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DECARBONIZING INDONESIA’S POWER SECTOR THROUGH RENEWABLE ENERGY EXPANSION: POLICY, MARKET DYNAMICS, AND INSTITUTIONAL TRANSFORMATION
Issue Vol. 2 No. 1 (2025): Volume 02 Issue 01 --- Section Articles
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Abstract
Indonesia’s energy transition occupies a uniquely complex position within global decarbonization efforts. As a rapidly growing middle-income economy with abundant fossil fuel resources, high energy demand growth, and deep institutional legacies in state-owned energy enterprises, Indonesia faces structural challenges that distinguish it from both advanced economies and least-developed countries. This article develops an original, theory-driven and empirically grounded analysis of Indonesia’s renewable energy transition, with a particular focus on solar photovoltaics, wind resources, and the political–institutional economy shaping energy policy outcomes. Drawing strictly on the provided references, the study synthesizes insights from disaster risk science, energy economics, development finance, policy analysis, and comparative institutional studies to construct a comprehensive understanding of why renewable energy deployment in Indonesia has lagged its technical potential, and how this trajectory might be altered.
The article advances three core arguments. First, Indonesia’s renewable energy potential—particularly in solar and wind—is not primarily constrained by resource availability, but by institutional uncertainty, tariff design, and risk allocation mechanisms that shape investor behavior. Second, the persistence of fossil fuel subsidies and the political sensitivity of fuel pricing have created path dependencies that weaken renewable competitiveness, even when technology costs decline. Third, state-owned power companies play a decisive mediating role in the energy transition, acting simultaneously as potential enablers of decarbonization and as institutional bottlenecks when governance reforms lag behind policy ambition.
Methodologically, the article adopts a qualitative–integrative research design that combines policy document analysis, conceptual modeling, and comparative interpretation of empirical findings from prior studies. Rather than introducing new quantitative datasets, the research emphasizes deep theoretical elaboration of existing evidence, tracing causal mechanisms linking policy instruments, financing structures, market behavior, and technological diffusion. The results demonstrate that incremental policy adjustments are insufficient to unlock Indonesia’s renewable energy transition; instead, coordinated reform across tariffs, financing support, spatial planning, and state-owned enterprise governance is required.
The discussion situates Indonesia’s experience within broader debates on energy transitions in emerging economies, highlighting the importance of aligning decarbonization strategies with social equity, disaster risk reduction, and long-term development objectives. The article concludes by outlining a forward-looking agenda for research and policy, emphasizing institutional learning, regulatory credibility, and the strategic repositioning of state-owned utilities as central actors in Indonesia’s low-carbon future.
Keywords
References
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