The Habibie Center | The Energy Transition Has Also Been Impacted by Cuts to Regional Financial Transfers

Regions have significant potential to realize the energy transition. However, their fiscal authority and capabilities are limited, especially with cuts to regional financial transfers.

The path to achieving energy transition in the regions is becoming increasingly difficult. In addition to the limited authority of local governments, the energy transition is also threatened by cuts in regional financial transfers in 2026. Meanwhile, the government aims for Indonesia to achieve clean energy by 2060.

Concerns about the potential hindrance of the energy transition program from fossil-based energy to new renewable energy, particularly in the regions, emerged during a discussion held by The Habibie Center (THC) in Jakarta on Wednesday (26/11/2025). This event was supported by the Ford Foundation and the Ministry of Home Affairs.

The event is part of a series of National Seminars and Research Results Presentations titled "Realizing Green Democracy: Strengthening Institutional Energy Transition for Social Justice and Environmental Sustainability." Representatives from the central and regional governments, as well as academics, also participated in the discussions.

The atmosphere of the National Seminar and Presentation of Research Results titled "Realizing Green Democracy: Strengthening Institutional Energy Transition for Social Justice and Environmental Sustainability" in Jakarta, Wednesday (26/11/2025). The event, initiated by The Habibie Center (THC) with the support of the Ford Foundation and the Ministry of Home Affairs, discussed equitable energy transition. KOMPAS/ABDULLAH FIKRI ASHRI

Permadi Mohamad Nurhikmah, Head of the Energy Division of the West Java Provincial Energy and Mineral Resources Office, stated that the energy transition program has already been included in the budget allocation according to the regional government information system. In 2024, for instance, the budget will reach IDR 13 billion.

"However, this year (2025) it has decreased to Rp 11 billion. Next year, it may only be Rp 1 billion due to a reduction in TKD (transfers to regions), and this impacts, among other things, the EBT (new and renewable energy) program," stated Permadi, who was one of the speakers.

TKD is a fund from the state budget (APBN) allocated to local governments. This year, the TKD funds distributed to the regions amount to Rp 848 trillion. However, the government and the DPR have agreed to reduce the amount of TKD funds in 2026 to Rp 693 trillion.

The TKD for West Java has decreased by approximately Rp 2.1 trillion. According to Permadi, this reduction will diminish funding for energy transition programs, including the development of renewable energy-based installations. Moreover, local governments also require funds for other sectors, such as infrastructure.

Although not detailing the specifics, according to Permadi, even without the trimming of the TKD, the fiscal capacity of local governments for energy transition programs is already limited. This condition is inseparable from the limited authority of local governments based on Law Number 23 of 2014 concerning Regional Government.

In the annex of Law No. 23/2014, the authority of local governments is limited to permits for the direct utilization of geothermal energy across regencies/cities and permits for the utilization of biofuel within certain capacities. "For West Java, there are currently no objects for these two authorities," Permadi stated.

Activities participating in the Draw the Line: #ResetIndonesia action in the Dukuh Atas area, Jakarta, Friday (19/9/2025). This action, held at 33 locations across Indonesia, carries several demands, including the ratification of the Climate Justice and Indigenous Peoples Bill, the release of all criminalized demonstrators, the withdrawal of subsidies for the dirty coal industry, and a clean and just energy transition. KOMPAS/ADRYAN YOGA PARAMADWYA

The authority of local governments has increased according to Presidential Regulation (Perpres) Number 11 of 2023 concerning Additional Concurrent Government Affairs in the Field of Energy and Mineral Resources in the Sub-Field of New and Renewable Energy. This authority includes the management of biogas, biomass, and renewable energy sources.

However, he stated that the regulation still requires norms, standards, procedures, and criteria (NSPK) as guidelines for local governments in exercising their authority. On the other hand, local governments remain limited in terms of fiscal capacity. "Our position is indeed highly dependent (on the central government), but with low influence," he said.

In fact, fiscal support and authority can enhance energy transition programs in the regions. Until 2024, Permadi stated, the share of renewable energy in the energy mix in West Java reaches 24.46 percent. This figure has already exceeded the target of the Regional General Energy Plan (REUDP) of West Java, which is 17 percent.

Technicians monitor the absorption temperature on the surface of solar panels at the Cirata Solar Power Plant (PLTS) managed by PT Pembangkitan Jawa Bali, located in the Cirata Reservoir area, Purwakarta Regency, on Thursday (September 23, 2021). This 1 MW PLTS serves as a pilot project and a learning tool for PLTS. The plan is to build a floating PLTS with an installed capacity of 145 MW within the Cirata Reservoir. KOMPAS/IWAN SETIYAWAN

Nevertheless, according to him, one of the obstacles to the development of small-scale renewable energy (RE) in West Java is its sustainability. "Many face issues after the (RE) is established. This poses a risk, which is why we prefer an electrification approach through PLN," he stated.

This year, the organization is constructing electrical installations for approximately 72,700 households, almost entirely through the expansion of the network of PT Perusahaan Listrik Negara (Persero). For areas that are still very far from the electrical network, assistance is provided in the form of energy-efficient solar-powered lights.

Regional potential

Muhammad Arief Virgy, a researcher at THC, stated that the region has significant potential in renewable energy. However, its utilization remains minimal. In West Java alone, out of its potential of 176 gigawatts (GW), the installed generation capacity is only 3,735 megawatts (MW).

In fact, in East Nusa Tenggara, out of a potential 388 GW, the installed capacity of renewable energy power plants is only 56 MW. "This means that the installed generation capacity in the region is still far from optimal. On the other hand, local governments have a significant role in enhancing the mix of renewable energy," he stated.

A 4 x 6 meter Surya Panel in Welai Village, Alor Regency, NTT will be inaugurated by the Minister of Energy and Mineral Resources Ignasius Jonan on Saturday (24/3). A total of 21 units of renewable energy will be inaugurated by Ignasius Jonan across several villages in NTT. KOMPAS/KORNELIS KEWA AMA

Based on research related to the governance of energy transition by the central and regional governments, they found obstacles to the development of energy transition in the regions. This study employed qualitative research methodologies, such as interviews and focus group discussions with relevant agencies, as well as document analysis.

As a result, the authority of provincial governments for energy transition is still very limited compared to the central government. For example, electricity tariffs, the selling price of renewable energy, permits for large-scale solar power plants, as well as fiscal transfers and various incentives are central government policies.

"This level of dependency has become one of the important findings. When regions wish to develop various clean energy programs, they must still adhere to central policies."

Ultimately, local governments are highly dependent on the central government. "This level of dependency is a key finding. When regions want to develop various clean energy programs, they still have to follow central government policies. For example, the net metering policy was abolished by the central government," he said.

Net metering is a two-way electricity metering system that allows rooftop solar power plant owners to channel excess energy to the PLN grid. "Previously, this policy provided an incentive for households and investors to install rooftop solar power plants. Without the incentive, investor interest in the region declined," said Virgy.

They also found that there are inconsistencies in the central government's policies. The target for the energy mix in the National Energy Policy (KEN), for instance, has changed from an initial 23 percent by 2025 to between 19 percent and 23 percent by 2030. Currently, the total installed capacity of renewable energy power plants is only 14.5 percent of the total electricity generation.

Based on this research, the party recommends several measures to optimize the role of local governments in the energy transition. Some of these include the decentralization of the energy transition by increasing the authority of local governments, the implementation of NSPK, and the ratification of the Draft Law on New Energy and Renewable Energy.

Edison Siagian, Director of Synchronization of Regional Government Affairs I at the Ministry of Home Affairs, acknowledged that local governments are still facing obstacles in terms of funding and authority for energy transition. Currently, 33 out of 38 provincial governments have allocated budgets for renewable energy programs in their regional budgets.

Infographic on the Development of Solar Power Plants (PLTS)

"However, this is not yet optimal. Not all regions are implementing it, and the budget allocated is not substantial. This heavily depends on the financial capacity of the regions and their commitment," he stated. The absence of NSPK also makes regions hesitant to carry out their programs.

Widya Adi Nugroho, Coordinator of the New Renewable Energy and Energy Conservation (EBTKE) Plan and Report at the Directorate General of EBTKE of the Ministry of Energy and Mineral Resources, stated that they continue to promote the energy mix of EBT in Indonesia. One of the initiatives is the establishment of a directorate for new and renewable energy.

"This institution is present to provide renewable energy infrastructure, especially in the 3T areas (underdeveloped, frontier, and outermost) that have not yet been reached by electricity supply," he said. This year, he stated, the Ministry of Energy and Mineral Resources has added more than 1.1 GW of renewable energy, increasing from 14.3 GW to 15.7 GW.

The Vice Chairman of the People's Consultative Assembly, Eddy Soeparno, added that institutional governance remains one of the obstacles in the development of energy transition. According to him, the numerous agencies managing the programs only add to the bureaucratic pathways.

***

By Abdullah Fikri Ashri
Article published in Kompas.id on December 8, 2025.

The Energy Transition Has Also Been Impacted by Cuts to Regional Financial Transfers

Share