Abstract
Indonesia's electricity sector sits at the intersection of three mandates that increasingly collide: deliver reliable power as a foundation for national development; keep electricity affordable and equitable for households and businesses across a vast archipelago; and decarbonize fast enough to meet Indonesia's own climate trajectory — including a power-sector transition consistent with net zero emissions before 2060.
Yet the sector's current institutional design still concentrates planning, procurement, system operations, and much of investment decision-making in a single vertically integrated, state-owned utility — PLN — within a political economy where tariffs, contracts, and access have long been arenas of distributional conflict. Electricity reform is never just technical. It is fundamentally about who pays, who benefits, and who controls rents, which is why tariff policy, procurement discipline, and governance credibility become the real battlegrounds, not the engineering.
Under a renewables-base planning scenario in the RUPTL 2025–2034, coal still accounts for roughly half of electricity generation in 2034, with renewables below one-third. Even a more ambitious scenario leaves coal as the single largest source well into the 2030s. This is not a matter of more projects — it reflects deeper questions about how the sector plans, how it contracts, how it allocates risk, and how it disciplines investment decisions in a system where a dominant buyer and planner can unintentionally hardwire lock-in.
The system also carries warning signs of inefficiency that make the transition harder and costlier: a very high reserve margin in the Java–Bali system, far above typical reliability requirements, means paying for capacity that is not needed. When oversized planning meets long-term contractual obligations, the result is fiscal and quasi-fiscal pressure, tariff politics, and an incentive to run existing thermal plants to recover costs even when cleaner alternatives become available.