While there is massive potential in Indonesia to develop renewable energies, the country remains largely dependent on fossil fuels, which account for over 80% of its energy mix. Through AFD, France is working in partnership with the European Union and local authorities to increase support for a just energy transition in Indonesia.
Achieving a just energy transition means recognizing that environmental and social crises are intrinsically linked. In other words, a country’s energy transition strategy must take into account the interests of workers from vulnerable communities. This is the concept behind the Just Energy Transition Partnership (JETP).
For example, when a country like Vietnam, South Africa or, in this case, Indonesia, requires AFD’s support in reducing its dependence on fossil fuels and replacing them with renewable energies, there are a wide range of financial tools at its disposal to support planning, governance, job creation, and so on. Such is the case with the Indonesia Energy Transition Facility (IETF) which was officially launched in Jakarta on February 5. This initiative has been awarded a €14.7 million grant (with 72% being financed by the EU) to drive Indonesia’s energy transition between 2025 and 2030.
A key stage
“The launch of the IETF represents a key stage,” says Diana Acconcia, Director for International Affairs and Climate Finance for the European Commission. “Team Europe, which includes the EU, the European Investment Bank, Denmark, France, Germany and Italy, has pledged €3.5 billion in grants and concessional loans under the JETP. The EU’s new contribution to the IETF further reinforces our support for sustainable infrastructure in line with our Global Gateway strategy.”
In practice, the IETF is based on a two-pronged strategy:
- Support for public policy: AFD is working with the Indonesian Ministry of Energy and Mineral Resources (MEMR) to develop regulatory frameworks that promote the development of renewable energies, while incorporating environmental, social and gender issues.
- Project preparation and implementation: In partnership with the state-owned electricity company PLN, AFD is supporting the development and upgrade of energy infrastructure in compliance with strict environmental and social standards.
Targeting carbon neutrality in Indonesia by 2050
The IETF is aligned with the Just Energy Transition Partnership (JETP), to which France has awarded €500 million since 2022. The aim is to support Indonesia to reach peak power sector emissions of 250 MtCO₂ by 2030, with an energy mix comprising 44% renewable energies, and a net-zero power sector by 2050.
“Together with AFD, we hope to accelerate Indonesia’s transformation to a greener, more sustainable and environmentally-friendly energy system,” explains Dadan Kusdiana, Secretary General of the MEMR.
“The launch of the IETF confirms France’s long-term commitment to Indonesia, with the energy transition marking a key chapter in our cooperation,” says Fabien Penone, French Ambassador to Indonesia, East Timor and ASEAN.
In line with this commitment, AFD recently approved two landmark projects. A budgetary loan of €150 million was granted in October 2024, earmarked for the implementation of reforms to drive the energy transition by strengthening governance in the sector and establishing frameworks that are more attractive to the private sector.
Financing of €300 million has also been pledged to support the transformation of the energy company, PLN. This loan from AFD will be used to advance the energy operator’s low-carbon trajectory, by financing its investment plan and attracting private investment. This financing will also help to bring PLN’s operations into compliance with environmental and social standards, as well as the requirements of a just energy transition.
A catalyst for new initiatives going forward
In addition to this financing, AFD will continue to mobilize other partners and resources to meet Indonesia’s needs. In this regard, the IETF could serve as the impetus for other innovative projects, such as:
- The development of green hydrogen.
- The decarbonization of islands and support for value chains associated with minerals deemed critical to the energy transition.
- The production of bioenergy from agricultural waste.
“Through a combination of financing and expertise, we’re constructing a comprehensive and collaborative energy transition, while working closely with PLN and the MEMR,” says Yann Martres, AFD Director in Indonesia. With this new formative program, AFD has consolidated its role as a trusted partner in Indonesia’s energy transition, while supporting more sustainable, inclusive and resilient development.
