Indonesia’s energy transition is hindered by persistent structural challenges rooted in the contractual design of Power Purchase Agreements (PPAs). These long-term contracts, often including take-or-pay clauses and capacity payments, financially bind the state-owned utility PLN to coal-fired generation. Despite official decarbonization targets, coal continues to dominate the power mix, exceeding 60%, resulting in electricity oversupply and fiscal strain. Current regulations and incentive structures remain insufficient to accelerate the coal phase-out.

This thesis investigates the systemic impact of coal PPAs on Indonesia’s decarbonization pathway, particularly in the context of early termination policies and financial instruments such as the Just Energy Transition Partnership (JETP). A System Dynamics (SD) model is developed to simulate the interplay of contractual lock-in, procurement logic, and financial levers over time. The model structure is informed by stakeholder interviews and validated through historical calibration, sensitivity testing, and scenario analysis.

Results indicate that coal dependency is structurally reinforced unless both upstream and downstream barriers are addressed. In the Base Case, installed coal capacity rises from 5.6 GW in 2015 to over 227 GW by 2060. Policy interventions such as a modest carbon price (2.02 USD/tCO₂) or targeted JETP funding alone achieve only limited reductions—capacity remains at 180 GW under Scenario E04. A complete coal phase-out by 2040 is only achieved when a strict procurement moratorium is combined with sufficient transition funding, leading to the retirement of over 70 GW of coal capacity and a 100% reduction in coal-based electricity generation compared to the base scenario.

The novelty of this study lies in its integration of contractual, institutional, and financial dynamics into a unified feedback-based simulation framework. It is the first study to quantify how coal PPAs interact with policy and finance to sustain or disrupt coal lock-in. The model explicitly captures mechanisms often overlooked in static assessments, offering policymakers a dynamic tool to explore intervention strategies and system leverage points.

While the model simplifies the technology mix to a coal–solar binary and assumes idealized funding flows, it offers valuable insights into PPAs as systemic anchors. Key limitations include the exclusion of strategic stakeholder behavior, spatial heterogeneity in grid capacity and demand, and detailed grid operational constraints. Addressing these limitations in future research could improve the realism and applicability of the model. In particular, expanding the model to incorporate energy choice heterogeneity, agent-based negotiation dynamics, and integration with power system adequacy or dispatch models would allow for a more comprehensive understanding of political feasibility, grid reliability, and transition costs.

This research contributes a transferable simulation tool and strategic policy insights for countries confronting similar PPA-induced lock-ins. It highlights the need for coordinated structural reform, regulatory realignment, and targeted finance to enable a just and timely coal transition.