Indonesia should embed its newly launched 100-gigawatt (GW) solar programme in national least-cost electricity planning, rather than treat it as a standalone target, according to a new analysis by think tank Institute for Energy Economics and Financial Analysis (IEEFA).
The South East Asian nation’s least-cost plan aims to meet future electricity demand reliably at the lowest overall expense to the power system. It considers not only a plant’s upfront cost, but also fuel, grid, storage and operating expenses, as well as the cost of retaining aging generation assets.
IEEFA said the solar programme, first announced in June last year and officially launched by President Prabowo Subianto on 25 August, should be incorporated into future revisions of Indonesia’s Electricity Supply Business Plan (RUPTL), a 10-year roadmap that aims to turn that national least-cost electricity planning approach into specific generation, grid, storage and procurement choices.
“Embedding the solar target in the planning framework would enable the government and state utility PLN to coordinate investments in generation, transmission and energy storage around the locations and technologies that offer the strongest economic and technical returns,” said the report.
Rather than relying on only large solar farms or treating each type separately, RUPTL revisions should plan for several types of solar projects together, such as ground‑based solar, floating solar (up to 91.6 GW potential across lakes and dams), and rooftop solar (30 to 40 GW potential from households and businesses).
Replacing coal and gas capacity requires approximately three times as much solar to produce the same amount of electricity, while diesel replacement requires about twice as much solar, said researchers. Image: IEEFA
The plan would also need to account for the different amounts of solar capacity required to displace fossil generation, as replacing coal and gas-fired power would need about three times more solar capacity to produce the same volume of electricity, while replacing diesel generation would require roughly twice as much, said the study.
IEEFA also said Indonesia’s power planning needs to reflect current and projected generation costs, rather than long-standing assumptions that coal is the country’s cheapest source of electricity.
On a levelised-cost basis, the report estimated coal-fired generation at US$0.10 to US$0.15 cents per kilowatt-hour (kWh), compared with US$0.5 to US$0.8 cents for utility-scale solar photovoltaic projects and US$0.6 to US$0.10 cents for onshore wind. At the low end of the respective ranges, utility-scale solar is about 44 per cent cheaper than coal, while onshore wind is around 32 per cent cheaper, according to the analysis.
The report said coal generation costs rose 46 per cent to IDR930 (US$0.052) per kWh in 2025 and could reach IDR1,060 (US$0.06) per kWh in 2026, further weakening the rationale for treating coal as the default low-cost option.
The study said the changing economics give the 100 GW solar programme a central role in a least-cost strategy. Strategically locating solar and associated storage in high-cost regions could reduce reliance on expensive fossil-fuel generation, improve energy security and direct investment to where it produces the largest savings.
IEEFA also called for an early retirement strategy for inefficient fossil fuel power plants, particularly aging coal facilities. Retiring such plants ahead of schedule could free grid capacity, reduce subsidies and create room for renewable energy additions, directly supporting the 100 GW solar target.
“Indonesia’s challenge is no longer whether renewable energy can compete with fossil fuels, but whether the electricity planning framework can keep pace with rapidly evolving generation economics,” said Mutya Yustika, IEEFA’s research and engagement lead for Indonesia’s energy transition.
“It is critical to plan electricity system development based on current economics rather than historical assumptions.”
