More than 11,000 companies worldwide—accounting for over 40 percent of global market capitalization—have set science-based targets to lower carbon emissions. To reach these targets, companies must buy electricity from green sources such as solar and geothermal. While Indonesia has expanded its suite of mechanisms for purchasing green power, many of its neighboring countries offer more options, leaving it at a comparative disadvantage.

Our survey of companies in Indonesia revealed that they prefer green power procurement options that are straightforward and affordable. Most saw unbundled renewable energy certificates (RECs) as the best short-term option. In the long run, many prefer mechanisms which currently have limited availability, such as on-site generation and contracts with off-site generators.

To help Indonesian stakeholders identify options for the expansion of green power procurement, we examined measures that other countries have taken to help companies pursue these mechanisms, such as novel business models and enhanced data transparency. To respond to green energy demand and attract investment, Indonesian stakeholders could lower barriers to on-site generation, mature the market for unbundled RECs, enhance the public communication of utility contracts, and pursue grid rental for off-site generation.

Key Findings

Below are our findings on preferences regarding each mechanism and key findings from our review of international experiences. The former should be understood in the context of constrained corporate choice in Indonesia, where access to multiple green power procurement mechanisms remains limited. Thus, respondents’ perceptions may reflect limited exposure rather than a mature assessment, biasing responses towards mechanisms which are currently more recognized or accessible.

  • Unbundled EACs or RECs. Unbundled EACs or RECs are currently the preferred option and perceived as the easiest to procure in Indonesia. International experience suggests that their effectiveness depends on strong systems for traceability and emissions accounting, such as frequent updates to the emission factor and residual emission factor, which help buyers accurately report emissions.
  • On-site generation. On-site generation is the second most preferred option, though there are polarized views on how easy it is to deploy. International experience suggests that long-term adoption relies on early incentives followed by expanded business models and measures to ensure grid reliability.
  • Contracts with electric utilities. Companies expressed polarized views on the difficulty of pursuing this mechanism. The option ranked third among preferred mechanisms, which may reflect limited awareness, since Perusahaan Listrik Negara (PLN), the national electric utility, had only recently launched its Green Energy as a Service: Dedicated Source (GEAS DS) as of the date of our survey. International experience suggests that strong uptake is correlated with buyer awareness of the cost structure and generation sources.
  • Contracts with off-site generators. Companies perceived this option as the most difficult but also showed strong interest. International experience suggests this mechanism is often made available in gradual steps, in consultation with buyers, and in response to salient national issues such as energy security and industrial competitiveness. Availability is possible via exemptions to the single-buyer model (where the only customer for generators is the utility) or via comprehensive power sector reform.

Conclusions and considerations for Indonesian stakeholders

A comparison with other countries’ green power purchasing mechanisms revealed options for the Indonesian government and PLN to consider as they respond to buyers’ demand for green energy:

  • Lower barriers to on-site generation. Raise caps for grid-connected rooftop PV while taking steps to mitigate oversupply and preserve system reliability, such as storage deployment, appropriate allocation of grid cost and curtailment risk, and close operational coordination between transmission and distribution. Further, provide revenue options for the utility and clarify that RECs from grid-connected rooftop PV can go to the generators. Lastly, consider an exemption from capacity and emergency charges for ground-mounted and floating solar.
  • Mature the market for RECs. Pursue a comprehensive policy for RECs to enhance their credibility, transparency, and eligibility for trading. Moreover, add newer power plants to PLN’s REC program to enable compliance with voluntary action frameworks and regularly update both the grid and residual emission factors to prevent double counting. Lastly, given corporate interest in greater additionality, continue to enhance mechanisms beyond RECs.
  • Enhance public communication of utility contracts. Increase awareness of GEAS DS by further promoting it. Publish the list of power plants allocated to GEAS DS, as well as their cost structure and commissioning timelines, to help buyers make informed decisions.
  • Pursue joint utilization schemes. The Ministry of Energy and Mineral Resources (MEMR) may play a more active role in off-site generation pilots by further clarifying the procedures required for joint utilization of the grid and updating regulations to stipulate fair and transparent grid rental fees for off-site generation. Lessons from early implementation may point to possible adjustments to the joint utilization scheme as it moves toward wider adoption.

Regarding how to pursue the above, Indonesian authorities may wish to consider the following:

  • Broader institutional leadership for green power. Indonesia competes with neighboring countries for foreign direct investment and supply chains. Green power purchasing mechanisms may be part of an industrial competitiveness and investment strategy which relies on ministries such as the Ministry of Industry and the Ministry of Investment in addition to MEMR, which already plays a central role.
  • Buyer consultations. Indonesian authorities may benefit from continuing to engage in dialogue with companies to ensure reforms respond to market needs. This can be done through transparent stakeholder consultation during rulemaking, structured socialization of new regulations, and continued outreach to buyers to support understanding and adoption.
  • Supportive, clear, and predictable regulations. Indonesian authorities may wish to provide clear and long-term regulatory visibility to buyers. This may include piloting changes among a few buyers, learning from experience, and then gradually expanding eligibility.
  • Independent or more coordinated regulation. Creating an independent regulator or strengthening coordination among MEMR, PLN, and other government agencies may provide clarity about responsibilities, timely policy implementation, transparent decision-making, and responsiveness to buyer demand.

This paper focuses on the perspective of corporate buyers. These initial considerations are not exhaustive and should not be treated as definitive recommendations. We encourage consultation with additional stakeholders and further analysis to validate our findings.

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