Yes, including tax holidays, import duty exemptions, and accelerated depreciation are available.
In recent years, Indonesia has made significant strides toward cleaner, greener energy. With its vast natural potential, ranging from sunlight and wind to geothermal and hydropower, the archipelago nation is uniquely positioned to lead Southeast Asia’s energy transition. However, seizing this opportunity hinges on more than just natural resources. It requires a modern, investor-friendly, and consistent legal framework that can foster innovation while ensuring sustainability.
Indonesia’s renewable energy transition is not just a policy buzzword; it’s a fundamental national priority. The country has pledged to generate 23% of its energy from renewable sources by 2025 and reach net-zero emissions by 2060. These targets are ambitious, but achievable with the right mix of legal clarity, financial incentives, and project execution.
Moreover, global climate agreements and growing domestic demand for clean energy have created mounting pressure for Indonesia to act decisively. Against this backdrop, Indonesia Renewable Energy Law has undergone multiple reforms, reflecting the government’s intention to not only meet sustainability targets but also remain competitive in the regional investment landscape.
To support its energy vision, Indonesia relies on a framework of several core laws, each playing a distinct role in shaping the sector.
This law lays the foundation for Indonesia’s energy management. It affirms the state’s authority over energy resources and promotes energy diversification, conservation, and efficiency. It also recognizes renewable energy as a national priority, urging the use of cleaner alternatives to fossil fuels.
With Indonesia housing around 40% of the world’s geothermal reserves, this law is a game-changer. It reclassifies geothermal energy as non-mining, which simplifies licensing procedures. This shift encourages more developers, especially foreign ones to enter the geothermal sector with fewer regulatory hurdles.
Perhaps the most transformative, the Omnibus Law streamlines licensing through the Online Single Submission (OSS) system, cuts red tape, and centralizes investment approvals under BKPM (now Ministry of Investment). This law has dramatically improved ease of doing business, particularly for renewable energy ventures seeking swift and transparent regulatory engagement.
Together, these laws form the pillars of the Indonesia Renewable Energy Law, offering a solid yet flexible base to support the country’s green transition.
Among all recent developments, Presidential Regulation No. 112 of 2022 stands out as a watershed moment for renewable energy in Indonesia. This regulation introduces critical policy shifts:
This regulation has dramatically reshaped the sector’s investment climate. For the first time, there is a clear signal from the government: the future is green. Investors, both domestic and foreign, are taking note and so should businesses looking to enter this dynamic market.
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Understanding which government agencies oversee what is essential to navigating Indonesia Renewable Energy Law successfully. Here’s a breakdown:
Projects often require coordination across these entities. Having a legal team familiar with their respective roles can dramatically reduce delays and ensure regulatory compliance at every stage.
While the OSS system has simplified the investment journey, renewable energy projects still demand a structured and sequential approach to licensing. Key requirements include:
Each step involves different documentation, timelines, and regulatory standards. In our experience, early legal guidance is crucial to ensuring a smooth and risk-mitigated licensing process.
Tariffs for renewable energy projects in Indonesia are governed by the “ceiling price” system. This mechanism caps the electricity price PLN is allowed to pay for power generated from renewables.
PPAs are legally binding contracts between developers and PLN. These contracts define the purchase price, duration, delivery obligations, and risk allocation between parties. However, PPAs in Indonesia have historically been viewed as favoring PLN, often resulting in lengthy negotiations.
Hence, it’s vital to structure PPAs carefully, balancing bankability for investors and compliance with regulatory expectations. This is where the legal finesse of negotiating PPAs becomes a strategic asset.
To attract capital and technology, the government has rolled out generous incentives for both foreign and local investors in renewable energy. These include:
These incentives, combined with the country’s vast renewable potential, create a fertile environment for growth under the Indonesia Renewable Energy Law.
While the legal ecosystem is improving, several challenges still exist:
To navigate these issues, businesses must proactively assess legal, environmental, and social risks. Solid stakeholder engagement strategies and legal risk management are critical to project success.
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Indonesia’s net-zero emissions ambition is more than symbolic; it is shaping national and sectoral policy. The Energy Transition Mechanism (ETM), backed by institutions like ADB and the G20, helps finance the early retirement of coal plants and supports renewable development.
Furthermore, Indonesia is developing a carbon pricing and trading framework to align its energy system with global sustainability standards. Companies that integrate these legal shifts early on will not only comply but also gain competitive advantage.
At Kusuma & Partners Law Firm, we regularly advise clients navigating the intricate maze of the Indonesia Renewable Energy Law. Here are three key lessons we’ve learned:
Whether you’re launching your first renewable project or scaling operations, legal foresight is not optional; it’s essential.
Indonesia is undergoing a renewable energy revolution and the law is evolving to support it. For businesses, the opportunities are immense. But as with any opportunity, success depends on preparation, strategic partnerships, and solid legal foundations.
At Kusuma & Partners Law Firm, we provide strategic legal guidance for renewable energy investments in Indonesia. From licensing and structuring to PPA negotiations and regulatory compliance.
Fill in the form below to get our expert guidance.
“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult us.
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