Why Bottlenecks and Fiscal Realism Are Slowing a Landmark $21.4 Billion Clean Energy Transition

JAKARTA, Investortrust.id — Southeast Asia’s largest economy is running into structural bottlenecks as it deploys one of the world's most high-profile green finance programs.

The government has drawn down only $3.93 billion—roughly 18%—from its $21.4 billion Just Energy Transition Partnership (JETP) funding commitment, leaving the vast majority of international climate financing unspent amid complex commercial negotiations and grid integration challenges.

The slow deployment highlights the friction emerging markets face when balancing rapid industrial growth with decarbonization. For global climate financiers and private energy developers, clearing domestic power-purchase logjams and permitting red tape remains the ultimate test of whether multilateral transition funds can actually scale.

PPA Frictions and Ecosystem Gaps

Speaking at his office in Jakarta on Thursday, Coordinating Minister for Economic Affairs Airlangga Hartarto acknowledged that deploying the multibillion-dollar climate facility remains complex.

"We have utilized $3.93 billion so far, which leaves substantial capital available to be tapped," Hartarto said, emphasizing that legal and commercial structures remain key hurdles. "The primary challenges center on building the ecosystem, especially regarding power purchase agreements (PPAs) and related frameworks."

German Minister for Economic Cooperation and Development Reem Alabali-Radovan affirmed that international partners, led by Germany and Japan, remain committed to advancing joint renewable initiatives that deliver reciprocal economic and environmental value.

Long-Standing Structural Hurdles

The modest drawdown reflects broader systemic obstacles that have constrained Southeast Asia's renewable energy buildout for years.

Last year, JETP Indonesia Secretariat Head Paul Butarbutar warned that achieving long-term climate targets would require upward of $100 billion, identifying four persistent bottlenecks: regulatory uncertainty, commercial financing terms, ground-level permitting, and grid off-taker coordination.

Butarbutar noted at a business forum in August 2025 that lengthy environmental licensing and land disputes frequently stall projects, while single-buyer dynamics through state utility PT Perusahaan Listrik Negara (PLN) require projects to clear rigid bankability hurdles. Without resolving these issues, Butarbutar cautioned, ambitious national milestones—such as deploying 100 gigawatts of solar capacity within a decade—would face severe headwinds.

At the same time, fiscal policymakers have consistently underscored economic pragmatism. In mid-2025 remarks, Energy and Mineral Resources Minister Bahlil Lahadalia maintained that decarbonization cannot strain state finances, emphasizing that the nation's 35.2 billion-ton (31.95 billion-metric-ton) coal reserves will remain a critical baseload pillar via carbon capture and storage (CCS) technology.

Revving Up Geothermal Capacity

To unlock private capital without overextending public finances, the energy ministry is prioritizing baseload renewables, particularly geothermal. Although holding the world's largest geothermal reserve base at 23.2 gigawatts, the country has developed only 2.78 gigawatts, leaving over 88% of its resource base untapped.

"Indonesia ranks number one globally in geothermal resources, but in actual implementation, we are still number two behind the United States," Lahadalia said during the IIGCE 2026 conference on Wednesday.

To close the gap, authorities are revising Presidential Regulation Number 112 of 2022 and Government Regulation Number 7 of 2017 to improve project returns, grant tax incentives, and pressure concession holders to fast-track delayed field developments.