Dr. Dinita Setyawati is Ember’s senior electricity policy analyst for Southeast Asia.

Indonesia’s President Prabowo Subianto has announced a goal to end coal by 2040 – a bold move for a country that produces 62% of its electricity from coal. As the president’s first 100 days in office unfold, there is an urgent need to develop a feasible plan to achieve this ambitious aim.  

So far this is lacking. Indonesia’s recently published National Electricity Master Plan (RUKN) 2024-2060 includes phase-out strategies that propose co-firing with biomass fuel and retrofitting existing coal infrastructure with carbon capture and storage technology. These strategies seem to contradict the country’s decarbonisation targets and divert from the renewable energy acceleration needed to meet demand growth by 2040.  

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Changing historical reliance on fossil power requires systemic change in the power sector. Building on President Prabowo’s announcement, the next step could be developing a blueprint to retire coal power plants with very large emission footprints, including captive coal plants (power stations that are operated off-grid), to ensure a comprehensive transition to clean energy. Without addressing captive coal, a significant portion of Indonesia’s coal emissions would remain unregulated, undermining the country’s climate goals. 

At the same time, redesigning the contractual obligations between PLN (Indonesia’s state electricity company) and power producers is necessary to enable a faster reduction in coal power operations. Current contracts often lock PLN into purchasing fixed amounts of coal-generated electricity, limiting the integration of renewables. 

More flexibility needed 

A key challenge in reducing reliance on coal is improving the flexibility of coal-fired power plants. Downward coal flexibility refers to the ability of coal plants to reduce their output quickly when renewable energy sources are available. Enhancing this capability will allow renewable energy to take priority in the grid, minimising the use of coal power and reducing carbon emissions.

To achieve downward coal flexibility, power plant operators must invest in upgrades and adopt new operational practices that enable quick adjustments to energy demand. This step is crucial to ensure that coal plants do not hinder the growth of renewable energy sources. 

With more coal power plants planned to be retired early, accelerating renewable energy deployment should proceed in parallel to buffer the impact of coal plant closures. 

One scenario to achieve the coal phase-out target by 2040, while maintaining electricity supply and demand, is to increase the share of renewable energy to 65%. Under this scenario, solar would account for 20%, wind for 11% and other renewables – such as nuclear, geothermal, bioenergy and hydro – would make up 34%.

The calculation includes 68GWh (gigawatt hours) of battery capacity in stationary applications designed for fixed installations, to stabilise solar energy output, based on key parameters such as efficiency, capacity utilisation factor for solar plants, and storage hours.  

Funding for early retirement 

Successfully retiring coal power plants early will require dedicated financial support. The Indonesian government must collaborate with power plant owners, financiers and international partners to develop viable funding solutions that reduce the financial burden of the transition. 

Securing financing will involve exploring various funding mechanisms, such as climate finance, carbon markets and public-private partnerships. By mobilising financial resources, Indonesia can accelerate the coal phase-out process, invest in renewable energy projects and support economic diversification in coal-dependent regions. 

With electricity demand projected to grow by around 5% annually in the coming years, expanding solar energy – combined with battery storage to maximise its utilisation – offers significant opportunities to meet rising electricity demand.

Incentives for clean energy 

Storage systems are essential for addressing the intermittency of solar power and ensuring a reliable renewable energy supply. However, current policies provide limited incentives for integrating battery storage solutions into solar projects. For example, Presidential Regulation 112 sets a tariff structure that caps battery storage charges at 60% of the base tariff, which may not sufficiently cover the associated costs of battery storage infrastructure. 

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Trends in electrification of the transport sector further highlight the need for a comprehensive decarbonisation strategy to reduce its reliance on coal. Strengthening the role of private players in the electricity market could unlock substantial financing for Indonesia’s clean energy transition.  

Southeast Asian neighbours such as Viet Nam, Malaysia and Thailand have already introduced policies enabling companies to directly purchase renewable energy. Indonesia could consider similar regulations to allow clean electricity procurement for industrial clients.  

Expanding renewable energy deployment will also provide Indonesia with significant economic opportunities. The renewable energy sector can create new jobs, attract green investments, and offer access to cleaner and more sustainable power sources. Taking decisive action now will help Indonesia secure long-term economic growth, environmental stability and energy security. 

The post Indonesia’s next priority should be finding alternatives to replace coal appeared first on Climate Home News.

Indonesia’s next priority should be finding alternatives to replace coal