The Government of Indonesia (GoI) has set ambitious targets to reduce reliance on fossil fuels and accelerate the transition to renewable energy. Under its enhanced Nationally Determined Contribution (NDC), Indonesia has pledged to cut greenhouse gas emissions by 31.89% unconditionally (or 43.2% with international support) by 2030, and to reach net-zero emissions by 2060. However, progress to date has fallen short of these commitments.

The National Energy Policy issued in 2014 set a target for renewables to account for 23% of the national energy mix by 2025 and 31% by 2030. However, data from the Ministry of Energy and Mineral Resources (MEMR) shows that renewable energy represented only 14.68% of the mix as of 2024.

In 2022, the GoI introduced a moratorium on new coal-fired power plants (CFPPs). However, the regulation includes exemptions for:

• CFPPs already listed in the Electricity Supply Business Plan (Rencana Usaha Penyediaan Tenaga Listrik, or RUPTL); and
• CFPPs that meet specific criteria, namely:
1. integration with industries that increase the added value of natural resources or qualify as National Strategic Projects with significant contributions to job creation and/or economic growth;
2. commitment to reduce greenhouse gas emissions by at least 35% within ten years of operation, compared to the national CFPP average in 2021, through advanced technology, carbon offsets or renewable co-firing; and
3. operation limited to no later than 2050.

Importantly, these exemptions allow the continued development of captive CFPPs for powering smelters. Given the GoI’s emphasis on downstream mineral processing, the construction of additional captive CFPPs is likely in the near future.

In the transportation sector, the GoI has launched incentives for electric vehicles and charging infrastructure. Although these measures do not amount to a formal phase-out of internal combustion engines, they represent an incremental step toward reducing fossil fuel dependence.

Hydropower

Hydropower is the largest contributor to Indonesia’s renewable energy mix. The installed hydropower capacity is approximately 7.1 GW, which accounts for around 7.06% of national installed generation capacity. The 2025 National Electricity General Plan (RUKN) estimates Indonesia’s total hydropower potential to be 95 GW, of which the overwhelming majority (94.6 GW) is attributed to run-of-river systems.

Geothermal

Indonesia is among the world leaders in geothermal resources. Installed geothermal capacity currently stands at 2.67 GW (2.64% of total capacity), which makes it the second-largest renewable contributor after hydropower. National potential is vast (around 23.8 GW across 357 identified sites), with 14.4 GW having been confirmed as proven reserves. Given Indonesia’s volcanic geography, geothermal energy is expected to remain central to baseload renewable generation.

Biomass and Biogas

Biomass and biogas together contribute approximately 3.7 GW of installed capacity, largely through co-firing programmes in existing coal-fired power plants operated by PLN (Perusahaan Listrik Negara – the state electricity company). The 2025 RUKN estimates Indonesia’s biomass potential to be 53.4 GW, with an additional 1.3 GW from palm oil mill effluent, which brings total bioenergy potential to around 55.7 GW.

Solar Photovoltaic (PV)

Indonesia currently has a total installed solar PV capacity of only 920 MWp (0.9% of total capacity), but the country's solar resource is estimated at 3,315 GWp.

Wind

Wind energy plays a marginal role at present, with an installed capacity of 151.5 MW (0.15% of total). However, potential is estimated at 154.6 GW, divided between 60.4 GW onshore and 94.2 GW offshore.

Emerging Energy Sources

The clean energy transition in Indonesia has begun to expand into emerging energy sources. One area of rapid development is biofuels, where Indonesia operates one of the world’s most ambitious blending mandates in the transport sector. The biodiesel programme has advanced to B40 (40% fatty acid methyl ester in diesel), which contributes substantially to the renewable share in the national energy mix.

Contrastingly, hydrogen is still an emerging concept. Legally, hydrogen has been recognised as a form of “new energy” under the Energy Law. While current production is still confined to grey hydrogen from natural gas, a number of Indonesian companies are exploring pathways for green hydrogen and ammonia, particularly through geothermal and large-scale renewable projects. A clearer framework is expected to be introduced in the forthcoming New and Renewable Energy Law.

In June 2025, Indonesia and Singapore signed three memoranda of understanding (MoU) on:

• cross-border electricity trade;
• carbon capture and storage; and
• sustainable industrial zones.

Singapore’s Energy Market Authority also granted additional conditional licences and approvals for the import of renewable energy. With this new addition, there are currently six consortiums that have obtained conditional licences to import renewable energy from Indonesia. The signing of the MoU is expected to accelerate the development of large-scale solar PV projects in Sumatra Island and the development of a new subsea electricity cable between Indonesia and Singapore.

On 27 February 2025, the MEMR issued Regulation No 5 of 2025 on Guidelines for Power Purchase Agreements from Power Plants Utilising Renewable Energy Sources. The regulation serves as a guideline for the drafting of power purchase agreements (PPAs) between PLN and independent power producers (IPPs) for renewable plants – ie, geothermal, hydropower, solar, wind, biomass, biogas, waste-to-energy and ocean energy power plants. The MEMR also issued Regulation No 10 of 2025 on a Roadmap for Energy Transitions in the Electricity Sector.

A significant number of renewable projects are being procured by PLN via assignment to its subsidiaries, namely PT PLN Nusantara Power (PLN NP) and PT PLN Indonesia Power (PLN IP). For these projects, the PLN subsidiary is the one selecting strategic partners for each project, becoming the majority (51%) shareholder in the project. Previous projects that were developed under this scheme include the 145 MWac Cirata floating solar PV project (developed by Masdar and PLN NP) and the 50 MW solar PV project in the new capital city, Nusantara Capital City (Ibu Kota Nusantara, or IKN) (developed by Sembcorp and PLN NP).

In September 2024, PLN NP invited companies to participate in its preliminary evaluation. Shortlisted companies will then be invited to participate in PLN NP’s strategic partner selection process once PLN assigns certain renewable projects to PLN NP. It is envisaged that there will be 13 projects (hydro and solar) where PLN will do the procurement directly but PLN NP will be included as a mandatory partner with minority shareholding, and four other projects (wind) where it is not yet known if PLN NP will be the majority or minority shareholder.

According to the MEMR, an additional installed capacity of 876.5 MW was sourced from renewable energy during the first six months of 2025.

There is currently no specific legal framework for renewable energy. Current key primary legislation includes the following.

• Law No 30 of 2007 on Energy (Energy Law) provides the overarching framework for Indonesia’s energy sector, and obliges both central and regional governments to increase the supply and utilisation of new and renewable energy (NRE) (Articles 20(4) and 21(2)). It also allows business entities and individuals developing NRE projects to receive fiscal or non-fiscal incentives until their projects become economically viable. The Energy Law is general in nature, but establishes the legal foundation for subsequent renewable energy regulations, including the national target of achieving a 31% renewable share by 2050 under the National Energy Policy (KEN).
• Law No 30 of 2009 on Electricity, as most recently amended by Law No 6 of 2023 on Stipulation of Government Regulation in Lieu of Law No 2 of 2022 (Electricity Law) is the principal law governing electricity generation, transmission, distribution and sales, including for renewable energy.
• Law No 21 of 2014 on Geothermal Energy, as most recently amended by Law No 6 of 2023 on Stipulation of Government Regulation in Lieu of Law No 2 of 2022 (Geothermal Law) governs both the exploration and exploitation of geothermal resources for electricity generation and for direct-use applications. Notably, this law removes geothermal from the legal classification of “mining” which enables projects to be developed in conservation forest areas (this is important, as many geothermal fields are located in forested zones).

Key implementing regulations include:

• Government Regulation No 79 of 2014 on National Energy Policy (GR 79/2014 or KEN);
• Government Regulation No 25 of 2021 on Energy and Mineral Resources Business (GR 25/2021);
• Presidential Regulation No 22 of 2017 on the General Plan of National Energy (PR 22/2017 or RUEN);
• Presidential Regulation No 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity (PR 112/2022);
• MEMR Regulation No 11 of 2021 on the Implementation of Electricity Business, as amended by MEMR Regulation No 2 of 2024 on Rooftop Solar Power Plants Connected to Electrical Power Networkers of Holders of Business Licence for the Provisions of Electrical Power for Public Interest (MEMR Reg 11/2021);
• MEMR Regulation No 2 of 2024 on Rooftop Solar Power Plants Connected to Electrical Power Networkers of Holders of Business Licence for the Provisions of Electrical Power for Public Interest (MEMR Reg 2/2024);
• MEMR Regulation No 5 of 2025 on Guidelines for Power Purchase Agreements from Power Plants Utilising Renewable Energy Sources (MEMR Reg 5/2025);
• MEMR Regulation No 10 of 2025 on Road Map for Energy Transition in the Electricity Sector (MEMR Reg 10/2025);
• MEMR Decree No 188.K/TL.03/MEM.L/2025 on Approval of the Electricity Supply Business Plan of PLN for 2025-2034 (2025-2034 RUPTL); and
• MEMR Decree No 85.K/TL.01/MEM.L/2025 on National Electricity Plan (2025 RUKN).

Upcoming Changes

NRE Law

The draft bill on the NRE Law has been under discussion between the House of Representatives and the GoI for more than seven years, and it is expected to be finalised soon. The bill is anticipated to cover not only renewable energy, but also “new energy” sources such as nuclear, hydrogen and ammonia.

Electricity Law

A draft amendment to the Electricity Law is currently being prepared by the House of Representatives. The amendment is expected to strengthen support for renewable energy, provide greater detail on electricity exports, and simplify the tariff structure for end customers.

Waste-to-energy

The GoI is preparing a draft amendment to the government regulation on waste-to-energy programmes. In parallel, Indonesia’s sovereign wealth fund, Danantara, has launched the Patriot Bond, targeting USD3.1 billion. Proceeds will be used, among other purposes, to develop waste-to-energy projects across 33 locations nationwide.

Export of electricity

In light of the recent MoU signed between Indonesia and Singapore on the export of electricity, the GoI is preparing a draft amendment to Government Regulation No 42 of 2012 on Cross-Border Electricity Sales. Among other effects, the amendment is expected to extend the validity period of the export and interconnection permits (which currently can only be granted for a maximum period of five years), address power wheeling for export projects, and streamline licensing requirements.

The primary regulators for renewable energy in Indonesia are as follows.

• The Minister of Energy and Mineral Resources (MEMR) is the central authority that oversees the national energy and electricity policy. The two directorate generals within the MEMR that are relevant for renewable energy activities are the Directorate General of Electricity and the Directorate General of New Renewable Energy and Energy Conservation. Among other powers, the MEMR has the authority to:
1. issue electricity business licences;
2. conduct inspection and supervision of electricity business and facilities (including imposing sanctions and revoking business licences);
3. issue tariff approval; and
4. adjust the ceiling tariff for renewable projects currently set in PR 112/2022.

• The National Energy Council (Dewan Energi Nasional, or DEN) was created by the President and comprises 15 individuals: seven from government bodies and eight from stakeholder groups. DEN is tasked with:
1. designing and formulating national energy policies;
2. establishing the National Energy General Plan and measures to address energy crises and emergencies; and
3. supervising the implementation of cross-sectoral energy policies.
• The Minister of Investment and Downstream Industry/Indonesia Investment Co-ordinating Board (BKPM) co-ordinates business licensing, especially with respect to foreign investment. The Online Single Submission (OSS) system for licensing is managed by the BKPM.

The electricity sector in Indonesia is highly regulated. Renewable IPPs may carry out electricity generation activities and sell electricity under long-term PPAs with PLN, with a maximum period of 30 years from the commercial operation date (COD). PLN has to carry out limited tenders for the procurement of electricity from renewable sources, but direct appointments are permitted under certain circumstances.

For geothermal specifically, the company must obtain two main business licences:

• the Geothermal Licence (IPB); and
• the electricity supply business licence for public interest (IUPTLU) for power generation.

Captive power projects are allowed. However, due to restrictions on electricity sales and business areas, rooftop solar PV projects are typically structured by way of a long-term operating lease agreement between the solar PV developer and the customer.

Under MEMR Regulation No 48 of 2017 on Supervision of Business in the Energy and Mineral Resources Sector, the transfer of shares in an IPP company that sells electricity to PLN is prohibited prior to the COD, unless the transfer is to an affiliate that is directly owned more than 90% by the sponsor and is at one level below it. Any transfer of shares after the COD may be subject to certain contractual restrictions under the PPA.

For geothermal companies specifically, the initial public offering and transfer of shares in an Indonesian exchange are allowed after exploration, subject to prior approval from the MEMR. The transfer of shares via private sales is permitted but must be notified to the MEMR within five business days.

The lines of power generation (above 1 MW), transmission, distribution and sales are open for up to 100% foreign investment, as is geothermal business. Foreign investment companies are subject to minimum issued and paid-up capital requirements of IDR10 billion.

According to the 2023 Electricity Statistics issued by the MEMR, Indonesia has power plants with a total installed capacity of 91 GW. PLN owns and operates around 46 GW, and others (including IPPs supplying power to PLN and captive power plants) make up the remaining 45 GW.

The lines of businesses of electricity generation, transmission, distribution and sales are open for private investors. However, the Constitutional Court has recently issued a ruling that the electricity business must be conducted in an integrated (bundling) manner, and it cannot be conducted in an unbundling model (where each of the generation, transmission, distribution and sales is done by a different company).

Renewable IPPs may carry out electricity generation activities and sell electricity under long-term PPAs with PLN, with a maximum period of 30 years from COD. PLN has to carry out limited tenders for the procurement of electricity from renewable sources, but direct appointments are permitted under certain circumstances, as follows:

• hydropower projects utilising multipurpose infrastructure built by the state (eg, reservoirs, dams and irrigation canals);
• geothermal projects with an IPB holder, as the tender of the geothermal working area is already done by the MEMR;
• expansion of existing renewable power plants at the same location (for geothermal, hydro, solar PV, wind, biomass and biogas); and
• excess power (excess capacity) from operating power plants.

To participate in PLN’s tender, a company must pass certain financial and technical criteria and be shortlisted on PLN’s list of selected providers.

Market Structure

Biogas in Indonesia does not yet operate within a unified national market. Unlike electricity, which is fed into a single grid, biogas is typically produced and consumed locally. Most projects are still on-site (eg, palm oil mills processing palm oil mill effluent into energy, or landfill projects capturing methane for immediate use). As far as current regulations stand, there is no provision specifically allowing the injection of biogas into the national gas transmission grid. Any future injection of biomethane would likely fall under general natural gas regulations.

Key Parties

The main parties involved in biogas are Pertamina and PGN, government agencies, and producers of biogas and biomass – ie, major producers of biogas as a byproduct of their operations. Palm oil companies in particular have been encouraged to install biogas units. The Minister of Industry (MOI) and the MEMR offer some grants or subsidies for these installations (eg, through the Palm Oil Estate Fund for energy utilisation).

Applicable Rules and Regulations

Under PR 112/2022, PLN is required to purchase electricity from biogas and biomass power plants, provided that project developers can demonstrate a secure fuel supply throughout the PPA term. Several projects are already in operation, such as:

• the AANE Jangkang Belitung, Indonesia’s first commercial-scale biogas plant, which has been operating since 2014 with a capacity of 1.2 MW and annual production of around 8.5 million kWh; and
• the 3 MW Ujung Batu power plant in Riau, developed by PT Pasadena Biofuels Mandiri in 2023.

Licensing and Permitting

The business classification covering biogas as an alternative fuel is registered under KBLI 35203, which includes activities for processing gaseous fuel that can be directly utilised as energy. This encompasses fuel produced from agricultural, plantation, livestock or waste by-products, with additional processes undertaken to improve quality, such as purification, blending or other treatment. The activity is designated as high risk, which requires a Business Identification Number (Nomor Induk Berusaha, or NIB) and operational licences.

Once licensed, holders of a business licence for biogas as an alternative fuel are required to maintain the availability of biogas to meet domestic demand at reasonable prices, and to ensure the operation of appropriate facilities for provision, distribution and marketing.

The Geothermal Law distinguishes between direct use (using geothermal heat/fluid directly for its thermal energy without converting to electricity, such as for tourism, industry and agribusiness) and indirect use (for electricity). A company engaging in indirect use of geothermal power must obtain two main business licences:

• the Geothermal Licence (IPB); and
• the electricity supply business licence for public interest (IUPTLU) for power generation.

The MEMR has the authority to auction geothermal working areas for indirect use. Prior to the tender, PLN is required to submit the electricity tariff proposal, model power purchase agreement and pre-transaction agreement (which will be signed by the winning bidder and PLN) to the MEMR. PR 112/2022 stipulates that PLN may purchase the electricity from the project if the exploration is already completed and there is a proven geothermal resource, indicating that the PPA will only be signed once the exploration is completed. The maximum exploration period (including feasibility study) under the Geothermal Law is five years, which may be extended twice for a maximum period of one year for each extension. The exploration period can be granted for a maximum of 30 years after the feasibility study is approved by the MEMR.

The MEMR may also assign a business entity to carry out preliminary surveys and exploration (PSPE) in potential working areas. Geothermal working areas from this process will be auctioned via limited tender to the PSPE holder and state-owned enterprises engaging in the geothermal line of business.

In addition to the IPB licensing scheme described above, Indonesia still has several geothermal projects that were developed under the old joint operation contract (JOC) model. In this structure, PT Pertamina Geothermal Energy Tbk (PGE) holds the concession over geothermal working areas designated by the GoI. PGE appoints joint operation contractors to conduct geothermal exploration and exploitation within the area, and the electricity produced from the project is sold to PLN based on an energy sales contract.

Key Parties

The main parties involved are as follows:

• The Directorate General of New Renewable Energy in the MEMR has authority to supervise the geothermal sector in Indonesia, including for the issuance of the IPB and the tender of geothermal working areas.
• The Directorate General of Electricity in the MEMR has authority to supervise the electricity sector in general, including with respect to the issuance of IUPTLU and electricity tariff approval for geothermal projects.
• PGE is a subsidiary of PT Pertamina (Persero), which is the holder of geothermal working areas in various locations in Indonesia, including several geothermal concessions under the old JOC model.
• PLN is the main offtaker for electricity generated from geothermal projects.

Hydrogen

The production of hydrogen remains at an early stage in Indonesia. At present, hydrogen produced for industrial applications is treated simply as part of industrial activity subject to general industrial regulations. For green hydrogen (ie, hydrogen generated from renewable electricity via electrolysis), there is as yet no established PPA mechanism or offtake framework, which reflects the fact that such production has not yet reached a commercial scale in Indonesia.

Despite this absence of a regulatory framework, several key policy documents have provided further structure to Indonesia’s hydrogen ambitions. The Executive Summary of the Study on Green Hydrogen Development in Indonesia: Potential and Challenges, issued by BKPM, underscores the potential for green hydrogen to deliver exponential reductions in emissions as it begins to replace fossil-based fuels across transportation, buildings, electricity generation, industrial heating and feedstock applications. This policy direction has been reinforced by the MEMR, which, together with PLN, inaugurated Indonesia’s first pilot green hydrogen plant at the Muara Karang combined-cycle power plant in Jakarta, signalling a practical commitment to advancing hydrogen development.

The MEMR recently issued the National Hydrogen and Ammonia Roadmap for 2025–2060, which lays out three sequential phases.

• The Initiation Phase (2025–2034) prioritises pilot projects, including hydrogen refuelling stations, hydrogen-powered buses and trucks, and the blending of up to 20% hydrogen into the natural gas network. In the power sector, the focus remains on co-firing, with ammonia and hydrogen blending targets set at 3% by 2025 and 2030 respectively, rising to 30% ammonia and 10% hydrogen by 2034 and 2035.
• The Development and Integration Phase (2035–2045) foresees broader deployment of hydrogen technologies across industrial applications.
• The Acceleration and Sustainability Phase (2046–2060) envisions full-scale commercialisation with hydrogen integrated into Indonesia’s clean energy system.

Biofuels

Biodiesel is already integrated into the fuel market by mandate (Pertamina and other distributors blend and distribute it).

Quality Standard

Indonesia has begun to establish quality standards for biofuels, although they remain concentrated on biodiesel. The basis is SNI 7182:2015, which sets out specifications for biodiesel quality. Its key parameters include:

• a minimum methyl ester content of 96.5%;
• a minimum cetane number of 51;
• a maximum sulphur content of 50 mg/kg;
• an oxidative stability requirement of at least 480 minutes (using the Rancimat method); and
• a maximum total glycerol content of 0.24%.

At this stage, however, there are no equivalent SNI provisions governing higher biodiesel blends such as B35 or B40, nor are there national standards in place for bioethanol or aviation fuel.

Incentives

The GoI provides subsidies for biodiesel (the gap between the biodiesel production cost and the diesel selling price is covered by the Oil Palm Fund). No subsidy yet exists for hydrogen but, given global trends, Indonesia might incentivise green hydrogen for export or domestic industry via tax breaks. The NRE Bill includes the concept of a “Value of Carbon” (Nilai Ekonomi Karbon) incentive, under which a business that produces clean energy can earn carbon credits or other economic value.

Under the Electricity Law, consumers may conduct electricity business activities (generation, transmission and distribution) for their own use. In this case, the electricity business licence (IUPTLS) must be held by the end user. Due to the restriction on electricity sales and business areas, captive solar PV projects are typically structured as long-term operating lease agreements between the customer and the solar PV developer.

The main regulation governing grid-connected rooftop solar PV projects is MEMR Regulation 2/2024, pursuant to which, customers are allowed to own and operate rooftop solar PV power plants for their own use. However, such use will be subject to approval from the business area holder and the quota determined by the MEMR. Parallel operation charges are not applicable for rooftop solar PV projects for own use. MEMR Regulation 2/2024 also removed the net-metering benefit that used to be available for PLN’s customers under the previous regulation.

Market Structure

Indonesia’s electricity transmission and distribution network is dominated by PLN, which is mandated to supply electricity for the public interest. Under the Electricity Law, PLN has the “first priority” to undertake electricity supply in any given area. However, private companies, regional-owned enterprises, co-operatives and community-based entities may also engage in electricity supply business for public use if duly licensed, especially in cases or regions where PLN does not undertake the service. In practice, PLN holds IUPTLU covering generation, transmission, distribution and retail in most regions.

Assets and Grid Operation

The national grid infrastructure is predominantly owned and operated by PLN. Electricity from renewable sources is generally fed into PLN’s grid under PPAs with PLN as the offtaker or comes from renewable power plants owned and operated by PLN. Government Regulation No 25 of 2021 on Implementation of the Energy and Mineral Resources Sector (GR 25/2021) confirms that transmission and distribution are regulated businesses that require licences, and allows integrated operations by the same entity for public supply.

Applicable Rules and Regulations

Public grid operators (ie, PLN) have obligations to serve, including universal service targets and reliability standards, overseen by the MEMR and the Energy Regulatory Agency. Renewable electricity generators generally connect to PLN’s grid at the appropriate voltage level. As the grid operator, PLN is responsible for grid interconnection agreements and for ensuring system stability when intermittent renewables feed in.

Notably, energy storage systems (ESS) – particularly battery energy storage systems – are increasingly recognised in regulations as a means to support renewable integration. PR 112/2022 contemplates the use of battery or other energy storage facilities alongside intermittent renewable plants, and provides that projects like solar PV or wind that include storage may be subject to different tariff considerations. For instance, PR 112/2022 mandates the MEMR to set benchmark prices for renewables, with separate or additional pricing for installations equipped with batteries or storage. Following this, MEMR Reg 5/2025 allows renewable IPPs to incorporate storage technology and introduces the concept of “deemed dispatch” for renewable PPAs, which can compensate developers if the grid operator cannot offtake power due to congestion or other reasons. This incentivises the use of storage or grid upgrades to minimise curtailment.

There is no specific regulatory framework governing potential grid congestion and intermittency. PLN owns and operates the majority of transmission assets in Indonesia and a significant amount of generation assets. IPPs supplying power to PLN are also required to always comply with PLN’s dispatch instruction. Therefore, PLN can curtail the electricity supply at any time to mitigate potential grid congestion. PPAs between IPPs and PLN typically require PLN to pay for deemed dispatch if the curtailment (which is not caused by the IPP’s fault) exceeds a certain threshold.

The transportation and storage of renewable gas is governed not by a dedicated regime but rather by the general framework applicable to natural gas. The sector remains highly centralised, with transmission and distribution infrastructure dominated by PGN and Pertamina itself. Producers of renewable gas must either construct small, dedicated pipelines for “own use” under a licence from the Directorate General of Oil and Gas, or contract with a licensed pipeline operator such as PGN. By law, pipeline operators are obliged to provide third-party access where technically and economically feasible, although in practice such arrangements are still rare for renewable gas.

Where pipeline connection is not viable, renewable gas may be upgraded and compressed into Bio-CNG or liquefied into Bio-LNG, stored in cylinders or tanks, and transported by truck or vessel in a manner similar to LPG or conventional CNG. Indonesia has not yet developed large-scale storage facilities specific to biogas or biomethane; the market is limited to smaller bottling and distribution initiatives for off-grid cooking or transport applications.

Indonesia does not have an established sector for district heating or centralised heat distribution from renewable sources, primarily due to the tropical climate (which minimises demand for heating) and the lack of existing heat network infrastructure.

For the utilisation of geothermal power for heat, the rights to transport and store geothermal heat fall within the scope of the IPB, which authorises the holder not only to explore and exploit geothermal resources within the designated working area, but also to undertake the ancillary activities required for delivering the extracted heat to a power generation facility. In practice, geothermal operations are almost always developed in close proximity to the designated geothermal working area, which minimises the logistical need for long-distance transportation of geothermal steam or hot water. Consequently, the licence holder is usually responsible for building, operating and maintaining the necessary infrastructure to ensure the reliable supply of heat energy to the power plant.

Hydrogen

There is currently no specific regulation governing the storage and transportation of hydrogen in Indonesia. However, according to the Indonesian Hydrogen Roadmap, studies and pilot projects are planned for the movement of hydrogen in the form of high-pressure liquid, solid carriers and underground storage. In the maritime transport sector, demonstration projects are envisaged to test hydrogen shipping, accompanied by the development of liquid hydrogen infrastructure at ports and designated logistics hubs.

Biofuels

The transport and storage of biodiesel and bioethanol in Indonesia are governed under MEMR Regulation No 4 of 2025 on the Utilisation and Business Activities of Biofuels. Article 3 stipulates that the business activities of biofuels may only be conducted by a licensed biofuel business entity that is authorised to undertake the processing, purchase, sale, transportation, storage and marketing of biofuels. With respect to storage, Article 8 requires that biofuel business entities provide dedicated storage facilities for the biofuels they manage. Article 17 further clarifies that oil fuel business entities may store biofuels prior to blending them with conventional petroleum fuels. Blending obligations are set out under Article 15(2), which requires oil fuel business entities to carry out blending of biofuels with specific fuel types:

• biodiesel blended with designated types of diesel oil;
• biodiesel blended with general diesel fuel;
• bioethanol blended with gasoline;
• hydrotreated vegetable oil (HVO/diesel biohydrocarbon) blended with diesel fuel at a cetane number specification of 51, as distributed at fuel stations for road transportation; and
• bioavtur blended with aviation turbine fuel.

The sale and purchase of electricity in Indonesia is governed by the Electricity Law, which requires any business entity seeking to distribute and sell electricity to obtain a business area and integrated IUPTL licence. PLN’s business area covers the whole territory of the Republic of Indonesia, except for certain areas that have been carved out and granted to other developers; therefore, in practice, the retail supply of electricity to end users in Indonesia is monopolised by PLN for general consumers. PLN sells electricity to households, businesses and industries at tariffs approved by the government – a customer cannot currently choose a different electricity supplier in the way they might in liberalised markets, as there is no competitive retail market. Renewable electricity generated by IPPs is sold wholesale to PLN via PPAs, and then PLN mixes it into the overall supply for end users.

There are currently 65 business area holders (including PLN) across Indonesia. Most non-PLN business areas are industrial estates with independent power suppliers.

The retail gas market in Indonesia (piped gas to end users) is relatively small. The main supplier to end users is PGN (and its subsidiaries), which delivers natural gas via pipelines to industrial, commercial and some residential consumers. When it comes to gas from renewable sources (biogas/biomethane), there is not yet a distinct retail market. Renewable gas, if injected into the grid, will be commingled with natural gas and delivered by the existing gas utility to customers. End users typically cannot tell the difference and are not sold “biogas” separately.

Trading “heat” as a commodity to end users is virtually non-existent in Indonesia, given the lack of centralised heating systems. End users who need heat (eg, hot air, steam or hot water) typically produce it on-site (eg, through boilers, heaters, heat pumps or solar water heaters). PR 112/2022 allows PLN to purchase steam from geothermal licence holders, which will be subject to the same ceiling tariff as the purchase of electricity from geothermal power plants.

Hydrogen is not yet supplied to general end users. With no hydrogen refuelling stations in place, demand from households or transport is virtually non-existent. For biofuels, the dominant channel is blending with fossil fuels. End users consume biodiesel and ethanol only as part of blended products at the pump. Ethanol, for instance, is supplied by producers to Pertamina and blended into gasoline before reaching consumers at petrol stations, which makes the trade B2B upstream rather than retail.

There is currently no specific regulatory framework for the trade of renewable energy certificates (RECs) in Indonesia. PLN offers the sale of RECs to buyers in Indonesia, using an electronic tracking system from APX TIGRs.

A recent development is the establishment of an organised REC market on a commodity exchange. In 2024, the Commodity Futures Trading Regulatory Agency (Badan Pengawas Perdagangan Berjangka Komoditi,or Bappebti) issued Bappebti Regulation No 11 of 2024 on Procedures for Trade of Physical Renewable Energy in the Futures Exchange, which essentially creates a framework for trading RECs as a commodity. Following this, in April 2025, the Indonesia Commodity and Derivatives Exchange became the first licensed exchange to facilitate REC trading. Under this system, RECs are traded on the exchange, with Indonesia Clearing House providing clearing and settlement.

Due to restrictions on business areas and electricity sales in Indonesia, corporate PPAs are typically structured as long-term operating lease agreements.

Land Acquisition

Land acquisition remains a major concern for project development in Indonesia. A lot of land in Indonesia is not yet certified, which means that project developers often have to go through a lengthy and uncertain process to identify and verify the status and ownership of the land. Under Law No 2 of 2012 on Land Procurement for Public Interest as amended by the Job Creation Law, PLN (and in some cases IPPs) may utilise the mandatory land acquisition process as provided under the law, but the timeline for this process is very long (sometimes more than 300 business days).

Prior to obtaining title over the land, the developer must obtain a Conformity to Spatial Utilisation Activities (KKPR), which, among others, confirms that the proposed site of the project is already aligned with the spatial planning. KKPR is one of the basic licensing requirements that must be obtained by companies before they can obtain business licences.

Environmental Approval

Before commencing any business activity in Indonesia, companies have to prepare environmental documents and obtain an environmental approval. For renewable power plants and electricity transmission assets, the environmental documents are usually in the form of either an Environmental Impact Analysis (AMDAL) for projects with more significant impact on the environment, or an Environmental Management Efforts – Environmental Supervision Efforts document (UKL/UPL). Whether or not a project is subject to the AMDAL or UKL-UPL requirement will depend on the capacity and size of the project. The preparation of an AMDAL will involve public consultation.

Environmental approval is one of the basic licensing requirements that must be obtained by companies before they can obtain business licences.

Building Approval (PBG)

Building Approval is also one of the basic licensing requirements that must be obtained by companies before they can obtain business licences. The Building Approval must be obtained prior to the commencement of construction activities.

Forestry Area Use Approval (PPKH)

Where a renewable energy project is located within a designated forestry area, the project developer is required to obtain a PPKH, which serves as the legal basis permitting the use of forest areas for non-forestry activities, including renewable energy development. The scope of permissible activities is limited, and only certain renewable energy projects may be licensed to operate in forestry areas. Without this approval, no development may proceed on forest-designated land.

Onshore Contracting

Under the Indonesian Construction Law, foreign contractors (in the form of either foreign investment companies or joint operations with a local contractor) may only undertake construction work within market segments that are high-risk, high-technology and/or high-cost. Construction contracts for the provision of construction services in Indonesia have to be governed by Indonesian law; if made in dual language, the Indonesian version will prevail in the event of a dispute.

Split EPC contract models (for onshore work and offshore work) may be implemented, but project developers will have to consider the restrictions under the Construction Law and the tax implications of the arrangement.

Offshore renewable energy in Indonesia (eg, offshore wind, tidal, wave and ocean thermal) is still at a very early stage. Nevertheless, several studies have identified potential sites, including areas off the coasts of South Sulawesi, Java, and selected eastern islands, where wind speeds are promising. Pilot initiatives have been explored, such as a tidal current project in the Larantuka Strait in Flores.

From a regulatory standpoint, there is currently no separate framework governing offshore renewable projects; they are subject to the same permitting and licensing requirements as apply to onshore renewable energy development. What distinguishes offshore projects, however, is the necessity of subsea transmission infrastructure: every offshore wind farm, tidal array or ocean thermal project must export power to the onshore grid (or, in some cases, across borders) via subsea cables.

Subsea Infrastructure

Subsea cable placement in Indonesia is governed under marine spatial-use law. The Minister of Marine Affairs and Fisheries Decree No 14 of 2021 on Submarine Pipeline and/or Cable System provides the national map and designated corridors for subsea pipelines and cables, which serve as the reference for any undersea installation. In parallel, Minister of Marine Affairs and Fisheries Decree No 42 of 2022 on Mechanism for Implementing the Establishment and/or Placement of Buildings and Installations at Sea establishes the procedure for placing buildings and installations at sea.

Developers must submit a proposal detailing the project plan, geographic co-ordinates, intended use of marine space, navigational safety considerations, disaster mitigation measures and ecosystem safeguards. The proposal is reviewed by the National Team on Subsea Cable and Pipeline Management, which validates the application and issues recommendations for a marine survey. Once approvals are obtained and the marine survey confirms compliance, the project may receive a Conformity of Marine Spatial Utilisation, environmental approval and the relevant business licences.

A significant number of Indonesian renewable projects have been financed by way of limited-recourse project financing from international lenders. The main legal considerations for project finance are as follows.

Bankability

A bankable PPA with balanced risk allocation between sponsors and PLN is a key concern in project finance. PPAs with PLN typically provide take-or-pay obligations and an obligation for PLN to purchase the project in the event of PLN’s default or prolonged government force majeure. Government guarantees are available for IPP projects (including renewable projects). However, over the past ten years, there have been many precedents of renewable projects being financed by international lenders on a project finance basis without any government guarantee.

World Bank Negative Pledge

The World Bank Negative Pledge requires that any lien created on any “public assets” as security for a loan will equally and ratably secure the GoI’s loan payment to the World Bank, or alternatively the GoI must provide an equivalent lien to the World Bank. The World Bank Negative Pledge exempts liens granted for acquisition finance transactions, but not for limited-recourse project finance.

The term “public assets” is defined broadly to include assets of any entity owned or controlled by the country, or operating for the account or benefit of the country. Therefore, it may be interpreted to include assets belonging to state-owned enterprises or subsidiaries of state-owned enterprises. In projects where one or all of the sponsors are state-owned enterprises or subsidiaries of state-owned enterprises, the structuring and security package will have to take into account the World Bank Negative Pledge restrictions.

Security, Direct Agreements and Enforcement

The security package for renewable energy projects typically mirrors that of other project-financed assets, including:

• mortgages (hak tanggungan) over land and buildings;
• fiduciary security over movable assets, receivables and insurance proceeds;
• pledge of shares;
• pledge of bank accounts; and
• conditional novation of key project contracts (eg, EPC, O&M and insurance).

Tax Allowance

Government Regulation No 78 of 2019 on Income Tax Facilities for Investment in Certain Business Fields and/or in Certain Regions provides tax allowances for investments in designated sectors and regions, including power generation (including for mini and micro power plants with investment below IDR100 billion) and geothermal. The allowance includes:

• a reduction of next taxable income of up to 30% of the amount of qualifying investment in the form of fixed assets (including land), spread at 5% per year over a period of six years;
• accelerated depreciation of tangible assets and accelerated amortisation of intangible assets;
• a reduction of the final income tax on dividends paid to foreign shareholders to 10%, unless a lower rate is available under the applicable tax treaty; and
• an extended loss carry-forward facility to a maximum of ten years under certain conditions.

Import Duty and VAT Exemptions

The import of capital goods for power plants (not only renewables) may be subject to import duty and VAT exemption if the goods are not yet produced in Indonesia or if the local products are not yet sufficient (in quantity or specifications). This facility is available for IPPs selling power to PLN and holders of electricity business areas (wilayah usaha).

There is no specific regulatory framework for the decommissioning and disposal of renewable energy installations in Indonesia. In general, renewable energy project developers must prepare environmental documents (either AMDAL or UKL-UPL, depending on the scale of the project) and obtain environmental approval before the commencement of construction. The environmental documents generally include post-operation measures (including the decommissioning of the facilities).

In addition, the disposal of hazardous and toxic waste (which may include certain materials in solar PV panels and battery systems) will have to be done in accordance with the Environmental Law and its implementing regulations.

The following upcoming developments are of note.

• NRE Law – the draft bill on the NRE Law has been under discussion between the House of Representatives and the GoI for more than seven years, and it is expected to be finalised soon. The bill is anticipated to cover not only renewable energy, but also “new energy” sources such as nuclear, hydrogen and ammonia.
• Electricity Law – a draft amendment to the Electricity Law is currently being prepared by the House of Representatives. The amendment is expected to strengthen support for renewable energy, provide greater detail on electricity exports, and simplify the tariff structure for end customers.
• National Energy Policy (KEN) – a new KEN is expected to be issued shortly, replacing the policy issued in 2014. The revised KEN is likely to lower the renewable energy mix target to 19–21% by 2030 (from the previous 23% by 2025), while significantly increasing longer-term targets to 58–61% by 2050 (previously 30%) and 70–72% by 2060.
• Second NDC – the GoI is currently in the final stage of preparing its second NDC, which is expected to include a higher renewable energy mix target, confirmation of the Forestry and Other Land Use (FOLU) Net Sink 2030 target, and a new goal of achieving Zero Waste Net Emission by 2050.
• Waste-to-energy – the GoI is preparing an amendment to the draft government regulation on waste-to-energy programmes. In parallel, Indonesia’s sovereign wealth fund, Danantara, has launched the Patriot Bond, targeting USD3.1 billion. Proceeds will be used, among other purposes, to develop waste-to-energy projects across 33 locations nationwide.