Indonesia's Renewable Energy Transition: Key Regulatory Developments and Challenges

Strategic Insights -

As Indonesia accelerates its shift towards a greener energy future, the country's legal and regulatory landscape continues to evolve. The government is actively developing a policy framework to meet its clean energy goals, supported by a mix of financial and non-financial incentives. However, despite these efforts, the renewable energy sector in Indonesia still faces significant challenges, including grid constraints, regulatory complexity, and financing gaps. Investors must navigate these complex regulations to make informed investment decisions.

Key Takeaways:

  • The government has established a target of achieving 34.3 percent renewable energy in the national energy mix by 2034, up from 23 percent by 2025 (MEMR Decree No. 188.K/TL.03/MEM.L/2025).
  • Presidential Regulation No. 112 of 2022 restricts the development of new coal-fired power plants unless they meet stringent criteria, including a minimum 35 percent reduction in emissions within 10 years and the cessation of operations by 2050 at the latest.
  • Tax incentives for renewable energy investors include income tax deductions of up to 30 percent, extended tax loss carry-forward for up to 10 years, and accelerated depreciation of assets under Government Regulation No. 78 of 2019 (GR 78/2019).
  • Geothermal developers are eligible for import duty and VAT exemptions under Minister of Finance (MoF) Regulations No. 218/2019 and No. 198/2019.
  • Non-fiscal incentives, such as land and building tax reductions and streamlined permitting processes, are available to support project development.
  • The government aims to deploy 2 million electric vehicles and 12 million electric motorcycles by 2030, with VAT and luxury tax exemptions provided for EVs meeting local content thresholds under Presidential Regulation No. 55 of 2019 and MoF Regulation No. 21/2010.

Statistics:

  • By 2025, Indonesia aims to achieve 23 percent renewable energy in the national energy mix, as established by Government Regulation No. 79 of 2014.
  • The target has been increased to 34.3 percent by 2034, as per MEMR Decree No. 188.K/TL.03/MEM.L/2025.
  • The government aims to deploy 2 million electric vehicles by 2030.
  • The country's green target for 2030 includes 40GW of renewable energy capacity, with a view to increasing this to 70GW by 2035.

Sources:

  • Government Regulation No. 79 of 2014 on National Energy Policy (GR 79/2014)
  • MEMR Decree No. 188.K/TL.03/MEM.L/2025 on PLN's Electricity Supply Business Plan (RUPTL) for 2025-2034
  • Presidential Regulation No. 112 of 2022
  • Government Regulation No. 78 of 2019 on Tax Incentives for Renewable Energy Investors (GR 78/2019)
  • Minister of Finance (MoF) Regulations No. 218/2019 and No. 198/2019
  • Presidential Regulation No. 55 of 2019, as amended by Presidential Regulation No. 79 of 2023
  • MoF Regulation No. 21/2010
  • MEMR Regulation No. 10 of 2025 on the Energy Transition Roadmap