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Navigating Indonesia’s Energy Transition: Institutional, Policy, And Market Determinants OfRenewable Electricity Adoption
Issue Vol. 2 No. 02 (2025): Volume 02 Issue 02 --- Section Articles --- Published Date: 2025-10-18
Abstract
Indonesia’s electricity sector stands at the intersection of competing structural forces: long-standing fossil fuel subsidies, emerging renewable energy technologies, institutional market rigidities, and ambitious national development goals. This article develops a comprehensive, theory-driven analysis of Indonesia’s energy transition by synthesizing and critically interrogating existing scholarship on subsidy reform, rooftop photovoltaic adoption, renewable energy investment, excess electricity supply, and broader political–economic dynamics shaping the power sector. Drawing strictly on the provided references, the study constructs an integrated analytical narrative explaining why incremental policy reforms have thus far yielded limited transformation in the national energy mix, despite significant technical potential and growing international momentum for decarbonization. The article adopts a qualitative, interpretive research design grounded in policy analysis and institutional economics, supported by descriptive evaluation of empirical findings reported in prior studies. Particular attention is given to the paradox of subsidy phase-out, which, while theoretically expected to stimulate renewable competitiveness, may in practice reinforce structural inertia when implemented in isolation from market reform and demand-side restructuring. The analysis further explores household-level rooftop photovoltaic policies, highlighting how regulatory uncertainty, tariff design, and utility dominance constrain adoption, even where economic viability appears plausible. The discussion is extended to include electricity oversupply challenges, independent power producer contracts, and the political economy of downstream industrial policies such as nickel processing, situating renewable electricity within Indonesia’s broader developmental state strategy. By elaborating theoretical implications, policy trade-offs, and contextual limitations in extensive detail, this article contributes a holistic framework for understanding Indonesia’s stalled energy transition. The findings underscore that renewable electricity expansion is not merely a technological or price-driven process but a deeply institutional and political one, requiring coordinated reform across subsidies, market governance, investment regimes, and long-term planning. The article concludes by outlining future research and policy directions, emphasizing the need for integrated, context-sensitive approaches rather than fragmented regulatory adjustments.
Keywords
References
1. Hartono, D., Komarulzaman, A., Irawan, T., &Nugroho, A. (2020). Phasing out energy subsidies to improve energy mix: A dead end. Energies, 13(9), 2281. https://doi.org/10.3390/en13092281
2. Haryadi, F. N., Hakam, D. F., Ajija, S. R., Simaremare, A. A., & Aditya, I. A. (2021). The analysis of residential rooftop PV in Indonesia’s electricity market. Economies, 9(4), 192. https://doi.org/10.3390/economies9040192
3. Hasjanah, K. (2023). Indonesia’s electricity challenges, how to overcome excess electricity supply? Institute for Essential Services Reform. https://iesr.or.id/en/indonesias‐electricity‐challenges‐how‐to‐overcome‐excess‐electricity‐supply
4. Hesty, N. W., Cendrawati, D. G., Nepal, R., & al Irsyad, M. I. (2021). Energy potential assessments and investment opportunities for wind energy in Indonesia.
5. Hidayatno, A., Setiawan, A. D., Supartha, I. M. W., Moeis, A. O., Rahman, I., &Widiono, E. (2020). Investigating policies on improving household rooftop photovoltaics adoption in Indonesia. Renewable Energy, 156, 731–742. https://doi.org/10.1016/j.renene.2020.04.106
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