Indonesia's Electricity Supply Business Plan, from 2025 to 2034, requires $2.4 billion in annual investments to support the deployment of renewables, promote industrial electrification, and inter-island grid integration, according to a report by the Institute for Energy Economics and Financial Analysis.
The figure mentioned by the report is significantly above the $1.4 billion average annual investments that have been earmarked for the nation's grid since 2019.
IEEFA warned that the country's current financing framework, under which transmission assets are funded through state utility PLN's consolidated balance sheet, was inflating financing costs and obscuring the economics of grid infrastructure, while also being exposed to fuel and forex volatilities.
This, the report argued, increases the cost of borrowing for transmission infrastructure, while slowing down renewables deployment.
"Transmission is a capital-intensive, long-term infrastructure asset with stable and predictable usage patterns," the report said, adding that when financed as a low-risk regulated utility, it can attract long-term capital at borrowing costs closer to sovereign rates.
To address the issue, the report proposed establishing a separate PLN transmission company through corporate restructuring and financial ring-fencing while maintaining state ownership and oversight.
It pointed to examples from India and Vietnam, where state-backed transmission entities have successfully attracted large-scale financing through regulated tariff structures and clearer corporate governance.
India's Power Grid Corporation, for instance, has self-financed an average of about $2.5 billion annually in grid investments over the past decade, according to the report.
The report concluded by noting that Indonesia would require over $24.4 billion in investments over the next decade to finance its planned grid expansions. This is in addition to renewable energy additions, which require roughly four times that amount, underscoring the scale of capital needed to modernize the country's electricity system.