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View all search resultsInstitutional leadership and equitable financing vital for Indonesia’s energy transition
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Two villagers in Cibodas village, Lembang district, West Bandung regency, West Java, build a reactor to store cow dung waste that can be used as energy for daily use. The biogas is processed directly by the community. (Image courtesy of Yayasan Rekam Jejak Alam Nusantara)
D
espite strong international commitments and ambitious national targets, Indonesia’s energy transition remains a work in progress. The challenge lies not in vision, but in translating ambition into coherent institutional leadership and equitable financing mechanisms as the country gradually shifts away from its fossil fuel–dominated energy mix.
This is why integrated institutional leadership and fair financing are critical to accelerating Indonesia’s energy transition from aspiration to effective implementation.
Maryati Abdullah, program officer for natural resources and climate change at the Ford Foundation, underscored these issues while contributing to global forums on Indonesia’s energy transition, where she participated in and moderated discussions on energy transition and critical minerals.
She observed that while global forums continue to reaffirm commitments to expand renewable energy, reduce fossil fuel dependency and manage critical minerals as strategic economic assets, Indonesia is still navigating how to translate these commitments into aligned domestic policies and workable financing frameworks.
“The challenge is not a lack of ideas,” Maryati said. “It is the absence of integrated policy and institutional leadership that can synchronize financing, governance and implementation.”
Indonesia has repeatedly affirmed its commitment to renewable energy and global decarbonization in international climate negotiations. However, Maryati highlighted shortcomings in the Just Energy Transition Partnership (JETP), particularly its flagship financing mechanism. In her assessment, the model remains poorly structured to support an equitable phaseout of coal and the acceleration of renewable energy.
Under the JETP, partner countries have pledged some US$20 billion to support Indonesia’s energy transition. Yet, only a small portion has materialized as grants or concessional financing.
“International finance is still trying to determine how the President’s strong global message can be translated into technocratic and technical actions,” she said, pointing to the gap between high-level commitments and implementation by state-owned enterprises, including state utility company PLN and line ministries.
Energy subsidies
Energy subsidies illustrate this misalignment most clearly. For decades, fossil fuels, both for electricity and transportation, have been heavily subsidized through the state budget, while renewable energy has received comparatively limited fiscal support, even as clean technologies become increasingly cost-competitive.
“Coal and fossil energy are still heavily subsidized,” Maryati said. “Meanwhile, renewable energy receives far less support, despite its economic, climate and job-creation potential.”
She noted that previous administrations had begun to rationalize fuel subsidies, demonstrating that politically difficult reforms are possible. A similar redirection of subsidies, from fossil fuels toward renewable energy, could create fiscal space for other national priorities, such as disaster recovery and nutrition programs, while attracting private investment and mobilizing climate finance. At the same time, green transition efforts have already demonstrated their potential to generate economic growth.
Given the capital-intensive nature of energy infrastructure, Maryati emphasized that public funds alone are insufficient. She estimates that at least 70 percent of energy transition financing will need to come from the private sector.
Indonesia already has tools to help mobilize domestic and international private capital. These include climate finance guidelines and green taxonomy issued by the Financial Services Authority (OJK), as well as investment-holding institutions such as state asset fund Danantara, which are positioned to attract institutional investors into renewable energy and green downstream industries.
“Danantara can potentially be an elevator platform,” she said. “But investors, both domestic and international, need clear signals that projects are viable and aligned with long-term national plans.”
One area with strong public demand is rooftop solar and decentralized renewable energy, particularly in urban areas where households can afford installations through individual purchasing power. At the same time, the government has promoted a 100-gigawatt solar program through the Red and White Rural Cooperatives (KDMP), aiming to expand access while generating local economic benefits.
Maryati welcomed the initiative but stressed that cooperative models must be genuinely community-led and bottom-up, with clear mechanisms for local ownership and management. Without these safeguards, infrastructure projects risk stalling or failing to deliver intended benefits.
She also pointed to PLN’s restrictive quotas for rooftop solar connections to the grid, especially in oversupplied regions such as Java and Bali, as a barrier to adoption, even where consumer demand is high.
“This is about addressing the mismatch between demand, purchasing power and access to the electricity grid,” she said. “People want solar energy. Stronger support from PLN would enable the public to participate directly in the clean energy transition.”
Despite commitments to limit new coal-fired power plants and pursue early decommissioning, coal remains deeply entrenched in Indonesia’s energy system. This persistence continues to blur the line between transition and the continuation of extractive economic models.
Maryati cited the recent cancellation of the early retirement of the Cirebon coal-fired power plant, once a flagship international transition project, as a clear example of the practical challenges facing coal phaseout efforts.
“Without decisive policy changes, the extractivist mindset will continue to dominate,” she said.
Institutional fragmentation
Her most pressing concern lies in institutional fragmentation. Energy policy and implementation remain dispersed across ministries, state institutions, planning agencies and state-owned enterprises, with no single body clearly leading the transition.
In this context, the National Energy Council, chaired by the President, could play a pivotal role. By asserting its authority, the council could coordinate technocrats, regulators and state-owned enterprises around a unified road map to accelerate renewable energy adoption, phase out fossil fuels and strengthen energy security and sovereignty.
Maryati believes the payoff would be substantial. As a major global producer of coal and critical minerals, Indonesia has an opportunity to manage these resources strategically rather than rushing extraction.
“If we make the transition earlier, our economic structure will be more diversified,” she said. “A green economy and energy diversification will strengthen energy security and economic resilience.”
She also emphasized the social dimensions of the transition. Many renewable energy projects, particularly geothermal, are located near forests and indigenous lands. Protecting land rights, preventing displacement and ensuring fair benefit-sharing must be prerequisites, not afterthoughts.
Drawing on discussions at COP30, Maryati highlighted renewed attention to community-centered safeguards, including financing mechanisms that ensure a portion of climate finance reaches indigenous peoples, local communities, workers, women and persons with disabilities affected by energy transition projects.
“The just transition must truly be just,” she said. “Otherwise, it risks reproducing the same injustices that defined the fossil fuel era.”
As Indonesia faces budget constraints, increasing climate disasters such as recent floods in Sumatra, and rising public expectations for climate leadership, Maryati argued that coherent leadership will resonate both regionally and globally.
“If Indonesia can align its actions with a clear financing and policy framework, the energy transition could redefine its economy,” she said. “Without that alignment, we risk one delay after another.”
Her assessment highlights the paradox at the heart of Indonesia’s climate stance: ambitious targets and high-profile commitments confronting fragmented institutions and slow implementation. Whether political leadership can bridge this gap remains one of the most critical questions facing the world’s fourth-most populous country and a major emerging emitter.
