There’s a reason why great investors value endurance over excitement.
Euphoria builds headlines, meanwhile endurance builds wealth.
Indonesia’s renewable energy story sits right between the two. The ambition is grand, the speeches inspiring, yet the economics remain grounded in arithmetic. Transitioning from coal to clean power will not be decided by promises or press releases, but by how well capital compounds across decades.
I always remember Warren Buffett’s advice,
You can’t produce a baby in one month by getting nine women pregnant.
That truth applies here. Energy transitions require time, patience, and discipline, the same ingredients behind every lasting fortune.
The Mirage of Cheap Solar
Globally, solar manufacturing has turned into an economic paradox. China’s relentless expansion has made solar panels cheaper than ever, but the profit margins have vanished. For Indonesia, this looks like an opportunity:
- low prices
- accessible technology
- global pressure to decarbonize
Yet as any rational investor knows, an industry selling below replacement cost does not invite competition. It signals distress.
Polysilicon, the essential feedstock of the solar world, demands extreme purity and enormous electricity. Producing 1 kg requires about 50 kwh of energy, which, in most of Asia, still comes from coal.
The irony is sharp, clean technology still leans on dirty inputs.
Indonesia can process silica, but not yet into solar grade polysilicon. It can assemble panels, but it hasn’t built a moat. We can call this as a business without enduring economics, low barriers, high capital intensity, and returns that depend more on policy than performance.
Source: Database Value
Indonesia’s renewable energy ambitions have always been bold.
Originally, the government targeted a 23% share of renewables in the national energy mix by 2025.
According to the IESR 2025 report, the actual figure in 2023 stood at just 13%, far below the goal. The target for 2025–2030 has since been revised downward to 19–21% a polite nod to reality.
Meanwhile, coal still provides 81% of the country’s electricity, producing roughly 287 million tons of CO₂ equivalent each year. Total energy sector emissions reached 723 Mt CO₂e in 2022, and the trend remains upward.
These numbers tell a simple truth: Indonesia is not resisting the energy transition, it’s constrained by legacy contracts and sunk costs. PLN’s long term take or pay agreements with coal plants lock in capacity for decades.
Indonesia’s renewable strategy remains state led and deliberate. Pertamina NRE and PLN Nusantara Power dominate the field, approving and coordinating most projects. That keeps the lights on but slows adaptation.
Companies like Surya Energi Indotama (SEI) have shown consistent execution on government projects such as the Cirata floating solar plant. Yet the same centralization that ensures order also limits innovation. Bureaucracies prefer predictability to experimentation, even when the market rewards agility.
One of the most fascinating shifts in Indonesia’s energy landscape comes from its private conglomerates. The country’s old money mining, pulp, and power is quietly funding new industries.
Sinar Mas, through DSSA, and Petrindo (CUAN) are channeling coal profits into solar, gas, and even digital infrastructure powered by cleaner energy. Pertamina NRE has joined hands with LONGi Solar to explore domestic manufacturing. These are not acts of moral transformation; they are exercises in capital recycling.
DSSA’s Trina Mas Agra Indonesia venture, for instance, shows how legacy energy companies can hedge their core exposure while preserving cash flow. CUAN’s smaller projects carry the same spirit.
This is not virtue it’s survival.
The rational investor always reinvests his moat before the tide changes.
Renewable projects in Indonesia still face steep economics.
The average cost of capital stands near 8–10%, almost double that of developed markets. Public funds cover barely 23% of required financing, leaving a USD 7 Bio annual gap. Projects typically need 12 to 15 yrs to break even, while regulated tariffs and local-content rules push up costs by around twenty percent.
Developers must also manage foreign exchange exposure, with most loans denominated in U.S. dollars but revenues earned in rupiah. A modest currency shift can erase thin margins. For investors, this means patience isn’t optional, it’s part of the business model.
Technology Without Mastery
Factories can be bought, competence must be built.
Indonesia’s solar ecosystem still depends on imported expertise. Polysilicon purification and wafer slicing require chemical precision that can’t be learned from a manual. The early partnerships with Chinese and Korean firms have transferred machinery, but not yet mastery.
This is the quiet cost of industrial learning. Every emerging economy passes through this phase assembler before innovator. The question is whether Indonesia can move up the value chain before policy fatigue sets in. Competence compounds slowly; complacency compounds faster. Without homegrown technical depth, renewable manufacturing risks staying dependent on government protection rather than market strength.
Coal is not just an industry, it’s a livelihood. Entire provinces rely on royalties, jobs, and supply chains linked to it. Only seven provinces have exceeded their renewable energy targets, the rest struggle with fiscal constraints. Expecting them to embrace the transition overnight is unrealistic.
Behavioral economics explains the slowdown too. When PLN reduced rooftop solar incentives in 2023, installations plunged.
The public response was predictable: when incentives shrink, adoption does too.
Munger once quipped, “Show me the incentive, and I’ll show you the outcome.”
Policy trust matters as much as technology. Investors must believe that regulations won’t shift midstream, and households must trust that savings are real. Stability, not just vision, drives participation.
Despite these headwinds, progress is visible. Installed solar capacity has tripled since 2019, reaching roughly 600 MW by 2024. Floating projects at Cirata and Riam Kanan are operational. Pertamina NRE is building industrial partnerships, while DSSA and CUAN continue diversifying earnings.
Compounding is invisible at first. It never feels fast enough. But history shows that patience is a better strategy than panic. Remember, someone’s sitting in the shade today because someone planted a tree a long time ago. The next few years may not look dramatic, but they will decide whether the sector can move from policy dependence to self sustaining profitability.
Global Electricity Generation. Source: Database Value
For rational investors, Indonesia’s renewable sector is not about virtue—it’s about viability. The central question is timeless: does the business earn more cash than it consumes, and can it do so for years?
Firms like DSSA, SEI, and Pertamina NRE each show part of the answer. Integration, execution, and endurance matter more than novelty. The winners won’t be the ones who arrive first, but the ones who stay solvent the longest.
Source: IESR analysis (2024) based on Presidential Regulation 22/2017, MEMR (2024), and KEN 2024 draft (June 9th 2024 version)
The IESR 2025 report imagines Indonesia reaching 70% renewables by 2045. Whether or not that target is met, the direction is right. What matters now is execution, turning policy into profit, and enthusiasm into efficiency.
Coal built Indonesia’s foundation. Those earnings can finance its transformation. The past is not a burden, it’s seed capital. The real achievement will be to reinvest that legacy intelligently, converting exhaust fumes into enduring cash flow.
Notes and References
- IESR – Indonesia Energy Transition Outlook 2025 (Jakarta, 2025)
- Kementerian ESDM – RUPTL 2024 – 2033
- Badan Kebijakan Fiskal – Energy Transition Mechanism Report 2024
- OJK – Taksonomi Hijau Indonesia Versi 2.0 (2023)
- PLN Nusantara Power – Annual Report 2023
- International Energy Agency – Southeast Asia Energy Outlook 2024
- BloombergNEF – Global PV Market Outlook 2025
- DSSA Tbk, CUAN Tbk, Pertamina NRE Corporate Disclosures (2025)
Value Corporation
Best Investment Data Research in Indonesia
Jakarta, 2025