energy, which depend on weather conditions, hydropower plants can generate relatively stable electricity, helping improve the reliability of the national power system.
Beyond large-scale facilities, mini-hydropower plants also present significant opportunities to provide electricity to areas where access to the power grid remains limited.
3. Geothermal and Wind Energy Support Diversification
Indonesia is also known for having one of the world’s largest geothermal reserves due to its location along the Pacific Ring of Fire. This geothermal potential provides a unique advantage that few countries possess.
Geothermal energy can generate electricity continuously, 24 hours a day, regardless of weather conditions. As a result, it plays an important role in maintaining the stability of renewable-based electricity supply.
Meanwhile, wind energy is showing increasing promise, particularly in eastern Indonesia, including East Nusa Tenggara, where wind speeds remain relatively strong throughout the year.
Challenges Slowing Renewable Energy Development
Despite its tremendous potential, renewable energy development in Indonesia still faces several obstacles.
1. Infrastructure and Financing
One of the primary challenges is the fragmented state of the electricity grid, especially across Indonesia’s archipelago.
In addition, access to financing for renewable energy projects remains limited due to high upfront investment requirements.
Indonesia aims to significantly increase renewable energy capacity by 2034. Achieving this target will require accelerated investment and stronger support from banks and private investors.
2. Land Availability and Regulatory Issues
Land acquisition remains a major obstacle for large-scale energy projects.
Permitting processes and regulations also need to be simplified further to encourage faster and more efficient investment.
The government must continue developing transparent auction mechanisms and attractive project contracts to increase investor confidence in clean energy projects.
3. Costs and Fossil Fuel Subsidies
Another challenge is that renewable energy development costs can still be higher than conventional energy in certain cases.
Furthermore, substantial fossil fuel subsidies can reduce the competitiveness of clean energy alternatives.
Nevertheless, global trends show that renewable energy technology costs continue to decline. With the right policy support, Indonesia has a strong opportunity to accelerate clean energy adoption more economically.
Positive Impact on the National Economy
Despite these challenges, the energy transition offers significant benefits for Indonesia. Renewable energy development has the potential to:
- Reduce dependence on imported fossil fuels
- Lower carbon emissions and air pollution
- Reduce long-term energy subsidy burdens
- Create large numbers of green jobs
- Encourage technology transfer and industrial innovation
These benefits make renewable energy not only an environmental solution but also a sustainable driver of economic growth.
Read More: From Conventional Energy to Clean Energy: Indonesia’s New Direction for the Energy Industry
Turning Opportunities and Challenges into Real Action with TBS
Renewable energy opportunities and challenges in Indonesia require collaboration among the government, industry players, and communities to accelerate the transition toward cleaner and more sustainable energy.
As part of this commitment, TBS continues to expand its renewable energy portfolio through various strategic projects across Indonesia.
In 2020, through its subsidiary PT Toba Bara Energi (TBAE), TBS acquired PT Adimitra Energi Hidro (AEH), the developer of a 2x3 MW Mini Hydropower Plant (PLTM) in Lampung.
The project successfully achieved its Commercial Operation Date (COD) on January 22, 2025, and now contributes 6 MW of clean energy to the Southern Sumatra region.
In the same year, TBS also acquired PT Bayu Alam Sejahtera (BAS), a company developing wind energy potential in East Nusa Tenggara (NTT).
In addition, TBS is developing the Floating Solar PV Power Plant project in Tembesi, Batam. The project reached financial closing in 2024 and is targeted to begin commercial operations in 2026, integrated into the national electricity grid.
TBS is also currently developing a 46 MWp Floating Solar Power Plant in Batam.
This project is expected to deliver environmental and social benefits through carbon emission reductions, improved air quality, the creation of green jobs, and technology transfer for local communities.
Through these initiatives, TBS Energy demonstrates its commitment to supporting the acceleration of renewable energy development in Indonesia.
Visit TBS to learn more about the company’s initiatives and contributions toward building a more sustainable energy future.
