The PRAKARSA and ClientEarth Explore the Use of Extractive Revenues to Finance the 100 GWp Solar Power Program

This article was originally published in The PRAKARSA website and reproduced here with permission.

JAKARTA - The PRAKARSA, together with ClientEarth and in collaboration with the Indonesian Solar Energy Association (AESI), held a Focus Group Discussion (FGD) titled “Financing Indonesia’s Solar Energy: The Feasibility of Extractive Revenue” in Jakarta on Thursday (5 November 2026). The forum discussed preliminary findings from a joint study examining the feasibility of using government revenues from the coal, oil, and gas sectors to support financing for the 100 GWp Solar Power Plant (PLTS) program. The event brought together representatives from government institutions, financial institutions, the banking sector, industry associations, and research organizations.

Roby Rushandie, Director of Research and Knowledge Management at The PRAKARSA, emphasized that the energy transition is not solely about developing clean technologies but must also ensure people's welfare. Therefore, achieving the 100 GWp solar power target requires attention to upstream considerations, particularly its financing architecture. He noted that the role of fiscal policy should extend beyond direct financing, serving instead as catalytic capital to reduce investment risks and encourage private sector participation.

In his opening remarks, Deputy Speaker of the People's Consultative Assembly (MPR RI), Eddy Soeparno, stated that climate resilience is an integral part of national resilience. The impacts of the climate crisis are already evident, including land subsidence in Jakarta, which reaches 3.5–5 cm per year. For this reason, the energy transition must be positioned as part of the national development strategy.

He also highlighted the substantial investment required to achieve Indonesia's energy transition targets. The 2025–2034 Electricity Supply Business Plan (RUPTL) requires approximately US$190 billion in investment, while the 100 GWp solar power program is estimated to require around US$100 billion. Key challenges include land acquisition, the use of reservoirs for floating solar power plants, and high logistical costs in reaching remote areas.

One proposal raised during the opening session was the establishment of a renewable energy fund sourced from non-tax state revenues (PNBP) generated by the energy sector. Other priorities included accelerating deliberations on the Fair Climate Change Control Bill (RUU PPIB) and incorporating power wheeling provisions into the New and Renewable Energy Bill (RUU EBET) as part of broader efforts to strengthen energy transition policies.

During the study presentation, Dea Fajria Tatarizqa Japal, a researcher at The PRAKARSA, explained that Indonesia's installed solar power capacity had reached only approximately 1.5 GWp by the end of 2025. Meanwhile, the program's financing needs are estimated at US$73 billion, equivalent to approximately IDR 1,277 trillion, for the 2026–2030 period, with around 80% of the required funding concentrated between 2027 and 2029.

During the same period, potential central government revenues from the coal, oil, and gas sectors, after accounting for revenue-sharing transfers to regional governments, are estimated at approximately IDR 658 trillion. Through a fixed fiscal recycling allocation and the establishment of a renewable envelope within Danantara, approximately IDR 129 trillion, or around 10% of the program's financing needs, could potentially be allocated to support solar power development.

The study also indicates that the proportion of revenues allocated has a greater influence on financing outcomes than changes in commodity price assumptions. Based on these findings, the research team proposed four policy recommendations: establishing a coal and oil and gas PNBP recycling mechanism through a Presidential Regulation; creating a transparent renewable envelope within Danantara; strengthening PT SMI as a catalytic financing platform; and developing voluntary co-financing arrangements with resource-producing regional governments through revenue-sharing mechanisms (DBH).

If all four mechanisms were implemented, the potential funding could reach approximately IDR 147 trillion, equivalent to 11.5% of total financing needs. Public funds would not be intended to finance all projects. Instead, they would be directed towards components that are less attractive to commercial investors, such as rural solar power projects, while also reducing investment risks and encouraging greater private sector participation.

From a legal and governance perspective, Tim Guanzon, Acting Associate Director, Japan and Southeast Asia at ClientEarth, identified several challenges in utilizing extractive sector revenues to finance renewable energy development. These include the principle of universality in the state budget (APBN), which limits the earmarking of specific government revenues; the absence of adequate regulatory links between extractive revenues and renewable energy expenditure; and the lack of explicit mandates for state financing institutions to carry out such functions.

As an alternative, the legal analysis proposed a gradual reform approach, beginning with clarifying the regulatory framework, expanding institutional mandates and strengthening institutional capacity, before establishing a more targeted funding allocation mechanism.

During the discussion session, participants explored several challenges that need to be addressed to realize the 100 GWp solar power program. One issue that emerged was that the program's constraints are not limited to financing availability but also concern project readiness. Land acquisition, licensing, electricity grid readiness, and regulatory certainty were identified as factors that could hinder the absorption of funds that are already available, including through the Just Energy Transition Partnership (JETP).

The discussion also highlighted the need for government involvement in mitigating land acquisition risks and the importance of tailoring financing schemes to the characteristics of individual projects. This is particularly relevant given that financing costs significantly influence investment feasibility, especially for projects that have yet to attract sufficient commercial interest.

Other issues raised for further examination included the opportunity cost of reallocating extractive revenues, the sustainability of revenue sources amid commodity price fluctuations, and the mapping of institutional roles and mandates. Participants also emphasized the importance of aligning domestic industrial policies, domestic component requirements (TKDN), and certainty of domestic demand, alongside stronger coordination among ministries, government agencies, and regional governments. Alternative financing sources, including sustainable finance instruments and Islamic finance, were also discussed.

The FGD highlighted that fiscal space could be mobilized to support the 100 GWp solar power program, provided that appropriate financing, regulatory, and institutional arrangements are established. Public funds could be directed towards absorbing early-stage project risks, particularly those related to land acquisition, transmission infrastructure, and rural solar power development, thereby creating greater opportunities for private investment.

The insights and perspectives gathered during the forum will inform further refinement of the study by The PRAKARSA and ClientEarth ahead of the publication of the final report.