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    Indonesia Renewables SWOT


    May 25, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Indonesia Renewables SWOT

      • 25 May 2022
      • Indonesia
      • Renewables
      SWOT Analysis

      Strengths

      • The government has set ambitious targets for renewables capacity and emissions reductions as part of the national energy plan.
      • Indonesia has significant untapped geothermal potential.
      • The country is also well-suited to solar and wind power, particularly in more remote areas lacking grid connections.
      • The government has taken steps to reform the power sector and shake up the state utility Perusahaan Listrik Negara (PLN) to improve the investment environment.
      • A large population, growing economy and electrification efforts will drive robust electricity demand.

      Weaknesses

      • Land acquisition issues remain a key challenge in developing energy infrastructure projects in the country.
      • The government-regulated electricity tariffs are set artificially low, restricting potential returns on investment.
      • Integrating vast amounts of renewables capacity into the grid will require greater investment in the currently inefficient grid network.
      • Vast coal and gas reserves make thermal energy an attractive low-cost solution to growing consumption rates and could undermine investment in renewable energy.

      Opportunities

      • The National Energy Policy targets a 23% share of renewable energy in the total energy mix by 2025, paving the way for investment in the sector.
      • Indonesia has supportive regulations in place to encourage investment in the geothermal sector and is mooting new initiatives for the other renewable sub-sectors.
      • Growing demand for off-grid solar power given the remote nature of many of the islands and their limited access to electricity.
      • New avenues for foreign direct investment in the renewables sector and new public-private partnership projects.
      • The growing use of green bonds and sukuk could increase the financing available for the renewable energy sector.

      Threats

      • State-owned PLN has limited financial capacity, jeopardising Indonesia's power expansion plans.
      • A lack of a clear regulatory environment and limited incentives for the wind and solar sector will deter investment.
      • Stringent local content requirements and a preference for local firms in the tendering process will hinder growth.
      • Projects are frequently subjected to extensive delays, potentially deterring new entrants to the market.
      This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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