Despite pledges of a swift transition to renewable sources of energy, the planned 2026 budget pours more into fuel and coal subsidies than into clean energy, casting doubt on the government’s commitment.

In his state budget address at the Senayan legislative complex in Jakarta on Aug. 15, President Prabowo Subianto said Indonesia had to achieve 100 percent renewable energy within 10 years or sooner, reiterating a commitment first announced at the Asia Pacific Economic Cooperation (APEC) Summit last year.

However, there has been little progress in terms of regulatory changes or concrete achievements to support the ambitious target.

The 2026 draft budget earmarks more than half of its Rp 402.4 trillion (US$24.9 billion) energy security allocation, some Rp 210.1 trillion, for fossil fuel subsidies, including gasoline, liquefied petroleum gas (LPG) and coal-based electricity.

Mutya Yustika, an energy economist at the Institute for Energy Economics and Financial Analysis (IEEFA), said Indonesia’s pledge risks being undermined by the country’s continued reliance on fossil fuel subsidies.

The government has yet to publish a clear road map for gradually shifting subsidies toward renewable investments, she explained, and plans like the electricity procurement business plan (RUPTL) contain ambitious targets but their implementation remains inconsistent.

“Without concrete and measurable policy actions, this transition remains more promise than process,” she told The Jakarta Post on Thursday, arguing that the allotment reinforces dependence on fossil fuels and undermines the country’s effort to transition to renewable energy.

Little has been achieved so far to convince private investors that Indonesia is serious about renewables.

Indonesia’s efforts to achieve a renewable energy share of 23 percent in the national power mix in 2025 or earlier continue to face headwinds, as the country’s current performance remains well below target.

Data from the Energy and Mineral Resources Ministry shows that in mid-2025, the share of renewable energy in national generating capacity stood at just 14.5 percent, or 15.2 gigawatts.

Energy Minister Bahlil Lahadalia said the figure marked only a modest increase of 0.6 percentage points from the end of 2024, with 876.5 megawatts of new renewable capacity having begun operating in the first six months of this year.

Investment in the sector has failed to meet expectations. Ministry data recorded just $0.8 billion in realized investment for new and renewable energy projects during the first half of 2025, underscoring the financing and policy hurdles that continue to hold back the country’s energy transition.

Recent regulatory tweaks, including the relaxing of local content requirements and simplifying of power purchase agreements, have done little to offset complex procurement processes at state-owned electricity utility PLN.

Structural reforms were essential, Mutya said. Passing the long-delayed renewable energy bill, reforming transmission network rules and creating a transparent procurement framework would signal genuine commitment.

Meanwhile, fossil fuel subsidies continue to distort the market, making renewables less competitive.

To accelerate the shift, Indonesia has to pursue international financing aggressively, Mutya said, by ensuring projects are bankable, aligned with global environmental, social and governance (ESG) standards and backed by clear regulatory guarantees.

“Only with strong fiscal commitment and a credible road map can Indonesia’s clean energy ambitions move from rhetoric to reality.”

Fabby Tumiwa, the executive director of the Institute for Essential Services Reform (IESR), said Indonesia's new state asset fund, Danantara, could play a central role in mobilizing funds for Indonesia’s shift away from coal.

“Financing is key, which is why we need to mobilize funding [...] Danantara already exists and can be optimized. Through Danantara, we can create funds, seek assistance and collaborate with China.

“Likewise, [the role of] PT Sarana Multi Infrastruktur [PT SMI] can also be optimized,” he told the Post on Thursday.

He went on to say that Indonesia has to adopt extraordinary measures to accelerate its energy transition and end its reliance on coal, emphasizing the urgency of phasing out coal-fired power plants while scaling up renewable alternatives.

“We can't do it without political will, without proper planning, without the enabling environment,” Fabby said.

He was referring to the RUPTL, National Electricity Master Plan (RUKN) and draft of the National Energy Policy (PP KEN), which have yet to reflect President Prabowo’s ambitious targets.

“Let’s talk about electricity first. Can we achieve 100 percent renewable energy in the electricity sector by 2040? That's critical. Second, what needs to be changed are the regulations in the sector.”