Indonesia Faces Significant Power Sector Financing Gap – Report

At the 24th ASEAN Energy Business Forum (AEBF-24), Climate Policy Initiative (CPI) unveiled its Indonesia Power Sector Finance Dashboard, revealing a significant shortfall in the financing needed to meet the country’s climate targets. The dashboard highlights that Indonesia received an annual average of just USD 5.8 billion in power sector investments from 2019 to 2021—far below the required USD 19.4 billion per year as outlined in Indonesia’s Enhanced Nationally Determined Contributions (NDCs).

The comprehensive dashboard was developed using a rigorous data triangulation process that aggregates official datasets, addressing long-standing challenges in the transparency and accessibility of power sector investment data. It offers interactive features, allowing users to explore investment flows by source, thematic use, and sectoral allocation. This data is crucial for government officials and industry stakeholders looking to identify financing gaps and opportunities for new investments in Indonesia’s power sector.

Key findings from the dashboard include:

• Annual average renewable energy (RE) investments amounted to only USD 2.2 billion—significantly lower than the required USD 9.1 billion annually to meet climate targets.
• Fossil fuel investments averaged USD 3.7 billion per year, with private financial institutions contributing the largest share (84% from international sources, primarily from China and South Korea).
• Investments in coal and gas power plants are almost evenly split, with coal representing 51% of the total fossil fuel investments. Unreported investments in captive coal plants could inflate coal funding figures further, with an estimated additional USD 2.8 billion.
• RE investments were mainly sourced internationally (58%) and focused on hydropower (61%) and geothermal projects (22%), with relatively low investments in solar and wind power.

Tiza Mafira, Director of CPI Indonesia, highlighted the urgency of addressing the financing gap: “The data shows fossil fuel investments almost double those in renewable energy. There is a tremendous opportunity to rethink and redirect these flows, especially from international private institutions. Our dashboard provides the visibility needed to optimize policies and investments for a low-carbon, competitive future for Indonesia.”

The dashboard also sheds light on the role of Indonesia’s state-owned electricity company, PLN, in shaping the nation’s energy market and supporting its energy transition. This tool is expected to serve as a critical resource for driving policy adjustments and attracting sustainable investments to support Indonesia’s ambitious climate goals.