Giving local governments more autonomy and prioritising human rights are key to advancing Indonesia’s renewable energy aims, write two experts
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Farmers tend to their field as steam rises from a geothermal power plant in Dieng, Central Java (Image: Beawiharta / Associated Press / Alamy)
Geothermal energy is a crucial part of Indonesia’s plan to cut its greenhouse gas emissions to net zero by 2060. The country aims to add 5.2 gigawatts (GW) of installed capacity in 2025-2034, compared to a current capacity of 2.7 GW, according to state-owned news agency Antara.
By 2060, it is targeting 22.7 GW of non-variable geothermal capacity, mainly through large-scale plants. With this goal, the aim is to attract investment in these power plants, which are intended to replace coal-fired facilities; meet the country’s net-zero objectives by providing a stable baseload supply; and ensure grid reliability.
Indonesia possesses some of the world’s largest geothermal reserves, due to its proximity to tectonic plate boundaries, with estimates ranging from 23 to 29.5 GW, or about 40% of global geothermal potential.
Major geothermal fields are distributed across provinces such as Sumatra, Java, Sulawesi and East Nusa Tenggara. But strategic decisions, such as where to allow geothermal exploitation, remain the preserve of the central rather than local governments.
Such centralisation drives conflicts between the central government and local stakeholders and leads to community resistance against geothermal and other energy projects.
We believe local governments need to be given more authority in matters concerning geothermal development to ensure they can work towards energy justice.
We call for decision-making and participation in the production, trade, planning and regulation of energy to be decentralised.
Specifically, we suggest an asymmetric, or tailored decentralisation, in which different local governments are granted varying degrees of autonomy or authority. This would allow for different policies based on each region’s potential energy sources and enable each local government to manage its energy transition according to its unique needs.
A power imbalance
Under a 2018 regulation, the central government is authorised to designate areas where geothermal may be explored or exploited, known as “geothermal working areas” or WKPs. It is also authorised to assign state-owned enterprises or public service agencies to undertake such work within WKPs. A 2023 regulation strengthened the central government’s control of geothermal and other renewable resources by explicitly giving it the authority to issue recommendations for power generation projects to go ahead.
This means that the role of local government is limited to managing the development of geothermal projects once they have been approved by central government.
This division of authority has often been a source of tension for local governments. The central government tends to emphasise national interests such as energy-mix targets and broad strategic investments when promoting geothermal and other energy development. Meanwhile, local stakeholders are typically more concerned with the direct implications for spatial planning, community livelihoods, and environmental impacts in their territories.
Take Bandung as an example. In 2023, the province’s regent Dadang Supriatna stated at a meeting of geothermal company representatives and village heads that 3,000 families still lacked electricity. He pointed out that the majority of them lived not far from where geothermal companies operate, and called for the companies to allocate corporate social responsibility funds for villagers to access electricity.
The power imbalance also extends to the realm of raising and spending income.
Fiscal transfers and budgetary control are highly centralised. Local governments have only minor taxing powers such as on water, vehicle and hotels. Meanwhile, major taxes – income, luxury goods, VAT – remain under central control. Local authorities cannot set rates or broaden their tax base for significant revenue sources, making them dependent on central transfers for most of their budgets. They have no choice but to go along with the central government’s fiscal decisions.
This is the case in East Nusa Tenggara province’s Flores Island, earmarked by the central government as one of Indonesia’s priority regions for geothermal development. As with a number of provinces with limited private sector investment, East Nusa Tenggara’s revenue structure remains heavily reliant on fiscal transfers from central government.
This places regions like it in a vulnerable position, particularly when the central government enforces budget efficiency measures or reallocates funds for other national interests. For example, to cover the costs of President Prabowo Subianto’s priority programmes – including the hotly-debated “Red and White” village cooperatives initiative to drive local growth and the free nutritious meals programme – fiscal transfers to East Nusa Tenggara were reduced by IDR 184 billion (USD 11 million) as of February. This represents 4.2% of the province’s 2024 regional expenditure budget of IDR 4.36 trillion (USD 261 million), signalling a notable fiscal tightening. Further cuts are expected to continue.
On top of this, geothermal projects also often compromise local income. Farmers stand to lose IDR 470 billion (USD 28.1 million) in the first year of construction of geothermal power plants in three locations on Flores Island. This is according to economic modelling in a 2024 study by environmental NGO WALHI and the Center for Economic and Law Studies (CELIOS), a Jakarta-based thinktank. The power plants will also compete with local communities for water.
Planned centrally, suffered locally
Indonesia’s Energy Transition Roadmap, which sets geothermal energy as a pillar of power generation, was signed in April having been developed by the central government.
Projects such as the expansion of the Ulumbu geothermal plant, located in Poco Leok on the western side of Flores Island, play a key role in achieving the roadmap’s energy goals. However, according to the Alliance of Indigenous Peoples of the Archipelago, the project threatens to displace 4,506 people in 14 Indigenous communities from 3,778 hectares of their ancestral land.
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The Ulubelu 3 geothermal power plant in Lampung province, southern Sumatra (Image: Denny Pohan / ZUMA Press / Alamy)
Residents refused the project, fearing it would threaten their ancestral lands, water sources and cultural heritage. At the Environment Day celebrations in September in Maranggai, the regency where Ulumbu is sited, protests allegedly faced intimidation from the regent of Manggarai and his supporters.
The development is another clear example of the power imbalance in Indonesia’s geothermal governance, which can be summed up as planned centrally, suffered locally.
The WKPs on Flores Island were unilaterally designated by the central government. The lack of meaningful consultation mechanisms in this process risks marginalising civil society voices, disregarding customary land rights, and weakening local participation in decision-making processes. These outcomes stand in tension with the principles of a just and inclusive energy transition.
The case for asymmetric decentralisation
Asymmetric decentralisation enables more autonomy for local governments to manage the energy transition in their areas.
This system is applicable for several regions that have better readiness to assume greater autonomy in managing their energy transition agendas. Local governments’ readiness could be determined by development indicators such as the Regional Energy Transition Readiness Index developed by CELIOS, which is characterised by three dimensions: clean energy initiatives, economic resilience and government capacity.
This bottom-up approach positions regions as primary actors in accelerating the transition by granting them greater autonomy to design local energy plans, identify renewable resources, and engage local stakeholders in decision-making processes.
According to the CELIOS Index, East Nusa Tenggara is still “showing opportunities for improvement”, with clean energy initiatives and economic resilience scoring low and medium on the index – suggesting that its institutional and technical readiness remain limited. Therefore, any move toward asymmetric decentralisation for the province, and other regions at a similar level, should be accompanied by capacity building and economic support to ensure they can take on greater responsibilities effectively.
All of this is especially relevant as foreign investors are increasingly prioritising human rights and environmental safeguards in their energy-transition investment decisions. A report from the UN-supported Principles for Responsible Investment highlights how human rights and environmental supply-chain due diligence are essential to prudent investment. Weak due diligence can trigger financial, operational and reputational losses.
By embracing asymmetric decentralisation, future conflicts like those on Flores Island can potentially be avoided as affected communities are likely to have a stronger voice in the development of energy projects in their area. In doing so, Indonesia can transform geothermal projects from sources of resistance into pathways for inclusive development, community empowerment, and a truly just energy transition that is also attractive to global investors.
Author: Muhammad Arief Virgy, Hanifah Alya Chaerunnisaa
This article was originally published on Dialogue Earth under the Creative Commons BY NC ND licence. Read the original article.
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