The Hidden Opportunity in Indonesia’s Energy Transition: Solar, Carbon Credits, and ESG

Amid growing global uncertainty, energy has become a crucial component in supporting industrial activity and driving economic growth. Higher energy consumption is strongly associated with increases in gross domestic product (GDP). Nevertheless, rapid economic expansion also generates negative externalities, particularly global warming and climate change which are largely caused by greenhouse gas emissions from fossil-fuel-based energy systems.

Renewable energy has emerged as a strategic solution to mitigate greenhouse gas emissions while sustaining economic development. Various forms of renewable energy are currently being developed, including solar, wind, hydropower, geothermal, bioenergy, and waste-to-energy technologies.

Several months ago, I conducted a feasibility study for a solar photovoltaic (PV) project. In Indonesia, solar energy adoption remains relatively limited compared to coal-based electricity generation. At present, the largest solar power plant in the country is the Cirata Floating Solar Power Plant, which has a capacity of 192 MWp.

In my case study, I conducted due diligence on a proposed solar PV installation with a capacity of 100 MWp across approximately 100 hectares in East Java. The financial analysis demonstrated favourable results, particularly in terms of Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period (PP), supported by an attractive Power Purchase Agreement (PPA).

The project’s primary revenue stream is derived from electricity sales. In addition, carbon trading has the potential to become an alternative source of income. However, this mechanism remains underdeveloped in Indonesia due to limited market maturity and regulatory uncertainty. Consequently, the current financial model only incorporates revenue from electricity sales.

Furthermore, industries consuming renewable electricity may benefit from obtaining green industry certification, thereby strengthening their Environmental, Social, and Governance (ESG).

Indonesia Electricity Consumption

Within the broader vision of “Indonesia Emas 2045,” it is useful to benchmark Indonesia’s electricity consumption per capita against that of developed economies. Modern countries generally consume approximately 6,000 kWh of electricity per capita annually, whereas Indonesia’s electricity consumption is only around 1,267 kWh per capita, equivalent to approximately 21% of the level observed in developed nations.

Based on data from the Central Statistics Agency (BPS) in 2025, Indonesia’s population is projected to reach 284,438,800 people. By multiplying this figure by annual per capita electricity consumption, the estimated national electricity demand reaches approximately 360.38 TWh.

According to data cited by Gita Wirjawan, Indonesia’s installed electricity generation capacity reached 91,164 MW in 2023, while the annual rate of additional capacity development was approximately 5,636 MW. Based on this pace of infrastructure expansion, Indonesia would require nearly 60 years to achieve the electricity capacity necessary to support modern-country-level consumption.

However, Indonesia has only around 19 years remaining before reaching the 2045 target. From this perspective, the country must accelerate its electricity infrastructure development by at least (3x) three times the current rate in order to realistically achieve the goals of Indonesia Emas 2045, rather than relying on overly optimistic assumptions.

DNI, GHI, PVOUT of Indonesia

From a technical perspective, several geographical and meteorological indicators are critical in assessing solar energy potential. These include Direct Normal Irradiation (DNI), Global Horizontal Irradiation (GHI), and Photovoltaic Power Potential (PVOUT). Collectively, these parameters play a significant role in maximising electricity generation efficiency and determining the economic viability of solar PV projects.

Regarding location selection, Indonesian entrepreneur Timothy Ronald stated that approximately 30 km × 30 km, or around 90,000 hectares of land, with an installed capacity of approximately 37 GWp, could theoretically supply Indonesia’s electricity demand of around 360.38 TWh.

Conceptually, this projection appears feasible. However, such a mega-project would require comprehensive due diligence, including technical, environmental, financial, regulatory, and social assessments before implementation.

Based on DNI, GHI, and PVOUT data, West and East Nusa Tenggara have better solar potential than regions such as Kalimantan. These areas can produce electricity more efficiently for large-scale solar projects.

In conclusion, solar energy has strong potential to support Indonesia Emas 2045. However, detailed CAPEX and OPEX analysis is still needed to ensure economic feasibility. Although solar energy may not fully solve Indonesia’s energy challenges, it can become an important pillar of the country’s long-term energy transition.

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