Systems Engineering, Modeling and Simulation Laboratory, Industrial Engineering Department, Faculty of Engineering Universitas Indonesia, Depok 16424, Indonesia

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Abstract: The energy demand of Indonesia is continuously increasing because of the development of some main influencing factors. At the same time, the Indonesian government is concerned about the importance of sustainable development, which is one of the elements related to environmental protection. The large energy demand and the sustainable development concerns have led the Indonesian government to create a target of new and renewable energy (NRE) contribution in the final energy mix and to enact some policies to achieve this target. However, there are some challenges in the implementation of these regulations, such as business schemes and incentives, which are perceived to be not lucrative enough by investors. The objective of this research is to understand the dynamics of the system, the variables involved, and their interconnections in the development of NRE in Indonesia, particularly with regard to the price of electricity sold by power producers to the State Electricity Company (PT. PLN) and the tax facilities. This research aims to develop a generic, validated, and verified causal loop diagram that will serve as a conceptual model for system dynamics modeling for the analysis of similar energy policies on the basis of a case study in Indonesia.

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