Dynamics of renewable energy transition and regional welfare in Indonesia

Assessing environmental impacts under rapid urbanization

Abstract

The global acceleration of climate change places growing pressure on developing economies to shift toward sustainable energy systems while managing rapid urban growth. In Indonesia, this dual pressure reflects a spatial governance challenge: renewable energy adoption remains slow relative to the pace of sub-national urbanization. This study addresses a methodological gap in the literature by integrating renewable energy transition, urbanization, regional welfare, and environmental impacts within a single empirical framework — an integration that has, to date, been examined only partially and separately in prior research. Using a balanced panel of 38 Indonesian provinces from 2019 to 2023, the study estimates Fixed Effects models with moderation terms and Driscoll-Kraay standard errors robust to cross-sectional and temporal dependence. The findings suggest that a higher share of renewable energy in the provincial energy mix is associated with higher human development scores, lower poverty, improved air and water quality, and lower carbon intensity. Moderation analysis further indicates that rapid urbanization strengthens these associations, suggesting that it functions as a contextual amplifier of both the welfare and environmental benefits linked to renewable energy investment. These results imply that a purely technocratic national energy framework may be insufficient on its own; instead, the findings offer supporting evidence for policymakers considering closer coordination between Regional Spatial Plans (RSP) and Regional Energy General Plans, an alignment that appears relevant for an energy transition that is responsive to spatial realities and local development needs.