The Cost of Renewable Energy in Indonesia, Will It Cost More?

The Cost of Renewable Energy, Will It Cost More to Save The World?

  • InCorp Editorial Team
  • 9 January 2023
  • 4 minute reading time

It is astounding how quickly wind and solar power have developed. A short time ago, local and regional players were frequently responsible for creating new solar and wind farms, and the price was much greater than that of a coal plant. 

Today, the cost of renewable energy has drastically decreased, and giant multinational corporations are undertaking numerous solar and wind projects. These companies frequently also announce astronomical development goals.

The Appeal of Renewable Energy Investment

The Cost of Renewable Energy in Indonesia, Will It Cost More?

Renewable and sustainable procurement energy, spearheaded by wind and solar, is poised to become the foundation of the global power supply as nations work to meet aggressive decarbonization targets. 

The growth narrative, however, is just beginning. New kinds of companies are joining the market, in addition to capacity expansions from big energy suppliers. 

Major oil and gas companies, private equity players, and institutional investors that prioritize renewable energy as a critical component of their investment strategies are some of today’s fast followers. 

Business To Reduce Their Carbon Emission

These companies want to change their business models so they can benefit from the increased demand for renewables and the electrification of vehicles. Companies that make cars are also entering into agreements for renewable energy to power their operations and production and investing in wind and solar projects.

Steel producers are looking at green hydrogen to decarbonize their steel manufacturing, with renewables providing the green power for the process. Leaders in the shipping sector are investing in renewables to enable the production of hydrogen and ammonia as zero-emission fuel sources. 

The drive to expand solar and wind power capacity puts more pressure on developers to work quickly and effectively while ratcheting up competition for limited resources.

Read more: The Future of the Coal Power Plant Business in Indonesia

How Costly is The Renewable Energy Transition?

A significant increase in capital-intensive clean energy assets. Wind, solar PV, electric cars, and hydrogen electrolyzers are necessary to put the world on a path to achieve net zero emissions by 2050. These assets have relatively high upfront investment costs and lower operating and fuel costs over time. 

According to the IEA Net Zero Emissions by 2050 Scenario (NZE), the private sector will require to fund roughly 70% of clean energy investment over the next ten years. 

Other than that, access to low-cost funding must be made more accessible, especially in emerging and developing nations, if investment in clean technology is to increase. 

The widespread mobilization of low-cost debt, such as those offered by banks and credit unions, is essential to capital structures because clean energy transitions require substantially higher amounts of equity and debt.

The Benefits of Renewable Energy Investment

The cost of an energy transition that would keep the rise in global temperature well below 2 degrees would be $19 trillion higher than a business-as-usual strategy. Still, the benefits would be worth $50–142 trillion by 2050, increasing the global GDP by 2.4%.

Indonesia is among other countries that are determined to reduce carbon emissions by imposing legal and economic policies and incentives. Entrepreneurs should start to capitalize by expanding their business to Indonesia and gain competitive benefits, supported by the government. 

Indonesia Renewable Energy Initiative

By formally collaborating with Australian renewable energy company Sun Cable, the Indonesian government has taken the first step toward building an energy distribution network that will likely unlock the region’s estimated $115 billion in green sustainable economic development possibilities over the following ten years. 

To address the mismatch between renewable energy supplies and the locations of high electricity demand areas, as well as to maintain the stability and security of the electricity system, Indonesia is preparing to develop a super grid. InCorp Indonesia can help you by providing a business license to tap into the new business potential. 

The Acceleration

According to Indonesia, the ETM Country Platform would use a hybrid finance strategy to hasten the transition from dirty energy sources to clean ones. 

To oversee the ETM and provide a funding and investment framework, PT Sarana Multi Infrastruktur (PT SMI), a division of Indonesia’s finance ministry that finances infrastructure projects, has been chosen. 

The Climate Investment Funds’ governing board has approved giving Indonesia $500 million at highly reduced rates. 

As a result of these funds, more than US$4 billion in financing will be ready to speed up the retirement of up to 2 GW of coal-fired power plants, assisting in the reduction of an anticipated 50 million tonnes of carbon dioxide emissions by 2030 and 160 million tonnes by 2040.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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Frequent Asked Questions

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

There are two main types, namely, primary business licenses and non-primary business licenses. The primary ones commonly apply to various industries, such as general and industrial business licenses. Additional non-primary ones are included, depending on the operations of your business. Examples of non-primary business licenses are operational and commercial licenses.

Yes, you must apply for it to be able to issue work permits for your foreign employees. This permanent business license is also a prerequisite for the applications for other business licenses and import licenses.

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.