Indonesia’s Energy Transition: The Case for MENA as a Key Partner
Jakarta (27 February 2025)-CELIOS launched its new Indonesia-MENA Desk alongside its latest study, “Looking Towards MENA (Middle East and North Africa): Alternative Investment Partners for Indonesia’s Energy Transition.” The study highlights the growing importance of MENA countries in supporting Indonesia’s clean energy ambitions amid shifting global geopolitics.
Donald Trump’s energy policies signal a renewed focus on fossil fuel production, rolling back regulations and prioritizing the interests of the oil and gas industry. His administration’s appointment of pro-fossil fuel figures, such as Chris Wright, CEO of Liberty Energy, reinforces this stance. Such a shift could stall global climate action, much like Indonesia’s struggles in securing Just Energy Transition Partnership (JETP) funds, where only Rp 7.7 trillion ($500 million) of the committed Rp 300 trillion ($19 billion) has been realized.
Beyond the financial impact, a second Trump presidency could see the United States withdrawing from key climate forums, including COP and the Paris Agreement, further undermining international climate cooperation. His policies may also exacerbate U.S.-China trade tensions, creating economic instability in developing nations like Indonesia and discouraging investment in renewable energy projects.
“Indonesia must not rely solely on U.S. funding or China’s investments but seek alternative partners, including the Middle East countries to finance the energy transition,” said Bhima Yudhistira, Executive Director of CELIOS.
The MENA region’s growing role in global energy finance, particularly through sovereign wealth funds, offers Indonesia a potential lifeline. Sovereign wealth funds, including Saudi Arabia’s Public Investment Fund (PIF) and the Abu Dhabi Investment Authority (ADIA), have pivoted towards technology, real estate, and clean energy investments.
“Middle Eastern nations are actively reshaping their economies beyond oil, making them ideal partners for Indonesia’s energy transition,” said Muhammad Zulfikar Rakhmat, Director of the Indonesia-MENA Desk at CELIOS.
Saudi Arabia’s Vision 2030 and the UAE’s Masdar initiative underscore MENA’s leadership in clean energy, positioning the region as a crucial player in the global energy transition. As of 2023, Indonesia’s total installed power capacity stood at approximately 91 GW, with PLN contributing 79.3%, private power utilities 5.1%, and Independent Power Producers (IUPTLS) 15.6%. The government has set its sights on achieving Net Zero Emissions by 2060, yet a successful transition requires reducing reliance on natural gas, which still poses environmental challenges.
MENA offers a viable alternative for Indonesia’s energy transition due to several key factors. The region has significantly diversified its investments, with Gulf states committing $175 billion to energy in 2024, 15% of which was allocated to renewables. Strong bilateral relations between Indonesia and MENA, reinforced through platforms such as the G20 and BRICS, provide a solid foundation for collaboration. Additionally, investments in Indonesia’s renewable energy sector could generate IDR 4,376 trillion in economic output and create 19.4 million jobs over the next decade while reducing emissions and healthcare costs.
“Indonesia’s partnership with MENA countries can reduce reliance on a single funding source and ensure long-term energy security,” said Yeta Purnama, a researcher at CELIOS.
Despite China’s commitments to clean energy, its investments in Indonesia often contradict sustainability goals. Over 77% of captive coal plants supplying Indonesia’s nickel industry, with a total capacity of 15.25 GW, are financed by China. Additionally, the prospect of renewed U.S.-China trade tensions under Trump’s leadership threatens global economic stability. As Chinese businesses explore relocating renewable energy manufacturing to Indonesia, the country has an opportunity to position itself as a key player in the global supply chain while diversifying investment sources.
“Indonesia must strategically balance partnerships with China and MENA to ensure sustainable growth and avoid overdependence on a single investor,” said Zulfikar.
Indonesia’s renewable energy share remains at just 9.58% of total consumption as of 2023. Achieving Net Zero by 2060 will require up to $1 trillion in investment, with a focus on expanding grid infrastructure, battery storage, and component manufacturing. Securing diversified funding, including from MENA, will be essential in accelerating Indonesia’s clean energy transition and ensuring long-term energy resilience.
Please refer to the report in our website www.celios.co.id for more information.
Contact person
Yeta Purnama (admin@celios.co.id)
