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Lack of grid investment stalls progress on clean energy
A lack of investment in Indonesia’s power grid is emerging as a key obstacle to the country’s clean energy goals, as transmission constraints slow down the adoption of renewable energy.
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Electrical transmission lines are seen running through grassland to power the newly completed data center of Meta's Facebook, pictured in Eagle Mountain, Utah, the United States, on July 18, 2024. (AFP/George Frey)
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lack of investment in Indonesia’s power grid is emerging as a key obstacle to the country’s clean energy goals, with experts warning that transmission constraints risk slowing the adoption of renewable energy.
Putra Adhiguna, managing director at the Energy Shift Institute, told The Jakarta Post on Friday that, last year, the Energy and Mineral Resources Ministry said Indonesia needed Rp 40 trillion (US$ 2.43 billion) in annual investment to expand and upgrade the electricity grid.
“It is important to acknowledge that [state-owned electricity utility] PLN alone is unlikely to meet such a scale of investments. Investing in the power grid is capital-intensive and has a slower investment return than power generation [projects],” he said.
“Even in China, with rapid grid upgrades, the power grid remains a bottleneck for their renewables adoption.”
Putra pointed out that investors were drawn to opportunities with a balanced risk-reward profile, offering stable, long-term returns.
While grid improvement is crucial for expanding clean energy, investors may be reluctant to engage if the grid is used to support increased fossil fuel power, undermining decarbonization efforts, he noted.
According to PLN projections, Indonesia’s energy transition requires more than US$170 billion in investment over the next 10 years, PLN executive vice president of corporate finance Maya Rani Puspita said at a panel discussion at the 58th ADB Annual Meeting in Milan, Italy, on May 6.
