Briefing

Indonesia’s waste-to-energy sector: the next phase of investment and delivery

Indonesia is turning a long-standing waste challenge into a significant infrastructure and energy opportunity. Waste-to-energy (WtE) projects use technology to process municipal waste that would otherwise be sent to landfill into usable forms of energy, including electricity, bioenergy and renewable fuels, as well as other by-products, while reducing the volume of waste requiring disposal. Globally, WtE has become an increasingly important component of integrated waste management strategies, helping to reduce landfill volumes, improve environmental outcomes and contribute to energy security.

Introduction

In Indonesia, the case for investment is particularly compelling. Rapid urbanisation, population growth and rising waste generation have placed increasing pressure on landfill capacity and municipal waste management systems. At the same time, Indonesia is pursuing broader energy transition and sustainability objectives, creating a strong policy rationale for investment in WtE infrastructure.

Indonesia generated approximately 56.63 million tonnes of waste in 2023. According to the figures cited in Perpres 109/2025, only 39.01% was managed, while 60.99% remained unmanaged through open dumping. This gap has driven a significantly strengthened regulatory push toward WtE as both an environmental and energy transition solution.

For investors and developers, the appeal lies not simply in the scale of the waste challenge. It is the combination of government-backed project development, long-term revenue support and a regulatory framework that is increasingly designed to attract private capital into the sector. Taken together, these reforms signal a shift from a market historically characterised by a small number of pilot and municipally led projects to one increasingly capable of attracting large-scale private sector investment.

Learning from early projects

Indonesia has experience of WtE projects. Two early projects have entered commercial operation: Benowo in Surabaya, with a reported total capacity of approximately 11 to 12 MW (comprising a landfill gas component and a gasification component) and the ability to process up to 1,600 tonnes of waste per day, and Putri Cempo in Surakarta. The projects have produced different outcomes, illustrating the importance of sustainable project economics, reliable waste supply and appropriate risk allocation in delivering successful WtE facilities. These are among the issues the new framework seeks to address.

These projects were regulated under an earlier Presidential Regulation (Perpres) No. 35/2018 that designated twelve cities for waste-to-electricity development.

A new framework for investment

Perpres No. 109/2025, signed on 10 October 2025, provides a materially more investment-friendly framework with key improvements:

Nationwide eligibility for cities or regencies meeting defined criteria, including the ability to supply at least 1,000 tonnes of waste per day throughout the operating period, provide suitable land and fund waste collection and transportation.
Centralised coordination through BPI Danantara, Indonesia’s investment management agency, which through relevant state-owned entities and subsidiaries, has a central role in conducting technical and economic assessments, selecting project developers and, where commercially appropriate, investing in projects.
A simplified, bankable tariff being a fixed USD 0.20/kWh for a 30-year power purchase agreement, with Indonesia’s state-owned electricity company, PT PLN (PLN) required to sign within 10 working days of pre-construction permits being satisfied. The tariff is final and applies without negotiation or escalation. For sponsors and lenders, greater certainty around long-term revenue streams should materially improve project financeability compared with earlier project structures.
Faster environmental licensing, with approvals to be issued within two months of a complete application, deemed granted if that period lapses.
Clearer allocation of waste-supply risk, with local governments required to commit the agreed volume of 1,000 tonnes of waste per day throughout operations, providing developers and investors with greater certainty around feedstock availability.

Building momentum

The Republic of Indonesia, through statements by Danantara and government officials, has set an ambitious target of developing WtE facilities across approximately 33 locations nationwide; Perpres 109/2025 itself does not fix this number but instead sets nationwide eligibility criteria for participating cities and regencies. The program is expected to draw on Danantara-led investment and financing support, including proceeds from its approximately IDR 50 trillion Patriot Bond issuance, which have been identified principally for WtE and other renewable-energy projects. Earlier projects, including Jakarta’s ITF Sunter proposal, encountered financing and affordability challenges, illustrating the commercial constraints that the new framework is intended to address.

The first phase of Danantara’s programme has focused on projects in Bali, Bogor, Bekasi and Yogyakarta, with additional locations expected to follow as local readiness requirements are satisfied.

One of the most significant projects is Legok Nangka in West Java, Indonesia’s first WtE public-private partnership. The project is designed to process around 2,131 tonnes of municipal waste per day from six Greater Bandung municipalities and generate approximately 40.79 MW of electricity. It reached commercial close with a consortium led by Sumitomo Corporation, Hitachi Zosen and PT Energia Prima Nusantara (Astra Group) before breaking ground in July 2026.

Legok Nangka is significant not only for its scale, but also because it demonstrates the sector’s ability to attract sophisticated international sponsors, contractors and development finance institutions. That combination of public sector support, international expertise and private capital is likely to be replicated across future projects as the programme scales. For prospective investors, the project provides an early indication of the types of procurement structures, financing support and risk allocation frameworks that may emerge as the broader programme develops.

Key considerations for investors and developers

Feedstock variability remains the key technical factor to manage. Indonesian municipal waste is typically wetter and less segregated than in many mature WtE markets, which can affect calorific value, combustion efficiency and plant availability. The quality and consistency of waste supply is therefore not merely an operational issue, but also a key investment and financing consideration.

Remaining implementation detail, such as the precise form of PLN’s compensation mechanism and the operation of the standard take-and-pay terms, is still being finalised through derivative regulations and individual project agreements.

Developers, EPC contractors and operators will also need to give careful consideration to waste acceptance criteria, fuel specifications, testing regimes and contractual relief mechanisms where supplied waste falls outside agreed parameters. Clear allocation of these risks can improve project bankability and help avoid disputes during operations.

Contracting strategies will need to reflect Indonesia’s specific operating conditions. Tailoring EPC and O&M risk allocation to reflect genuine feedstock and technology risk, rather than importing risk profiles developed for other markets, should help ensure obligations are priced appropriately and remain commercially sustainable over the life of the project.

Interface management between waste suppliers, project companies, contractors, operators and PLN will also be important. Clearly defining responsibility for waste quality, performance testing, commissioning, availability and emissions compliance can reduce delivery and operational risk.

Sustained community engagement beyond the minimum public consultation and AMDAL (environmental impact assessment) requirements will help build durable local support as the programme scales, particularly given the emphasis Perpres 109/2025 places on environmentally sound technology. Projects that establish community confidence early, particularly around emissions monitoring and environmental controls, are likely to encounter fewer delays during development and operations.

Outlook

Perpres 109/2025 directly addresses the structural gaps that limited earlier delivery, and the scale of interest already shown supports that assessment. Around 200 entities have reportedly expressed interest in the programme, with 85 entities qualifying through the second selection wave of Danantara’s Selected Provider List (DPT). Together with the four-location first phase and Legok Nangka’s move into construction, this indicates substantial private-sector interest in the reformed framework.

With disciplined procurement, robust risk allocation and continued progress on the remaining implementing regulations, Indonesia’s WtE programme is well positioned to convert its ambitious pipeline into a substantial base of operating revenue-generating assets.

Challenges remain, particularly around feedstock quality, project execution and the implementation of supporting regulations, and success will depend on more than regulatory support alone. As experience in other WtE markets has shown, careful procurement, realistic risk allocation and a clear understanding of local conditions will be critical to converting policy ambition into long-term operational success.

Perpres 109/2025 represents one of the most significant reforms to Indonesia’s WtE sector to date. For sponsors, contractors, operators and investors prepared to engage with the market early, the next phase of Indonesia’s WtE programme may present some of the most compelling infrastructure opportunities in the region.