Indonesia's Energy Flip: The 2060 Horizon for Renewable Dominance

JAKARTA, Investortrust.id — Indonesia, the colossal engine of Southeast Asia’s economy, stands at a critical juncture, navigating a high-stakes transition from its deep dependence on fossil fuels to a cleaner energy future. With a national ambition to achieve Net Zero Emission (NZE) by 2060 or sooner, the nation is demanding a transformation pace three times faster than previous global energy shifts.

Yet, the path is fraught with a core contradiction: balancing global climate demands with the pressing reality of widespread poverty and the political mandate for affordable energy.

Currently, approximately 70% of Indonesia’s primary energy supply remains fossil fuel-based, with coal and oil dominating the mix. Although the share of New and Renewable Energy (NRE) in the national energy mix has crept up to 16% as of the first half of 2025, this progress remains modest compared to the nation’s staggering theoretical potential of over 3,687 Gigawatts (GW).

Primus Dorimulu, CEO of Investortrust.id, emphasized this reality at the Green Energy Summit 2025: "The role of new and renewable energy in our energy mix is still small. Coal is still dominant."

The critical question for investors, policymakers, and industry executives is not if Indonesia will transition, but when the decisive flip point—when RE sources exceed fossil fuels—will occur.

Projections indicate that a majority shift will not occur until 2060, when the NZE scenario estimates renewable energy penetration to reach about 70% of the total energy mix, even though parity at 50% could be achieved as early as 2040. Achieving this depends entirely on mobilizing colossal capital and structurally reforming policy to align ambition with affordability.

The $188 Billion Chasm: Financing the Transition

The most immediate constraint facing Indonesia's green agenda is the immense capital requirement. To meet the National Determined Contribution (NDC) target by 2030, Indonesia needs roughly Rp 4,000 trillion (approximately $250 billion USD), with the energy sector absorbing the vast majority (87.5%).

The state-owned electricity company, PT PLN (Persero), requires approximately Rp 2,134 trillion ($188 billion USD) just to realize the new capacity additions planned in the Revised Electricity Supply Business Plan (2025-2034).

This immense investment is necessary because, as Director General of New and Renewable Energy and Energy Conservation. Eniya Listiani Dewi pointed out, the goal to support 8% economic growth requires an accelerated pace of power plant additions. The required rate of new generation capacity must average 7 GW annually.

She challenged the financial sector to match the nation's rising ambition: "investment must also be aggressive. So hopefully Bank Mandiri won't just keep waiting. Mas Adam needs to be aggressive now."

The national investment vehicle, Danantara Indonesia, is stepping up to play a crucial role as an investor and facilitator. Speaking to the company’s investment philosophy, Managing Director Investment Stefanus Ade Hadiwijaya stressed the dual mandate: "we have a mission that I always call a dual mandate.

There are two mandates. First, as investors, we must want a return, a commercial return. But second, we also want that with our investment, it's not just about expecting a return, but also our investment has a real impact on the economy."

Danantara views its role not as a competitor but as a catalyst for growth. Stefanus Ade Hadiwijaya affirmed: "we don't want to crowd out investors. We want to crowd in. We want to bring global private investors, BUMN, and Danantara to work together to invest in renewable energy."

A key focus for Danantara in the short term is the implementation of Waste-to-Energy (WtE) projects. This strategy is designed to kill two birds with one stone: addressing the 35 million tons of annual waste while generating energy. 

Stefanus highlighted the priority: WTE aims for "environmental clean-up first, second is generating energy." However, WtE projects are complex and financially challenging: "honestly, if we look at waste to energy, it is actually the most expensive power generator or plant." The success of these projects relies on blending public and private capital, leveraging instruments like the Patriot Bond, and ensuring favorable pricing mechanisms from PLN.

The banking sector, represented by PT Bank Mandiri (Persero) Tbk, currently holds a Green Portfolio of Rp 157.5 trillion. Adam Zahir, VP ESG Communication at Bank Mandiri, acknowledged the financial gap but stressed the bank's commitment to collaboration. "We have already built the framework... we are the first bank to have a sustainable financing framework and transition financing framework," Adam said.

Adam warned that reliance solely on voluntary actions would not suffice; policy instruments must create a competitive environment for green investment. He argued that if the government implements effective pricing, the entire green ecosystem will flourish.

"Right now, it may be easier to drive progress in the banking sector because it is highly regulated," he said. He warned, however, that "if the private sector is not also encouraged, the journey will not be as fast as expected."

Zahir stressed that carbon taxes needed wider application. "At the moment, carbon taxes are only applied in one or two sectors, but this could be expanded further," he explained.

He pointed to Singapore as an example. "Why does Singapore’s carbon tax work well? Because it already runs across multiple sectors, and the rate is set higher than the cost of buying offsets," he said, adding that this makes "the ecosystem of instruments become alive."

The Policy Tightrope: Equity vs. Acceleration

The foundation of Indonesia’s energy dilemma is the "Just Energy Transition," a necessity eloquently stated by Primus Dorimulu: "a hasty energy transition without considering the fate of the poor, is the same as plunging the people into a new abyss: green inequality, injustice in the name of sustainability!"

He maintained that Indonesia must simultaneously achieve both social welfare and climate goals: "Indonesia must not be trapped into choosing one option: protecting the earth or improving the welfare of the people. We must do both."

This tension defines the strategic pivots being undertaken by state-owned power companies and fossil fuel giants.

PLN’s Strategic Grid Modernization: The state utility is focused on grid transformation as the critical foundation for the NRE flip. The Revised RUPTL mandates that 76% of new capacity additions through 2034 must come from NRE. However, integrating intermittent sources like solar and wind requires major infrastructure overhaul.

PLN is planning a "Green Supergrid," requiring over 48,000 km of new transmission circuits and 100,000 MVA of substations. Even with this push, PLN recognizes the transition must be gradual.

Parulian Noviandri, representing PLN, noted that the shift is incremental. "Indeed, it doesn't go directly from black to white, but it moves slowly," he said.

PLN must also contend with the fact that coal remains Indonesia's cheapest power source, which complicates the economics of decarbonization. Novianri admitted that integrating Carbon Capture and Storage (CCS) technology, while necessary for reducing existing PLTU emissions, "will indeed have an impact on increasing production costs."

Crucially, the government has now included Nuclear Power (PLTN) in the RUPTL, slated for grids in Sumatra and Kalimantan. Director General Eniya affirmed the government’s seriousness: the prerequisite "NEPIO (Nuclear Energy Program Implementation Organization)" regulation is being finalized, and once the Presidential Regulation is issued, it will represent the definitive decision.

"Passing the Presidential Regulation will be the decision to go nuclear," she said. The goal is to start construction (groundbreaking) within one year of the Presidential Regulation being issued.

The shift to renewable energy is being driven by industrial heavyweights across Indonesia’s economy. Major coal producers are investing in cleaner technologies, while oil refineries are upgrading to integrate biofuels and reduce emissions. At the same time, the telecommunications and fertilizer industries are channeling resources into green energy projects to cut costs and align with sustainability goals.

 

Industry Efforts: PTBA’s Dual-Track Transformation

State-controlled coal producer PT Bukit Asam Tbk (PTBA), a cornerstone of the coal industry, faces immense pressure but cannot pivot instantly. Iko Gusman, the subdivison head for energy business development at PTBA, acknowledged the company’s environmental position. 

"We are from a coal company that is said to be a significant contributor to carbon creation," he said.

He confirmed the company's commitment to a Dual-Track Strategy, balancing continued efficient mining operations with deep diversification. PTBA has committed 563 million tons of its reserves to downstream activities. This includes gasification projects like Coal to DME, Coal to SNG, and conversion to Methanol and Ammonia.

Critically, PTBA is working to mitigate the social disruption associated with the shift away from coal. Iko also offered an optimistic outlook on workforce management. "Until now, there has been no scenario for layoffs," Iko said.

Instead, the transition is seen as an opportunity to upskill and redeploy its existing workforce into new, green competencies. PTBA is also developing utility-scale solar PV on vast, unproductive post-mining lands.

Industry Efforts: The Geothermal Superpower

Indonesia holds the world’s second-largest geothermal resource base (24 GW potential). PT Pertamina Geothermal Energy Tbk (PGE) is leveraging this asset as the nation’s most stable source of green baseload (90% capacity factor). To meet RUPTL targets, PGE must dramatically accelerate development from historical rates of 100-150 MW/year to over 500 MW/year.

Manager Investor Relations Ronald Andre Hutagalung detailed a strategic shift toward rapid, smaller-scale projects using cogeneration: "using this cogeneration technology, we can build our power plants in 20 months so that the time to market is much faster with lower capex." He noted that PGE is proactively seeking soft loans from multilateral agencies, believing they "will bump our equity IRR... to 10 to 11%."

Industry Efforts: The Fertilizer/Chemical Pivot

PT Pupuk Indonesia (Persero), also know as Pupuk Indonesia Holding Company (PIHC), operates at the nexus of food and energy security. PIHC President Director Rahmad Pribadi highlighted the profound connection. 

"Fertilizer is most closely related to energy... with energy it is 75%," Rahmad said. Given that 71% of urea production cost comes from natural gas, PIHC’s decarbonization pathway focuses heavily on massive revitalization efforts to improve energy efficiency in its aging urea plants.

PIHC needs Rp 54 trillion for revitalization. Pribadi explained the impact of this investment: "if that is done, then the average cash consumption will drop by 20 to 24 [MMBTU/ton urea]."

Beyond efficiency, PIHC is pioneering clean ammonia (blue and green) development. They are involved in the "global first" Green Ammonia Initiative from Aceh (Project GAIA), utilizing a hybrid process combining natural gas and renewable-energy-derived green hydrogen. This transition is existential, as PIHC forecasts that 90% of its ammonia capacity will be clean by 2050.

Industry Efforts: The Biofuel Engine

Pertamina Patra Niaga is accelerating the shift in the transportation sector via biofuels. The biodiesel mandate, which began at 2.5% in 2008, has now reached 40%. However, the program faces intense commercial pressure.

Harsono Budi Santoso, director of planning and business development at Pertamina Patra Niaga, noted that the Indonesian price index for FAME (biodiesel) is substantially higher than diesel, meaning "the price of FAME or biodiesel is much higher than the price of diesel."

Despite the cost hurdles, Pertamina is leading innovation, notably with sustainable aviation fuel (SAF) produced via co-processing used cooking oil (UCO) at the Cilacap refinery. Santoso said the safety of the new blend, noting that recent trials proved it was "safe" for special flights. This initiative, which turns household and industrial waste into high-value jet fuel, is a crucial example of circular economy.

Industry Efforts: The Telco User and Enabler 

As a massive energy consumer, Telkom Group is pursuing NZE by 2060. VP Sustainability Gunawan Wasisto Ciptaning Andri detailed Telkom's strategy, which includes energy efficiency (e.g., RAN AI, equipment modernization) and mandatory EV transition by 2040.

However, Telkom’s ability to decarbonize relies heavily on grid decarbonisation by PLN. Andri admitted that this government effort is the primary lever, contributing "70% to 80%" of their necessary emission reductions. He justified the reliance by noting the cost barrier to self-investment: "If we do a self-initiative, for example, we invest in solar panels for all our operational sites, the cost will be significant," he said.

 

Industry Efforts: The Industrial Advocate

The Indonesian Chamber of Commerce and Industry (Kadin), representing private industry, advocates for policy acceleration and leverages Indonesia's competitive advantages in critical minerals like nickel.

Halim Kalla, deputy chairman of the green industry division at Kadin, countered the notion that green energy is inherently prohibitive, pointing to rapid technological progress. "For example, solar panels are now much cheaper, sir. Much cheaper than before," he said.

He added that the competition in new sectors like electric vehicles (EVs) is driving down costs and making green alternatives "affordable." Kadin also champions small-scale, decentralized waste management systems to reduce methane emissions, promoting local processing facilities that only require small land footprints, "only needing about 1,000 to 2,000 m²."

A Green Job Dividend: The Path to Social Equity

The most powerful element countering the "green inequality" risk is the massive potential for job creation in the new green sectors. Director General Eniya Listiani Dewi highlighted the stark skills mismatch that must be addressed: she cited a recent geothermal plant opening that received 12,000 applicants for only 35 high-skill staff positions, emphasizing that Indonesia "really lacks job opportunities for the industry" (referring to high-skill O&M roles).

Iko Gusman of PTBA confirmed that transformation is being managed internally to prevent layoffs, viewing the shift as an opportunity to retrain and redeploy their existing workforce.

This collective movement embodies the perspective shared by Pertamina’s Agung Wicaksono, arguing that the transition is fundamentally an economic imperative: "If you want to be wealthy, you want to have welfare, then we must also transform towards green energy. Because green also means welfare."

 

Optimism Amidst the Climb

Indonesia's aspiration to reach a majority RE power mix by 2060 is credible, underpinned by staggering natural endowments and a regulatory environment that is actively clearing the path for nuclear power and enhanced NRE deployment. The government has already made the economic determination that NRE, particularly when offsetting expensive diesel generation in eastern Indonesia, is now affordable.

However, the "flip point"—the moment renewables truly exceed fossil fuel dominance—remains distant and conditional on overcoming steep structural and financial challenges. Indonesia must mobilize hundreds of billions of dollars, and success hinges on institutional collaboration.

The Indonesian investment authority, Danantara, is strategically positioned to attract the necessary private and global capital by offering transparent structures and clear dual mandates. As Liengseng Wee, Managing Director of Risk & Sustainability at Danantara, concluded, the transition must be inclusive: "The Green Energy Summit's 2025 theme is adjust energy transition. It is a reminder that energy transition must also serve the people."

With pragmatic strategies—from accelerating geothermal development via smaller, faster projects, to integrating waste management into the energy supply, and leveraging the financial sector to activate market mechanisms—Indonesia is charting a course to transform environmental obligations into industrial sovereignty and long-term prosperity. As policymakers and industrialists unite, Indonesia stands ready to demonstrate that it can indeed achieve both a sustainable planet and social equity.

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Watch the full Green Energy Summit 2025, presented in three parts — the plenary session, the first panel, and the second panel — each offering key perspectives on Indonesia’s just energy transition.

Plenary Session

1st Session

2nd Session