In recent years, Indonesia has emerged as a beacon of hope in the realm of renewable energy, actively spearheading initiatives to foster green energy usage and developmentThis push has solidified the nation's role as a central player in Southeast Asia's energy transition, setting the stage for the ambitious goal of achieving net-zero emissions by 2060. According to the National Energy Council of Indonesia, as of 2023, the nation’s energy structure is still heavily reliant on coal (40.46%), oil (30.18%), and natural gas (16.28%), while clean energy constitutes a mere 13.09% of the total energy mixThe government aims to elevate the share of clean energy to 19.49% by 2024, reaching 23% by 2025, and achieving 31% by 2050. Furthermore, this year, Indonesia's sovereign wealth fund plans to invest approximately $1 billion across various sectors, with green energy being a primary focus.

Indonesia's rich natural resources provide a solid foundation for creating an electric vehicle ecosystem, developing clean energy solutions, and phasing out coal-fired power plants—all critical components driving the country’s energy transformation.

As one of the countries with the richest reserves of battery raw materials, Indonesia holds over 22% of the world’s nickel reserves and accounts for more than 37% of global nickel productionAdditionally, it ranks as the second-largest cobalt producer, contributing about 5% to the global cobalt marketThe nation also boasts adequate reserves of bauxite and copper, crucial for the manufacturing of automobile components.

Data from Indonesia's Ministry of Energy and Mineral Resources indicates that the potential for clean energy in the country is an impressive 3,686 gigawatts, encompassing a spectrum of sources including solar, wind, hydro, bioenergy, geothermal, and ocean energyNotably, as a volcanic archipelago, Indonesia has access to over 40% of the world's geothermal resources, boasting a geothermal power generation potential of 23.9 gigawatts

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Furthermore, the country's vast oceanic resources allow it to harness currents, waves, and tides to generate electricity.

Under the collective encouragement and support of the government and various stakeholders, Indonesia is rapidly becoming a hotspot for electric vehicle (EV) productionInternational EV manufacturers are keen to establish plants or sell their products within the Indonesian marketCompanies from China, such as Wuling, Chery, Neta, and BYD, are making significant strides after entering Indonesia, garnering considerable attentionIndonesia has set ambitious objectives, aiming to create a robust electric vehicle ecosystem by 2027-2028 and to have approximately 13 million electric motorcycles and 2.2 million electric vehicles on the roads by 2030. By 2050, the country aspires to limit sales solely to electric vehicles and motorcyclesThe Indonesian Minister of State-Owned Enterprises, Erick Thohir, noted that electric car sales have already reached 3% of total vehicle sales, showcasing a marked growth trend.

Indonesia is also making positive strides in clean energy developmentIn November 2023, the Zhilata floating photovoltaic project, constructed by China Energy Construction, became the first project of its kind in Indonesia and the largest in Southeast AsiaNotably, this project is also recognized as the world’s deepest floating photovoltaic installation currently under construction, serving as a vital benchmark for the advancement of clean energy not only in Indonesia but across Southeast AsiaUpon completion, the project is expected to generate 300,000 MWh annually, saving approximately 117,000 tons of standard coal and providing sufficient electricity for 50,000 households—significantly alleviating the energy shortages in West Java.

Statistics reveal that by the end of 2022, Indonesia had installed geothermal power generation capacity of 2,356 MW, surpassing the Philippines to become the second-largest producer of geothermal energy globally, following the United States

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To accommodate growing electricity demands, Indonesia's Ministry of State-Owned Enterprises aims for the state electricity company to purchase over 1 GW of new energy and renewable energy by 2024. Projections suggest that by 2030, Indonesia's geothermal power generation capacity will rise to 3,355 MW, with increments of 141 MW in 2024 and 870 MW in 2025.

Despite these promising developments, the new geothermal power generation capacity in 2023 was merely 43 MW, falling short of the 190 MW targetMajor challenges include difficulties in obtaining development licenses, excessively high localization requirements for components, and prolonged negotiations regarding sales agreements with the state electricity companyRizal, the Secretary-General of the Indonesian Geothermal Association, noted that these issues severely impede financing from financial institutions.

To address the rapid expansion of renewable energy and rectify mismatches between the distribution of clean energy and power demand, Indonesia's electricity company is accelerating the development of interconnected electricity grids, giving rise to a "super grid" to connect disparate island electricity systemsIn parallel, Indonesia is also exploring the establishment of smart grid projects.

The development and utilization of clean energy will not only facilitate Indonesia in conserving energy and reducing emissions but will also promote green and sustainable economic growth while alleviating the burden of importing oil and natural gasAccording to Minister of Energy and Mineral Resources, Arifin Tasrif, Indonesia produces 600,000 barrels of oil daily but requires an additional 840,000 barrels to meet domestic demands, indicating a significant shortfallMoreover, the country imports 5.5 million tons of liquefied natural gas annually.

Insights from the Indonesian Mining Association suggest that as the stock of electric vehicles rises, the lifespan of Indonesia’s coal reserves could extend to 150 years

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However, Indonesia’s energy transition is not without its hurdlesOne major concern is the public's reluctance to fully embrace electric vehiclesDespite a noticeable increase in EV sales, their share of the total vehicle ownership remains lowSimilarly, although government subsidy programs are in place, the sales of electric motorcycles have not witnessed substantial changesIn 2023, the government allocated 14 trillion Indonesian rupiah to subsidize 200,000 new electric motorcycles (including retrofitted vehicles), yet only 11,532 of the allocated quotas were utilizedThe government has proposed increasing subsidy amounts for 2024, but the remaining quotas still stand at 576,400 vehicles, with only 10,643 quotas applied for thus far.

Financing issues also pose significant challengesIn 2022, Indonesia launched the world’s largest energy transition financing initiative, targeting $20 billion through the international financing mechanism known as the Just Energy Transition Partnership over the next 3-5 years for developing clean energy, including support for the early retirement of coal-fired power plantsLed by the United States and Japan, an international coalition pledged to assist Indonesia in phasing out coal dependency and achieving carbon neutrality by 2050. However, tangible progress on this front has yet to materialize, and private capital interest in accelerating the early retirement of coal-fired plants remains minimalIn February of this year, Arifin stated that the government’s priority will shift from coal plant retirements to optimizing transmission infrastructure.