Indonesia is moving towards cleaner energy. With growing demand for electricity and strong government support, renewable energy is now a key area for investment. Find below why it’s the time to explore Indonesia’s renewable energy sectors, key opportunities, and how to tackle its challenges.
Why invest in Indonesia’s renewable energy sectors?
Renewable energy Indonesia is rapidly gaining global attention. Indonesia has committed to reaching net-zero emissions by 2060 and is actively building green infrastructure. The government aims to generate 23% of its total renewable energy by 2025, encouraging fast-track development and foreign investment.
Moreover, Indonesia also offers a prime location for solar, geothermal, hydro, bioenergy, and wind projects. With an estimated potential of over 400 gigawatts, Indonesia’s renewable energy sector offers an open door to long-term growth for local and foreign investors, sparking optimism and excitement about the opportunities it presents.
Five potential renewable sectors to invest in
Indonesia is rich in natural resources, making the renewable energy Indonesia is highly diverse. Here are the five key sectors where investors are seeing the most growth and potential:
1. Solar Energy
Because of its location along the equator, Indonesia receives high levels of solar radiation year-round. Large-scale solar farms and rooftop solar installations are expanding rapidly, especially in urban and industrial areas.
2. Hydropower
Indonesia’s river systems and mountainous terrain provide excellent conditions for both mini-hydro and large hydroelectric projects. The country has over 75 GW of untapped hydropower potential.
3. Geothermal Energy
Indonesia ranks second in the world for geothermal potential. Located on the Pacific Ring of Fire, it offers over 24 GW of geothermal capacity, but less than 10% has been developed so far.
4. Bioenergy
From palm oil waste to agricultural byproducts, bioenergy is a strong pillar of renewable energy in Indonesia. The sector supports rural development while reducing dependence on fossil fuels.
5. Wind Power
Certain regions, such as South Sulawesi and East Nusa Tenggara, have steady wind speeds, making them ideal for wind farms. With new technology and improved data mapping, wind energy is gaining traction.
These five areas offer significant investment opportunities. With proper guidance on environmental permits and ESG compliance, entering these sectors can be easier.
Read more: Investment opportunities in Indonesia: Top sectors & investors challenges
How Indonesia supports renewable investment growth
Government support plays a significant role in the rise of the renewable energy Indonesia. Several strategic incentives and policies are made to attract both local and foreign investors, including:
Fiscal and Non-Fiscal Incentives
Investors in renewable energy Indonesia enjoy several financial benefits, including tax holidays, import duty exemptions, accelerated depreciation, and VAT exemptions. These benefits provide economic security and confidence in the investment.
- Tax Holidays: Up to 100% income tax reduction for a set period, depending on the scale of the investment.
- Import Duty Exemptions: For equipment and materials not yet produced locally.
- Accelerated Depreciation: To reduce taxable income more quickly.
- VAT Exemptions: For renewable energy goods and services in select sectors.
Simplified Licensing and Permits
Indonesia is making it easier to start green businesses by simplifying business licenses and environmental permits. Through online platforms and regional coordination, the approval process is becoming more transparent and streamlined.
Government-Backed Platforms and Promotion
Initiatives like REI (Renewable Energy Indonesia) and national energy master plans support investment with clear roadmaps, sector breakdowns, and incentives. The REINVEST platform also offers insights and location-specific information on why Indonesia is ideal for renewable projects.
ESG and Green Financing
With growing ESG awareness, renewable energy projects are now more likely to attract funding from banks and global institutions. ESG advisory services and compliance standards help companies secure green bonds and climate finance.
Read more: Understanding sustainable and ESG reports: Scope, focus, and impact.
Challenges of investing in the renewable sector
Investing in renewable energy Indonesia offers strong long-term potential, but there are real challenges investors must prepare for, especially when entering a new regulatory environment. Key challenges include:
- Changing Regulations: Energy laws and policies often change, making it hard to keep up.
- Permits Complexity: Projects may need approval from several agencies, which can be confusing and time-consuming.
- Slow Approvals: Delays in paperwork or unclear rules can hold back project timelines.
- Missed Incentives: Without proper guidance, investors might lose tax breaks or other benefits.
To overcome these challenges, investors are turning to trusted local partners, like InCorp. By leveraging the local expertise and legal know-how, investors can confidently navigate Indonesia’s complex regulations and focus on growing their renewable energy business in Indonesia.
Start your renewable energy business with InCorp.
The renewable energy market offers many opportunities. However, challenges such as regulatory complexity, permit approvals, and compliance requirements can hold investors back.
That’s where InCorp Indonesia (an Ascentium Company) comes in. We help investors to enter the renewable sectors confidently with our key services:
- Business Setup: Register your renewable energy company in compliance with Indonesian law.
- Business License: Secure the proper licenses to operate legally and access government incentives.
- ESG Advisory: Ensure your project meets international ESG standards and unlock green financing.
- Environmental Permit: Navigate the approval process with expert help, from AMDAL to UKL-UPL reports.
Don’t let complex regulations slow you down. Contact us today and launch your renewable energy investment in Indonesia with clarity and compliance.
Frequently Asked Questions
What renewable energy sectors are growing in Indonesia?
The fastest-growing sectors are solar, hydropower, geothermal, bioenergy, and wind power.
Why is Indonesia attractive for renewable energy investment?
Indonesia has abundant natural resources, strong government support, and large untapped renewable energy potential.
Does the Indonesian government offer incentives for renewable projects?
Yes. Investors can access tax holidays, import duty exemptions, VAT incentives, and accelerated depreciation.
Is it difficult to obtain permits for renewable energy projects in Indonesia?
The process has become more streamlined through online licensing systems, but environmental and ESG compliance are still required.
How can InCorp help with renewable energy investment in Indonesia?
InCorp assists with company setup, licensing, environmental permits, and ESG advisory to ensure a compliant and smooth market entry.
Get in touch with us.
What you'll get
A prompt response to your inquiry
Knowledge for doing business from local experts
Ongoing support for your business
Disclaimer
The information is provided by PT. Cekindo Business International (“InCorp Indonesia/ we”) for general purpose only and we make no representations or warranties of any kind.
We do not act as an authorized government or non-government provider for official documents and services, which is issued by the Government of the Republic of Indonesia or its appointed officials. We do not promote any official government document or services of the Government of the Republic of Indonesia, including but not limited to, business identifiers, health and welfare assistance programs and benefits, unclaimed tax rebate, electronic travel visa and authorization, passports in this website.
Verified by
Ales Cina
Consulting Manager at InCorp Indonesia
Aleš manages solution delivery at InCorp Indonesia, optimizing incorporation processes and client relationships. His experience in internal auditing, retail, and sales offers valuable global insights. Aleš, with a degree in Economics and Finance from the Czech Republic, helps clients navigate cross-border business challenges, focusing on cultural and legal insights.
