The Institute for Essential Services Reform (IESR) emphasizes that Indonesia's pursuit of a robust energy transition is crucial for achieving economic growth exceeding 6%. This assertion aligns with the 2019 Low Carbon Development Initiative (LCDI) modeling study by the National Development Planning Agency (Bappenas), which indicates that integrating low-carbon development is essential for surpassing a 5% growth rate.

Fabby Tumiwa, Executive Director of IESR, highlights that low-carbon development can be realized by enhancing renewable energy utilization and energy efficiency. He warns that without these improvements and with continued high carbon intensity, Indonesia's economic growth aspirations above 6% may remain unattainable.

Investment Requirements for Energy Transition

Transitioning to renewable energy is a significant financial undertaking. IESR's analysis estimates that Indonesia requires an investment of approximately $1.3 trillion in the energy sector to achieve its Net Zero Emission (NZE) target by 2060. This translates to an annual investment of $30–$50 billion, or around Rp500 trillion to Rp800 trillion per year. Such substantial investment is imperative to replace and meet the growing energy demand, aiming for a 40% increase in renewable energy utilization.

Fabby Tumiwa urges the government to view this investment not as a burden but as a significant opportunity for economic advancement. He suggests that key figures, including the Minister of Energy and Mineral Resources, Bahlil Lahadalia, and the Special Presidential Envoy for Energy and Climate, Hashim Djojohadikusumo, should recognize the potential economic benefits of the energy transition. Perceiving the transition as a financial strain could deter progress and investment in renewable energy sectors.

Impact of Policy Statements on Investment Climate

Recent statements by Minister Bahlil Lahadalia, indicating a potential shift towards fossil fuels influenced by global trends, have raised concerns about Indonesia's commitment to renewable energy. Such remarks may introduce uncertainty into the investment climate for renewable energy, as investors seek stable and supportive policy environments. Political risks, including inconsistent policy signals, can deter investors from committing to long-term projects in the renewable sector.

Aligning the technical policy direction with President Prabowo Subianto's vision for energy self-sufficiency is crucial. Discrepancies between ministerial statements and presidential objectives could undermine efforts to achieve energy transition and self-sufficiency targets. A unified and consistent policy approach is essential to attract investment and realize Indonesia's renewable energy goals.

Conclusion

Indonesia's path to achieving over 6% economic growth is intrinsically linked to its commitment to an energy transition focused on renewable sources. Substantial investments, estimated at $1.3 trillion by 2060, are necessary to meet energy demands and environmental targets. Consistent and supportive policy frameworks are vital to attract and retain investors in the renewable energy sector. Embracing the energy transition not only aligns with global environmental standards but also presents a significant opportunity for Indonesia's economic prosperity and energy independence.