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Indonesia Renewables SWOT
- 25 May 2022
- 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.
- 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.
- 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.
- 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.
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