The decision to relocate Indonesia’s capital city from Jakarta to East Kalimantan is driven by a range of factors, including the need to decentralize economic activity and address Jakarta’s environmental issues. The New Capital City (IKN) is being developed as a sustainable urban center with the goal of becoming carbon-neutral by 2045. Law No. 3 of 2022 mandates that IKN will rely on 100 percent renewable electricity by 2045, underscoring the Indonesian government’s commitment to sustainability in the city. However, achieving this ambitious target presents significant challenges, particularly in terms of energy demand, renewable energy availability, and coordination across multiple sectors.
This research focuses on addressing these challenges by exploring the most cost-effective renewable energy sources for IKN and the necessary policies and actions to support their development and implementation. The backcasting approach was employed, which involves defining the desired future and working backward to determine the necessary steps to achieve it. Energy modeling, carried out using Calliope software, was used to simulate the future electricity system of the entire Kalimantan Island, including IKN, and to identify the least-cost combination of renewable energy sources to meet projected demand.
The study assumes that IKN’s peak electricity demand by 2045 will reach 792 MW. The least-cost vision suggests that this demand can be met primarily through solar PV and hydropower, with installed capacities of 890 MW and 792 MW, respectively. This combination results in the lowest Levelized Cost of Electricity (LCOE), calculated at 4.57 cents per kWh. Another vision explored in this study involves diversifying the energy mix by incorporating other renewable energy sources, such as floating solar PV, biomass, and battery storage. As reliance on hydropower and solar PV is reduced, the LCOE rises progressively, reaching 5.35 cents per kWh when the capacities of these two key sources are reduced by 50 percent.
While the technical feasibility of these renewable energy scenarios is promising, the political and economic barriers present the most significant challenges to their implementation. Politically, uncertainty in regulations, inconsistencies in policy frameworks, and the continuation of fossil fuel subsidies create hurdles. Economically, the lack of long-term financing options and limited resources available to developers and the national utility (PLN) present obstacles to renewable energy growth. Additionally, from a technological perspective, the current grid infrastructure in Kalimantan is not fully equipped to handle the intermittent nature of renewable sources like solar PV.
To address these challenges, several key actions and policies changes must be put in place. One crucial solution is the immediate introduction of a comprehensive new renewable energy law designed to attract investors by providing a stable and favorable regulatory environment. Financial strategies, such as government-backed loan guarantees and concessional financing from international organizations, are also crucial for making renewable projects economically viable. In addition, promoting public engagement and encouraging behavior changes, such as energy efficiency and conservation, can reduce peak demand and lower overall investment costs.
This study contributes to the body of research by providing a comprehensive strategy for renewable energy development in IKN. By combining energy modeling with a PESTEL analysis of drivers and barriers, it offers a comprehensive framework for understanding the challenges and opportunities in transitioning to 100 percent renewable electricity in IKN. Furthermore, this research lays the groundwork for future studies that can build upon its findings to explore specific sectoral actions in more detail.