In a previous essay, we argued that Indonesia’s sovereign wealth fund, Danantara, could serve as a bridge between the Gulf’s immense pools of capital and Indonesia’s vast renewable energy potential. That argument remains valid. As Gulf Cooperation Council (GCC) countries diversify beyond hydrocarbons and seek long-term investments in emerging markets, Indonesia stands out as one of the world’s most promising destinations for renewable energy development.
Yet capital alone cannot deliver an energy transition. If Indonesia is serious about achieving President Prabowo Subianto’s ambition to build up to 75 gigawatts of renewable energy capacity in the coming decades—a transformation that could require at least US$235 billion in investment—it will need not only GCC investors, but also something far less discussed: a pipeline of bankable green projects.
This distinction matters because green investment has become one of the defining economic priorities of our era. The Monetary Authority of Singapore estimates that ASEAN requires approximately US$200 billion in green investment annually through 2030 to meet climate and development goals. Despite this enormous demand, investment flows continue to fall short, reflecting not only financing gaps but also the difficulty of generating commercially viable projects capable of attracting capital at scale.
Indonesia exemplifies this challenge. For years, the country has announced increasingly ambitious renewable energy targets while paying insufficient attention to the institutional, social and bureaucratic foundations necessary to achieve them.
Renewable energy plans are unveiled, investment figures are celebrated and gigawatts are promised. Yet much less attention is devoted to project preparation, local participation and capacity building.
Ask financiers what constrains green investment in emerging markets, and many offer a surprisingly consistent answer: money is not always the problem. Rather, the shortage lies in bankable projects. A bankable project is more than an engineering blueprint or political aspiration. It requires clear regulations, predictable revenue streams, manageable risks, community support and business models that can generate long-term returns.
This problem is particularly acute in Indonesia. Even institutions established to facilitate energy transition financing often face limitations in preparing investment-ready projects. Designing renewable energy investments requires expertise that spans engineering, project finance, land acquisition, environmental safeguards and stakeholder engagement. Such capabilities cannot be built overnight, yet they are essential if Indonesia hopes to translate ambitious targets into actual infrastructure.
The experience of GCC investors offers important lessons in this regard. Investors from the Gulf have demonstrated a greater willingness than many conventional financiers to enter frontier sectors and support projects from an early stage.
The UAE-backed Cirata floating solar project illustrates how Gulf capital can help pioneer new technologies and business models in emerging markets. What this experience suggests is not that Indonesia lacks interested investors, but that attracting sustained investment requires a stronger pipeline of projects that meet international standards of bankability.
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Increasingly, therefore, the bottleneck lies on Indonesia’s side. The country still lacks a comprehensive blueprint for renewable energy development that integrates project preparation, institutional coordination and community readiness. Announcing large investment targets is important, but targets alone cannot substitute for the painstaking work of developing projects capable of convincing investors that risks are manageable and returns are achievable.
This challenge extends beyond economics and finance. Renewable energy transitions are not merely technological transformations; they are also social transformations. Indonesia has often approached infrastructure development from the top down, with government institutions dominating nearly every stage of project implementation. Yet renewable energy may deliver its greatest benefits when built from the bottom up, through stronger participation by local governments, cooperatives and communities.
Community-based renewable energy projects can create stronger local ownership, reduce resistance and ensure that the economic benefits of investment extend beyond state institutions and large corporations. Such an approach generates broader trickle-down effects while helping communities become active participants rather than passive recipients of development. A green transition rooted in society is ultimately more durable than one imposed solely through government policy.
Indonesia’s broader development experience reinforces this lesson. The World Bank has argued that faster growth and better jobs depend on business-enabling reforms, regulatory certainty and investments in both physical and human capital. Weaknesses in regulation, competition and market reforms have constrained private investment and kept resources concentrated in lower-value activities. Similar barriers continue to hinder renewable energy development, limiting the country’s ability to attract new technologies, expertise and capital.
Danantara therefore has an opportunity to become more than an investment vehicle. It can become an institution that prepares projects. Establishing a dedicated green project preparation facility under Danantara or PT SMI—a Special Mission Vehicle under the Ministry of Finance and Indonesia’s designated ETM Country Platform, though one that has itself been criticized for lacking the technical capacity to structure bankable green projects—with international technical partners would strengthen project readiness. Standardizing power purchase agreements and improving State Electricity Company’s credit-enhancement mechanisms could reduce uncertainty for investors. Expanding capacity-building programs for project finance professionals within state institutions would further strengthen Indonesia’s renewable energy ecosystem.
Most importantly, Indonesia should pilot several fully bankable renewable energy projects with GCC partners before announcing ever larger investment portfolios.
Indonesia’s renewable future will not be determined solely by the amount of capital it can attract. It will depend equally on whether the country can build institutions, communities and project pipelines capable of transforming ambition into reality. GCC investors can become important partners in this transition, but even the deepest pools of capital require projects worthy of investment.
Indonesia’s green transition therefore requires two things at once: investors willing to finance the future and institutions capable of building it. Without both, ambitious targets will remain on paper. With both, Indonesia could emerge as one of the most important renewable energy success stories in the Global South.
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The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.
