Danantara and the Gulf could finally turn Indonesia’s renewable energy ambition into reality

Indonesia has no shortage of renewable energy ambition. What it lacks is capital, execution and, above all, trust.

For years, successive governments have promised a green transition. The targets have become increasingly ambitious, culminating in President Prabowo Subianto’s pledge to accelerate Indonesia’s energy transition and build up to 75 gigawatts of renewable energy capacity in the coming decades, a plan that could require at least US$235 billion in investment. 

Yet the reality remains sobering.

Indonesia’s renewable energy mix remains far below the national target. The government originally aimed for renewable energy to contribute 23 percent of the national energy mix, but the figure remains stuck at around 16 percent. Even that number includes geothermal energy, which, while classified as renewable, continues to raise ecological concerns due to its impacts on forests, biodiversity and local communities.

Meanwhile, Indonesia’s electricity planning still struggles to break free from its dependence on fossil fuels. Coal-fired power plants remain deeply embedded within the country’s energy system, and discussions about early retirement of coal plants often end with the same explanation: there is not enough financing.

But what if financing is precisely where the solution lies?

This is where Danantara, Indonesia’s new sovereign wealth fund, could become one of the most important institutions in the country’s energy transition.

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Since its establishment, Danantara has been promoted as more than just another state investment vehicle. With authority over major state-owned enterprises, including State Electricity Company (PLN) and Indonesia’s state-owned energy giant, Pertamina, and control over hundreds of billions of dollars in state assets, it was designed to become a strategic engine for national development. Today, it has an opportunity to prove that promise. 

The challenge facing Indonesia is not a lack of renewable resources. The country possesses some of the world’s largest renewable energy potential, from solar and hydropower to wind resources. What Indonesia lacks is the scale of investment necessary to unlock that potential. 

That is why the Gulf countries matter.

Across the Middle East, sovereign wealth funds are actively searching for long-term investment opportunities beyond oil. Saudi Arabia’s Public Investment Fund, Qatar Investment Authority, Abu Dhabi Investment Authority and other Gulf investment vehicles are increasingly looking toward emerging markets where large-scale infrastructure and energy projects can deliver stable returns.

Indonesia should be at the top of that list.

The signs are already visible. The United Arab Emirates has expressed interest in partnering with Danantara on renewable energy projects, including a potential 10-gigawatt initiative. UAE renewable energy giant Masdar has already established a presence in Indonesia through the Cirata floating solar project and continues to explore new investments. 

The logic is compelling for all sides.

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Indonesia gains access to the capital required to accelerate renewable energy deployment, modernize transmission networks and reduce dependence on coal. Danantara gains an opportunity to demonstrate that it can prioritize investments that are both financially viable and environmentally sustainable. Gulf investors gain access to one of the world’s largest renewable energy growth markets while expanding the global reach of their energy, grid and clean technology industries.

This is not merely an investment story. It is a strategic partnership.

For Gulf countries, Indonesia represents a rapidly growing economy with enormous energy demand. For Indonesia, Gulf sovereign wealth funds represent patient capital capable of financing projects that commercial lenders often view as too risky or too large.

Yet none of this will succeed without one critical ingredient: regulatory certainty.

In the world of finance, trust is currency.

Investors can tolerate risk. They can tolerate long payback periods. What they struggle to tolerate is uncertainty.

If Indonesia wants Danantara to become a gateway for Gulf investment into renewable energy, it must ensure that energy policies remain consistent across political cycles. Investors need confidence that power purchase agreements will be honored, permitting processes will remain predictable and energy regulations will not shift unexpectedly after billions of dollars have already been committed.

This challenge is especially important today, when domestic political debates and concerns about governance continue to shape investor perceptions.

Indonesia’s renewable energy future will not be determined solely by the abundance of sunlight, rivers or wind. It will be determined by whether the country can build institutions that inspire confidence.

Danantara could become the bridge connecting Indonesia’s vast renewable potential with the Gulf’s immense pools of capital. But bridges require strong foundations.

Without trust, Indonesia’s green ambitions will remain targets on paper.

With it, they could become one of the most significant energy transformation stories of the twenty-first century.

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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.