Rethinking Indonesia’s electricity economics to reach the 100GW solar target
Indonesia’s Electricity Supply Business Plan (RUPTL) 2025–2034 targets 69.5 gigawatts (GW) of new generation capacity, including 42.6GW of renewable energy and 10.3GW of energy storage, supported by substantial investment in transmission infrastructure.
In June 2025, the Government of Indonesia (GOI) announced an ambitious 100GW solar program¹, which President Prabowo Subianto officially launched on 25 August 2026², signaling a greater role for renewable energy in the country’s electricity supply. This program is expected to be incorporated into future revisions of RUPTL.³
Together, these plans will require unprecedented investment over the next decade, making cost-effective electricity planning more critical than ever. Developing new generation, transmission, and storage projects at the lowest long-term cost will be essential to maintaining affordability, ensuring the financial sustainability of Indonesia’s national electricity utility, PT Perusahaan Listrik Negara (PLN), and minimizing future subsidy requirements.
For decades, electricity planning in Indonesia has assumed that coal-fired generation is the cheapest electricity source. This premise underpins the use of PLN’s Basic Cost of Providing Electricity (Biaya Pokok Penyediaan [BPP]) as the benchmark for electricity planning and renewable energy procurement.
However, the economics of electricity have changed significantly. Rising fossil fuel costs, exchange-rate volatility, and aging thermal power plants have increased the cost of conventional generation, while renewable energy technologies have become steadily cheaper.
In 2025, coal-fired generation cost IDR930 per kilowatt-hour (kWh), compared with IDR313/kWh for hydropower and IDR906/kWh for wind. The Institute for Energy Economics and Financial Analysis (IEEFA) estimates that coal-fired generation costs could rise to approximately IDR1,060/kWh in 2026.
As a result, some of the economic assumptions underlying Indonesia’s electricity planning no longer fully reflect current market realities.
The distortion becomes even clearer when considering the impact of the Domestic Price Obligation (DPO) policy, which masks the true cost of coal generation. Without this policy, the actual cost is estimated to be around IDR1,455/kWh in 2025, highlighting the extent to which regulated pricing influences the apparent cost competitiveness of coal.
The historical cost advantage of fossil fuel generation in Indonesia has narrowed substantially and, in many cases, disappeared.
Across the Association of Southeast Asian Nations (ASEAN), utility-scale solar and wind are increasingly cost-competitive with coal-fired generation, while solar photovoltaic (PV) combined with battery energy storage systems (BESS) can already deliver electricity at a lower cost than diesel generation in many remote power systems.
Global projections indicate that the costs of solar PV, wind, and BESS are expected to continue declining, further strengthening the long-term competitiveness of renewable energy.
