Danantara and The Energy Transition: A Major Opportunity or A Dangerous Risk?

Image: Danantara

 

Established in 2025, Danantara has become the government’s vehicle for pursuing several priority missions, including energy-transition projects. But how has this superholding agency, tasked with managing the country’s SOEs, performed so far?

 

The broad scope of Danantara’s mandate under the administration of Prabowo Subianto was clearly evident in the State of the Nation Address delivered during the Annual Session of the People's Consultative Assembly (MPR RI) and the Joint Session of the House of Representatives (DPR RI) and the Regional Representative Council (DPD RI)—held to commemorate Indonesia's 81st Independence Day on August 14, 2026. The President mentioned Danantara seven times, commending its track record in managing state-owned enterprises (SOEs) and outlining the institution's future mission.

 

Equally important, Danantara is also at the helm of a dimethyl ether (DME) processing project, touted as a substitute for liquefied petroleum gas (LPG). There are also downstream processing projects for copper, gold, and aluminum, as well as waste-to-energy initiatives—all of which have the potential to drive economic growth and create jobs.

 

Against the backdrop of these missions, Randi Bachtiar, an Energy Finance Specialist at the Institute for Energy Economics and Financial Analysis (IEEFA), shares his insights on Danantara’s future role in the energy transition in this edition of #TanyaAhlinya.

 

In what capacity does Danantara serve as a driving force to accelerate Indonesia's energy transition? What constitutes its primary asset?

 

Danantara arrives at a time when the economic logic of Indonesia’s electricity sector is beginning to shift: the energy source long considered the cheapest is no longer necessarily the most economical choice.

 

Recent IEEFA analysis shows that electricity generation costs for coal-fired power plants range from US$10.0 to 15.1 cents/kWh, whereas large-scale solar power plants (PLTS) cost approximately US$5.6–8.4 cents/kWh. At the lower end of the range, solar power generation costs are about 44% cheaper than those of coal. This economic shift should serve as a fundamental consideration in determining where Danantara’s capital is directed.

 

Danantara’s role extends beyond new investments to encompass existing assets and energy-sector state-owned enterprises (SOEs). Through its stakes in PLN and Pertamina, Danantara can drive asset optimization and enhance efficiency, while simultaneously steering investment toward renewable energy and supporting infrastructure. Priorities must be determined by identifying where capital yields the greatest economic benefit, while also taking into account the varying conditions and social contexts across different regions.

 

Danantara can also selectively deploy its capital to attract private investment. For the IEEFA, success is not measured by the volume of capital deployed, but rather by the value it can generate.

 

What are the barriers facing Danantara in accelerating the energy transition?

 

Danantara’s primary challenge is not merely the availability of capital, but the availability of projects that are ready and bankable. Uncertainties regarding electricity prices, off-take agreements, permitting, land, grid readiness, and risk allocation can render technologically attractive projects unbankable.

 

Another challenge lies in the financial condition of the state-owned enterprises (SOEs) that form a key part of Danantara’s portfolio. Furthermore, many investment hurdles are beyond Danantara’s control, particularly those related to power system planning, regulations, procurement, and grid development.

 

Therefore, its success depends heavily on whether available capital can be matched with the right projects, at the right time, and with manageable risk.

 

How does IEEFA assess Danantara’s involvement in the government’s strategic missions so far, including those related to the energy transition?

 

IEEFA views Danantara as having a pivotal role in supporting the government's strategic agenda, including the energy transition. However, the scope of Danantara’s mandate raises questions regarding how investment interests and public policy objectives will be balanced.

 

In its study, the IEEFA emphasizes that the challenge lies not only in the scale of assets under management but also in the ability to generate sustainable value and revenue. This is crucial because not all government strategic projects possess the characteristics of commercial investments. If a project delivers significant development benefits yet fails to yield adequate returns, government support mechanisms must be clearly defined, ensuring that risks are not quietly shifted to state-owned enterprises (SOEs) or the state itself.

 

According to the IEEFA, Danantara needs to demonstrate that its involvement generates funding and creates added value, rather than merely serving as a vehicle to fund the government's priority programs.

 

Danantara consistently emphasizes economies of scale, large-scale projects, and foreign investor involvement in its planned initiatives. How does this perspective align with a just energy transition?

 

Large-scale projects and foreign investor involvement are not inherently at odds with a just energy transition. Indonesia’s investment needs are immense, meaning domestic capital alone is unlikely to suffice. However, the scale of investment is not the benchmark for success; what matters more is whether these projects can generate electricity at competitive prices, deliver economic benefits to Indonesia, and offer reasonable risk-return profiles.

 

Foreign investor involvement should also generate added value for the domestic economy, such as technology, jobs, and industrial development. In the view of the IEEFA, capital should follow economic value, not the other way around. Danantara must not pursue massive investments solely to meet targets; instead, it must ensure that the selected projects genuinely deliver long-term benefits for Indonesia.

 

The government is targeting a solar power capacity of 100 GW within a relatively short timeframe. From the IEEFA’s perspective, how realistic is this target, and how can Danantara ensure it is actually realized?

 

The target of 100 GW of solar power capacity within a three-year timeframe is highly ambitious. The government estimates the required investment at approximately IDR 1,130–1,140 trillion, or around US$73 billion.

 

For comparison, that figure is equivalent to approximately 28% of the total state expenditure of IDR 4,097 trillion projected in the 2027 Draft State Budget (RAPBN). Indonesia's solar power capacity stands at only around 1.49 GW as of the end of 2025; consequently, the target requires an approximately 67-fold increase in solar capacity within a three-year period.

 

However, the challenge lies not only in constructing power plants. If transmission and distribution infrastructure is not ready, the electricity generated by solar power plants cannot be fully distributed or utilized—potentially leading to curtailment—thereby creating a risk of suboptimal asset utilization.

 

Therefore, the 100 GW target needs to be integrated with the Electricity Supply Business Plan (RUPTL), grid development, energy storage, and electricity demand growth. Danantara can provide investment support, but its success ultimately depends on the entire system's ability to absorb that capacity economically.

 

How does IEEFA assess Danantara's capacity to accelerate innovative financing, given that the corporate sector still lags behind in this area?

 

The dominance of government green bonds indicates that green financing in Indonesia remains heavily reliant on the state, while the corporate sector has yet to significantly tap into this market. Private financing encompasses blended finance—which combines public funds with commercial capital to mitigate project risks—as well as Public-Private Partnerships (PPPs), which enable the government and business entities to share both financing burdens and risks.

 

Electricity transmission is an example of an asset suitable for long-term financing. IEEFA studies indicate that long-lived transmission assets can be financed through bonds or long-term loans, provided their revenue structures and risk profiles are clearly defined. However, foreign currency financing requires caution, as it can give rise to exchange rate risk if project revenues are denominated in rupiah.

 

For IEEFA, Danantara’s success lies not in creating an ever-growing number of financing instruments, but in its ability to facilitate the right projects in securing the right capital at the right cost and risk.