Jakarta, INTI - The ambition of Prabowo Subianto to develop 100 gigawatts (GW) of solar power capacity, starting with the conversion of 13 GW of diesel power plants (PLTD) into solar power plants (PLTS) in the initial phase, has been widely seen as a strategic move worth supporting. The Institute for Energy Economics and Financial Analysis (IEEFA) estimates that this initiative could significantly reduce electricity costs and generate state budget savings of up to US$4 billion, or approximately Rp62 trillion annually.
High Diesel Costs and Energy Vulnerability
IEEFA highlighted that Indonesia’s reliance on diesel for electrification in remote areas has placed a heavy burden on state finances due to high fuel import costs and volatile global oil prices. This is reflected in the sharp increase in diesel power generation costs, rising from Rp4,746 (around US$0.37 per kWh) in 2020 to Rp8,748 (approximately US$0.57 per kWh) in 2023.
Geopolitical tensions in the Middle East have further underscored Indonesia’s vulnerability as a net oil importer. These developments demonstrate that achieving energy security remains difficult as long as the country depends heavily on global fuel markets.
According to IEEFA’s latest analysis, a combination of solar power (PLTS) and battery energy storage systems (BESS) could generate electricity at a significantly lower cost, ranging from US$0.08 to US$0.20 per kWh. This is considerably cheaper than diesel-based generation, which costs between US$0.29 and US$0.40 per kWh, and even reached US$0.55 to US$0.65 per kWh in 2023.
“The transition to solar-based systems will fundamentally reshape the cost structure of electrification in remote islands. Instead of relying on imported fuel and complex logistics, Indonesia can harness abundant solar energy, store it locally, and distribute it reliably for over a decade,” said Mutya Yustika in a statement on Thursday, April 2, 2026.
IEEFA estimates that converting diesel plants to solar could save around US$2 billion annually from reduced diesel imports. Additionally, it could cut electricity subsidies by US$1.5–2 billion per year, equivalent to 15–18% of the total subsidies and compensation allocated to PT PLN (Persero), which reached US$11 billion in 2024.
Investment Challenges and Policy Barries
Despite its strong economic potential, IEEFA noted that the implementation of the conversion program faces several challenges, including regulatory uncertainty and procurement processes, particularly regarding electricity tariff schemes for solar and BESS projects.
The organization emphasized that without transparent and bankable tariff structures, the signing of power purchase agreements (PPAs) could be delayed, potentially discouraging private sector investment.
On the financing side, the program requires significant upfront capital, estimated at around US$15–19.5 billion. Rising global interest rates in recent years have also increased project financing costs, especially for smaller-scale systems in archipelagic regions with limited economies of scale.
Another key challenge lies in land acquisition, which is often hindered by complex regulations and inconsistent policies. To address this, the government needs to strengthen spatial planning integration, establish land banks, standardize contracts, and encourage community involvement.
“If these barriers can be addressed, the conversion from diesel to solar will not only reduce electricity costs but also strengthen energy security and accelerate Indonesia’s transition toward a cleaner and more sustainable energy system,” Mutya concluded.
Conclusion
Indonesia’s plan to convert diesel power plants into solar energy systems represents a transformative step toward a more sustainable and resilient energy future. While the economic benefits are substantial, addressing regulatory, financial, and infrastructure challenges will be critical to unlocking the full potential of this transition and ensuring long-term energy security.
Read more: IESR: Energy Transition Program Needs Technical and Economic Review