Early retirement plan for steam power plants (PLTU) coal in Indonesia is one of the most strategic agendas in the transition to clean energy.
In recent years, the direction of national energy policy has begun to shift focus from fossil energy to renewable energy, in line with global climate demands and commitments to reduce emissions. However, this process is not without obstacles.
Funding, regulatory certainty, and implementation readiness are important factors that determine whether this ambitious plan can be achieved on time.
Through international schemes such as the Just Energy Transition Partnership (JETP), Indonesia received global support in the form of funding promises of up to US$ 20 billion to accelerate the reduction of dependence on coal.
Unfortunately, the flow of funds has never been realized, making PLTU’s early retirement plans face increasingly real uncertainty.
This article outlines the entire context starting from JETP’s ambitions, funding conditions, socio-economic risks, to alternatives to PLTU and what needs to be done so that the energy transition does not stop at the discourse level.
JETP’s ambition to close 6.7 GW PLTU before 2030
JETP is a global partnership mechanism involving donor countries such as the United States, European Union, Japan and several other G7 countries.
In 2022, JETP set a funding commitment of US$20 billion for Indonesia over a three to five year period, through a combination of loans, grants and private investment mobilization.
One of JETP’s main targets is the early retirement of 6.7 GW of PLTU capacity before 2030, or the equivalent of 13.5% of the total national PLTU capacity.
This target is not just a number, but a symbol of change from dependence on coal energy towards a cleaner and lower emission energy system.
This commitment is also relevant because Indonesia is among the largest coal electricity producing countries in the world. With Southeast Asia’s largest economy, Indonesia’s successful energy transition will be an important catalyst for global climate policy.
Financial Clarity of Current Funding
Even though JETP has started implementation in 2025 with initial funding of US$2.85 billion and a grant of US$186.9 million, until now no specific funds have actually flowed for the PLTU early retirement program.
Of the latest fund commitments of US$19.53 billion, only a small portion is in the process of being distributed, while US$6 billion in early pension funds have still not been disbursed.
This condition creates a big dilemma, such as very high ambitions, but the prepared finances are not yet available. Because of this, Indonesia is starting to consider temporarily suspending the 6.7 GW early retirement plan until funding clarity emerges.
Reuters analysis (2025) states that the risk of failure to disburse funds could disrupt the overall coal phase-out agenda. This uncertainty not only hampers PLTU retirement projects, but also sends a bad signal to renewable energy investors.
Obstacles and Challenges to be Faced
Based on reports from JETP, the Asian Development Bank (ADB), and the Southeast Asia Energy Transition Partnership (SEA-ETP), there are at least four groups of challenges that are currently the main obstacles.
1. Early Retirement Funding is Unclear
Early retirement requires compensation for PLTU owners because their assets have not yet reached their economic life. Without clear financial mechanisms—eg buyoutblended finance schemes, or income guarantees—asset owners will likely resist early retirement.
2. Changes in Donor Country Commitments
JETP donor countries are not completely consistent. Recent reports even say that the United States withdrew some of its support, weakening the momentum of the transition. On the other hand, Japan and Germany are still trying to ensure the direction of funding remains on track.
Political misalignment in donor countries creates uncertainty for Indonesia because the PLTU pension program relies heavily on their support.
3. Domestic Social & Economic Risks
Closing the PLTU prematurely will have an impact on PLTU and coal mine workers, local communities who depend on the plant’s economic activities, as well as the potential for electricity prices to increase if there is no cost mitigation.
Without a comprehensive plan to shift the workforce or ensure electricity price stability, early retirement plans risk generating social resistance.
4. Financial & Legal Risks for Asset Owners
PLTUs generally have long-term contracts in the form of a Power Purchase Agreement (PPA). Terminating a PPA prematurely means complicated legal consequences, large compensation costs, and potential lawsuits if it is not resolved clearly.
The SEA-ETP study (2025) shows that the complexity of regulations is what makes the PLTU early retirement process require thorough preparation, not just a promise of a vision.
Alternative to PLTU
If the PLTU has to be stopped sooner, then national electricity needs will have to be met by other generators. The two main alternatives are solar and geothermal generation.
1. Solar Generator
Solar energy is relatively flexible, clean, and quick to build. However, the challenges are big for regions like Java due to limited land, population density, and the need for high grid-scale infrastructure investment.
The construction of solar farms often clashes with the need for urban space and productive land.
2. Geothermal Generator
Indonesia has the second largest geothermal potential in the world. However, exploration and development costs are very high, so initial funding is a major challenge.
The risks of underground exploration, expensive drilling technology, and long development times mean that the investment scale for geothermal tends to swell.
Cirebon-1: Pilot Project that Determines the Future of Early Retirement
One of the early retirement pilot projects is PLTU Cirebon-1 (660 MW) in West Java. This project is managed by ADB through the Energy Transition Mechanism (ETM) scheme with funds of US$ 2.56 billion.
Cirebon-1 is projected to become a financing model that can be replicated in other power plants. However, until now a final funding agreement has not been reached. The stipulated deadline has passed, and the negotiation process is still ongoing intensively.
If this pilot project fails to run, the early retirement target of 6.7 GW in 2030 is likely to be delayed. The JETP Report 2025 reference confirms that the success of the pilot model will be a determining factor in accelerating the retirement of other PLTUs.
What Should Indonesia Do Facing Early Retirement of PLTU?
So that the PLTU early retirement plan really works, there are at least four strategic steps recommended by several energy transition institutions.
1. Accelerate the Realization of International Funding
Without clarity of funding, it is impossible for the program to run. Indonesia needs to encourage donor countries to make their commitments binding and not just long-term promises.
2. Design a transparent compensation mechanism
Asset purchase schemes, transition subsidies and blended finance must be prepared with a clear and fair model for PLTU owners.
3. Develop a Workforce Transition Program
The replacement of the PLTU must be accompanied by a worker reskilling and upskilling program so as not to create serious social impacts.
4. Guarantee Political and Regulatory Certainty
Renewable energy investors need policy stability to invest capital in the long term.
Conclusion
The early retirement plan for 6.7 GW of PLTUs in Indonesia is an ambitious target that requires synchronization between finance, policy and implementation.
Uncertainty regarding the disbursement of international funds has put Indonesia’s energy transition plans at a crossroads.
The success of pilot projects such as Cirebon-1 will be a barometer of whether Indonesia is able to close some PLTUs sooner or even postpone the target until beyond 2030.
With a more solid funding strategy, clear compensation mechanisms, and political support from donor countries, Indonesia has the opportunity to accelerate energy transformation and gradually reduce dependence on coal. Keep reading Minerco Media for other mining news.
Source: www.minercomedia.com
