PLN's 'Beyond The Greenest' Electricity Supply Plan

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On May 26, 2025, after years of anticipation, Indonesia's energy sector received a major boost -- PLN secured the long-awaited approval from the Minister of Energy and Mineral Resources (Minister) for its new general plan for electricity supply (rencana umum penyediaan tenaga listrik or RUPTL) for the period from 2025 to 2034 (the 2025 RUPTL). Officially published on June 3, 2025, this marks the reopening of opportunities for independent private producers (IPPs) particularly for new and renewable energy (NRE) projects.

Themed 'Beyond the Greenest', the 2025 RUPTL contemplates that, among other things:

61% of new generations would be NRE with storage capacity comprising 15%;
no development of new coal-fired power plant (with some exceptions); and
there will be a transition to NRE (subject to security of supply, affordability and reliability), including the inclusion of nuclear energy in the energy mix.

The 2025 RUPTL, however, does present certain challenges. As PLN's generation strategy prioritizes projects with the lowest production cost, coal-fired power plants are likely to be favored over newer NRE technologies in terms of energy affordability, sustainability and security, due to their higher capacity factors and lower costs of production. Meanwhile, NRE plants (other than geothermal) face intermittency challenges and require additional capital investments, such as battery energy storage system (BESS) to stabilize output for interconnection with PLN's grid network. These factors drive up production costs and may increase the burden on the state electricity subsidy. The 2025 RUPTL addresses this by now allowing the private sector to participate in the development of transmission projects, to ease PLN's expenditure on transmission cost.

In conclusion, the 2025 RUPTL brings a breath of fresh air and new opportunities for the IPP market, with emerging prospects in nuclear energy and expanded roles for the private sector in the development of transmission and substation.

KEY ASPECTS OF THE NEW RUPTL

Key aspects of the 2025 RUPTL to consider are as follows:

The 2025 RUPTL sets out two scenarios for sales and demand growth: (i) the "Renewable Indonesia Base" or RE Base as the moderate and most likely to happen scenario and (ii) the "Accelerated Renewable Energy Development" or ARED as the optimistic scenario that aims to reduce GHG emissions by 151 million ton of CO2 compared to the 2030 Business-As-Usual scenario.
The annual average growth rate of electricity is projected to be 5.3% over the next ten years, which is an increase compared to the 4.9% annual growth forecast in the 2021 RUPTL.
A total of 69.5 GW in new generation (consisting both PLN-owned projects and IPP projects, as well as storage capacity), representing an increase from the 40.5 GW in new generation projected in the 2021 RUPTL. PLN aims to achieve an increase of 27.9 GW within the first five years, and 41.6 GW within the last five years of the period from 2025 to 2034.
Indonesia's energy mix by 2034:
- in the RE Base scenario: 29.7% from NRE and 70.3% from coal, gas and oil, and imported energy; and
- in the ARED scenario: 34.3% from NRE and 65.7% from coal, gas and oil, and imported energy.
In the RE Base scenario, NRE is projected to make up 18% of the energy mix by the end of 2029 (which is a decrease compared to the 22.15% projected in the 2021 RUPTL). NRE is expected to increase to 29.7% of the energy mix through 2034, despite aggregate growth of new generation. Coal-fired power plants will remain the backbone of the generation mix, but their share is expected to decrease from 59.4% in 2029 to 47.1% in 2030.
The 2025 RUPTL contemplates waste-to-energy (WtE) plants as part of the NRE and allows for cofiring with coal-fired power plants. The development of WtE plants is planned to be in the same cities as previously listed in the 2021 RUPTL: Palembang, Tangerang, Tangerang Selatan, DKI Jakarta, Bandung, Bekasi Semarang, Surakarta, Surabaya, Makassar, Manado and Bali.

ENERGY TRANSITION

The 2025 RUPTL gives some flexibility by allowing exemptions to the restriction on new coal-fired power plants (whether using subcritical, supercritical or ultra supercritical technology), as the country seeks to prioritize energy security.
In addition to the existing projects included in the 2021 RUPTL, the 2025 RUPTL reiterates the exemptions for new coal-fired power plant projects as set out in Presidential Regulation No. 112 of 2022 on the Acceleration of the Development of Renewable Energy for the Supply of Electrical Power.¹
PLN will make efforts to reduce emissions from its coal-fired power plants, both existing and new, as it must participate in the cap and trade mechanism or otherwise offset any excess emissions with mitigation initiatives or pay carbon tax once implemented.

CONTEMPLATED NRE DEVELOPMENT

PLN's development plan for NRE generating capacity is set out below:

PRIVATE SECTOR OPPORTUNITIES

The 2025 RUPTL anticipates that 49.1 GW from new generations will involve the private sector, accounting for 71% of the total investment of IDR 2,967.4 trillion (approximately USD 185.5 billion).
PLN also makes clear that it is opening investment opportunities for the private sector in the development of electricity transmission, with total investment projected at IDR565.3tn² (approximately USD35bn). This is good news for independent transmission producers (ITPs), as the Constitutional Court previously ruled that private participation in unbundled electricity projects is not constitutional. Alternative project structures may need to be explored by ITPs and/or PLN in this context.
The private sector's involvement will largely be required for: (i) projects with high land acquisition risk; (ii) projects with high fuel supply risk (including projects that require the development of new fuel supply infrastructure); (iii) NRE projects; and (iv) expansion of existing IPP projects.
For IPP projects, PLN may require: (i) PLN's subsidiary participation via the 51% model or otherwise; and/or (ii) a build-own-operate-transfer (BOOT) or build-own-operate (BOO) scheme as set out in the power purchase agreement (PPA).

GENERATION DEVELOPMENT STRATEGY

PLN uses a merit order system (i.e., least cost of production) to dispatch electricity from power plants in order to minimize the cost of power production. When PLN considers dispatching electricity, the merit order aims to minimize production costs based on certain calculation using net present value (NPV) of the power plant costs. A plant with a lower NPV value at the time of dispatch will be prioritized based on this merit order system. This system takes into account all generation costs, which include capital costs, fuel, operation and maintenance, and energy not served.
For capacity development of larger, interconnected grids, PLN considers the optimum reserve margin and prioritizes capacity increase for base load power plants. For smaller, isolated grids, the plan includes hybrid or renewable-based solutions tailored to local needs.
There is a clear program to replace diesel generators in remote regions with cleaner technologies, including hybrid approach with NRE plants and gasification. The 2025 RUPTL also outlines an initial strategy for developing nuclear capacity as a future option, with the intention to construct nuclear plants within the Sumatera and Kalimantan grids in the period from 2030 to 2034.
PLN continues to prioritize net-zero emission objectives in its strategic planning. The 2025 RUPTL outlines measures to lower the carbon intensity of electricity generation, promote carbon finance initiatives, and enhance the resilience and flexibility of the national grid to accommodate rising demand and the integration of variable energy sources.
Recognizing that transportation is the second largest contributor to emissions, PLN is also considering the expansion of electric vehicle (EV) charging infrastructure as part of its strategy to achieve net-zero targets, which may additionally stimulate electricity sales.

TRANSMISSION AND DISTRIBUTION DEVELOPMENT STRATEGY

PLN's infrastructure strategy includes extensive upgrades and expansions to both transmission and distribution networks. New transmission lines and substations will facilitate the integration of renewable energy, with the objective of creating inter-island grid connectivity.
As PLN welcomes private sector to participate in transmission projects, it contemplates several partnership schemes, including public partner partnership (PPP), Sharia funding and deferred payment schemes. These novel options will require further exploration by market participants, particularly in addressing the recent Constitutional Court ruling on unbundled electricity supply projects.

ADDRESSING INTERMITTENCY OF RENEWABLE ENERGY

The intermittent nature of most renewable energy resources presents operational challenges for PLN in term of grid reliability. To minimize unpredictable variability, PLN requires wind and solar projects to:
- integrate their weather sensors (i.e., pyranometers or anemometers) with PLN's control center to provide accurate generation forecasts based on changing weather conditions; and
- employ automatic frequency regulators (M-VAR) and BESS to minimize destabilization of the grid's frequency.³
PLN acknowledges that these technologies will require greater capital investment and may struggle to compete with cheaper existing base load resources such as coal-fired and hydro power plants. PLN hopes the government will consider such potential increase in capital cost. The 2025 RUPTL does not specify what PLN wishes the government to consider, however we expect that PLN anticipates an increase in electricity subsidy or compensation if renewable energy becomes the primary base loader resource for its grid.
Unlike in the 2021 RUPTL where PLN did not contemplate any new solar rooftop generation, PLN now supports the development of solar rooftop plants and commits to preparing the necessary infrastructure to ensure reliability of electricity for on grid solar rooftop plants customers.

Our key takeaways

PLN offers significant opportunities for the private sectors to develop renewable energy and new transmission lines. PLN also emphasizes its plan to increase the use of renewable energy to serve as base loader but with certain conditions, among others the installation of BESS. However, the production cost of BESS is currently not included in PLN's average cost of production; therefore, in a competitive tender, the BESS tariff would not be benchmarked against PLN's cost of production.
As noted above, 51.9% of the new generation under the 2025 RUPTL comes from NRE plants in the RE Base scenario and 61.3% in the ARED scenario. On one hand, PLN operates its dispatch based on a merit order system and on the other hand, PLN notes the risk of a mismatch between the location of NRE sources and demand centers. PLN's proposed risk mitigation includes, among others: (i) developing a green super grid and inter-island interconnection; and (ii) implementing a more flexible PPA for NRE power plants developed by IPPs. We note that under the 2025 RUPTL, the major interisland interconnections (i.e., Sumatra-Java and Kalimantan-Java) are still subject to further studies by PLN.
Under the ARED scenario, PLN aims to significantly accelerate the development of renewable energy in 2030-2034 with a planned new NRE generation capacity of 30.4 GW for that period (compared to 12.2 GW of NRE for 2025-2029).
- For the 2025-2029 period, PLN anticipates a 12.7 GW⁴ increase in fossil fuel generation with gas being the dominant source of energy at 9.3 GW. This period is expected to be active for the development of gas power plants, potentially straining PLN and developers in securing sufficient gas supply. This may also raise concerns among gas/LNG exporters, as more LNG may be diverted for domestic use.
- After 2029, market participants can expect partner selection and/or IPP tenders for the development of NRE plants. PLN may require its subsidiary to participate in the IPP scheme, and seemingly the well-known 'up to 51% model' may still be a feature of upcoming IPP projects.
The 2025 RUPTL provides some flexibility to establish a legal basis for PLN to purchase electricity from WtE plants not included in the 2025 RUPTL. Rather than amending the RUPTL, PLN would only need to apply for the Minister's approval for the assignment to purchase electricity.

Footnotes

1 Exemptions are provided if the project is (i) integrated with industry that increases value of the natural resources (such as for refinery) or a part of the National Strategic Project, (ii) commits to reduce GHG emissions by min. 35% within 10 years since COD, and (iii) operates until at least 2050

2 Based on the Minister's press conference slide deck on the 2025 RUPTL, accessible on gatrik.esdm.go.id/assets/uploads/download_index/files/4ec39-materi-paparan-ruptl-2025-2034.pdf and presented on May 26, 2025.

3 We however note that 79 MW installed capacity from solar PV and 145 MWac Cirata Solar PV Project each does not operate with BESS.

4 Based on the Minister's press conference slide deck on the 2025 RUPTL, accessible on gatrik.esdm.go.id/assets/uploads/download_index/files/4ec39-materi-paparan-ruptl-2025-2034.pdf and presented on May 26, 2025.

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