Indonesia will encounter “significant implementation challenges” in its plans to phase out all fossil fuel-based power plants within the next 15 years, according to credit ratings agency Fitch Ratings. The target was revealed last month at a Group of 20 summit by Indonesian President Prabowo Subianto, who also announced plans for 75 gigawatts of additional renewable energy over the next 15 years and expansion of biodiesel production. Coal-fired generation currently represent around 67% of Indonesia’s power output, with a further 20% coming from gas and diesel plants. Fitch projects fossil fuels to account for more than 80% of power generation in the country until 2027. “Phasing this capacity out by 2040 could heighten execution and policy challenges around Indonesia’s energy transition, as well as raising risks to energy security,” the briefing warned. The agency highlighted that the country has been “weak” in following through on energy transition commitments in the past, noting that Indonesia has fallen far short of its 23% renewable power share target by 2025, achieving just 12% in 2023. Fitch added that the credit profile of corporates in Indonesia’s power and coal sectors could be detrimentally affected over the medium term if the government adjusts its policy approach to meet the target. Larger Indonesian coal producers are developing plans to diversify away from thermal coal, but the government’s support for a faster coal-power phase-out could accelerate investments and encourage more to consider investing in businesses other than thermal coal, Fitch noted.
