A few years ago, coal power plants quietly carried most of Indonesia’s electricity demand. Today they still do. But the conversation around the country’s energy sources is beginning to change.
Across government policy circles and industry forums, the question now comes up more often: how long can coal remain the backbone of Indonesia’s power system?
For decades, coal energy Indonesia has supported industrial growth and affordable electricity. Yet pressure to accelerate a renewable energy transition is increasing — both from international partners and from domestic industries that are beginning to rethink their long-term energy supply.
Understanding where Indonesia’s energy mix might go next requires looking at both realities at the same time.
Coal Still Dominates Indonesia’s Energy Sources
Indonesia’s electricity grid remains heavily dependent on coal-fired power plants. These facilities generate roughly 60 percent of the country’s electricity.
State utility PLN operates coal plants across Java, Sumatra, Kalimantan, and several other islands. Many were built under long-term power purchase agreements that lock the system into coal use for years to come.
Those contracts are one of the less visible barriers to a faster renewable energy transition.
Cheap, reliable electricity was the engine behind Indonesia’s industrialisation and the expansion of grid access across one of the world’s most geographically complex archipelagos. A pricing structure designed to keep power affordable made that possible — and coal was the fuel that made the pricing structure work. The result is an electricity system whose foundations are, by design, built around coal infrastructure.
The dominance of coal is visible not only in policy documents but also in infrastructure. Across Java and Kalimantan, large coal-fired plants still anchor regional power supply. Many of these facilities were built within the past two decades, which means they are unlikely to disappear quickly.
Coal’s Economic Role Beyond Power Generation
Coal also plays a major role in regional economies.
South Kalimantan and East Kalimantan are not incidentally connected to coal — they are built around it. Hundreds of thousands of workers depend on mining directly, with significantly more tied in through supply chains and the broader industries that coal production sustains.
Any shift in Indonesia’s energy sources therefore raises questions about employment, regional development, and fiscal revenue.
A realistic transition must address those economic realities.
Indonesia’s Renewable Energy Potential Is Significant
Indonesia’s renewable resource base is substantial.
Few countries are as geologically fortunate as Indonesia when it comes to geothermal energy source. Straddling the Pacific Ring of Fire, it sits on one of the largest geothermal reserves in the world — a natural advantage that shapes the entire conversation about what a realistic renewable energy transition actually looks like here.
Geothermal as a Stable Energy Source
Unlike solar or wind, geothermal delivers consistent power around the clock — no intermittency, no storage problem.
That reliability makes it particularly valuable for a grid that still depends on steady baseload generation. Java and Sumatra already have operating geothermal plants, and the development pipeline is extending further into eastern Indonesia.
Solar and Hydropower Are Also Expanding
Solar power is growing as technology costs fall and installation becomes easier.
Rooftop solar systems are appearing in commercial buildings and industrial parks. Utility-scale solar projects are also under development across several provinces.
Hydropower remains an established contributor in parts of Sumatra and Kalimantan. Government planners have identified additional river systems that could support future hydroelectric expansion.
Indonesia set a target of 23 percent renewable energy in its overall mix by 2025. The current figure sits somewhere between 13 and 14 percent — a gap that reflects just how difficult the transition has proven in practice.
Even so, policy attention and investment signals suggest the direction is gradually shifting.
The Roadblocks Slowing Indonesia’s Renewable Energy Transition
Moving away from coal will take time. Indonesia’s power system was built around it, and replacing that foundation cannot happen overnight.
Financing the Energy Transition
Renewable energy projects require large upfront investment.
The capital required to build out geothermal plants, solar farms, and transmission networks at scale is beyond what Indonesia’s state utility can realistically carry alone. That is where international climate financing enters the picture.
The Just Energy Transition Partnership — signed in 2022 — brings roughly US$20 billion in commitments from international partners, and sits at the centre of Indonesia’s financing strategy for the transition.
Actual fund deployment, however, has progressed more slowly than expected. The funding exists on paper. Turning that commitment into real projects is another story.
Grid Infrastructure and Geography
Indonesia’s electricity system also faces geographical challenges.
Unlike continental countries with interconnected grids, Indonesia operates multiple regional networks across thousands of islands. Integrating renewable power into these systems requires significant upgrades to transmission infrastructure and grid management technology.
Variable power sources such as solar energy also require storage solutions or backup generation.
Regulatory and Permitting Challenges
Geothermal development moves slowly by nature.
Exploration, environmental assessment, and permitting can stretch the timeline from initial survey to first power generation to a decade or more. Efforts to cut through that regulatory complexity are ongoing, but streamlining a process this layered takes time in itself.
What the Next Decade Could Look Like
Indonesia’s energy future is more likely to unfold gradually than dramatically. Coal will stay central to the electricity mix in the near term — that much is not in serious dispute. What is shifting is the policy direction: retiring older, less efficient coal plants while drawing a line under new construction beyond the projects already in the pipeline. It is a slow pivot, but it is a pivot.
Private sector investment is also starting to accelerate.
Multinational manufacturers operating in Indonesia are under pressure to reduce supply-chain emissions. Many now prefer sourcing electricity from renewable projects where possible.
This demand is helping drive new solar and geothermal developments.
Impact: Energy Transition and Economic Growth
Expanding renewable energy will open up real economic ground — engineering work, technical roles, infrastructure contracts, equipment supply chains, and project financing are all segments that grow as new capacity gets built.
But the transition carries an obligation that cannot be deferred: the coal-dependent regions of Kalimantan and Sumatra need credible economic alternatives, not just policy statements.
How Indonesia manages that balance will say more about its long-term energy strategy than any renewable energy target on paper.
Conclusion
Coal will remain part of Indonesia’s power system for years to come. The infrastructure is already in place, and the economic ties are deep.
At the same time, the country’s mix of energy sources is slowly changing. Geothermal projects are moving forward, solar installations are appearing in industrial zones, and international financing is beginning to flow into renewable projects.
None of this suggests a sudden break from coal.
What it does suggest is a gradual shift. Indonesia’s renewable energy transition will likely unfold step by step, shaped as much by economic realities as by climate targets.
FAQ
Why does Indonesia still rely heavily on coal energy?
Coal remains the most established and affordable energy source in Indonesia. Long-term power contracts, domestic coal reserves, and employment in mining regions make a rapid shift difficult.
What renewable energy sources are most promising for Indonesia?
Geothermal energy is widely considered Indonesia’s strongest renewable resource. Solar power and hydropower are also expanding as technology costs fall and investment grows.
What is the Just Energy Transition Partnership?
The Just Energy Transition Partnership is a global funding program that helps Indonesia switch to renewable energy. It wants to help shut down coal facilities and speed up investments in renewable energy sources.
