Renewable energy financing and sustainable development : evidence from the Indonesian electricity sector

Abstract

The transition toward renewable energy is essential for achieving sustainable development, improving energy security, expanding clean electricity access, and reducing greenhouse gas emissions. Although Indonesia has substantial renewable energy potential and ambitious energy transition targets, renewable energy deployment in the electricity sector remains limited. This condition is mainly influenced by financing gaps, regulatory uncertainty, weak project bankability, institutional fragmentation, fossil fuel lock-in, and infrastructure constraints. Therefore, this thesis examines how renewable energy financing contributes to sustainable development outcomes in Indonesia’s electricity sector and identifies policy measures needed to strengthen renewable energy investment. This study adopts a pure qualitative research design using the Method for Analysis of Empirical Evidence in Management (MAEEM). Data were collected through semi-structured interviews with key stakeholders, including representatives from MEMR, PLN, OJK, and an academic/ADB expert, supported by official policy, financial, and institutional documents. The analysis was conducted through keyword identification, coding, theme development, and conceptual model formation. Instead of measuring statistical causality, this study interprets the mechanisms through which financing, regulation, institutional capacity, and infrastructure influence renewable energy development in Indonesia. The findings show that renewable energy financing in Indonesia is supported by public finance, private investment, concessional loans, blended finance, green bonds, green sukuk, and international climate finance. However, the scale of investment remains insufficient to meet national renewable energy targets. High perceived risks, unstable regulations, unclear procurement processes, limited domestic financial participation, and inadequate grid readiness continue to weaken project bankability and slow project realization. The study concludes that renewable energy financing can contribute to sustainable development through investment growth, job creation, improved energy access, welfare enhancement, emission reduction, and reduced fossil fuel dependence, but these benefits require stronger policy certainty, better institutional coordination, effective risk-mitigation instruments, improved PLN procurement and power purchase agreements, expanded blended finance, and grid modernization.