Challenges of Renewable Energy Investment in Indonesia: Bloomberg Version

Indonesia's attractiveness for renewable energy investment remains low. The main challenges are its perceived limited market potential and experience in this field.

This is evident in the *Climatescope 2024* report released by Bloomberg New Energy Finance (BloombergNEF), a US-based energy transition research firm.

BloombergNEF measures the attractiveness of developing countries for renewable energy investment using indicators of government policy (fundamentals), market potential (opportunities), and experience.

Government policy (fundamentals) indicators include renewable energy development targets, energy tariff regulations, tax incentives, and national climate change mitigation policies.

Market potential (opportunities) indicators include domestic energy price competition, electricity prices, electrification ratio, macroeconomic conditions, and local company commitments to emissions reduction.

Finally, experience indicators include the performance of the renewable energy industry, such as investment growth, power plant installations, and national clean energy production.

The results are processed into a score on a scale of 0-5 points. The higher the score, the better a country's attractiveness and readiness to receive renewable energy investment is assumed to be.

In 2024, Indonesia's overall score was only 2.01 out of 5 points, ranking 6th in Southeast Asia.

Broken down by indicator, Indonesia received a strong score in government policy but performed weakly in market potential and experience.

In the government policy (fundamentals) aspect, Indonesia achieved a score of 3.17 out of 5 points. Although relatively strong, this aspect is considered suboptimal because Indonesia has not yet implemented regulations mandating the use of renewable energy (renewables mandate).

On the other hand, in the market potential (opportunities) aspect, Indonesia only achieved a score of 0.97 out of 5 points. This low score is partly influenced by the decline in national electricity prices during the 2017-2023 period.

In the experience aspect, Indonesia's score was even lower, at only 0.71 out of 5 points. This is partly due to the limited history of renewable energy power plant installations, production, and investment in Indonesia.