Resource and economic assessments of Eastern Indonesia’s offshore wind energy investment

Abstract This study aims to evaluate the techno-economic feasibility and investment incentives required for offshore wind energy development in Eastern Indonesia. Advancing beyond previous studies that employed uniform cost assumptions and deterministic methods, this research applies a probabilistic framework integrating site-specific cost modeling by using Monte Carlo simulation to capture uncertainty in wind speed, CAPEX, and OPEX parameters. The central hypothesis is that, under current tariff and policy frameworks, offshore wind projects in the region are not yet economically viable without compatible financial incentives. To test this, wind resource assessments using ERA5 reanalysis data, cost modeling, and Monte Carlo simulations were conducted for three representative sites in Merauke, Janeponto, and Rote Island. To test this hypothesis, we evaluate project viability using two financial criteria: (1) net present value (NPV) must be non-negative (NPV ≥ 0), and (2) internal rate of return (IRR) must meet or exceed the discount rate of 10%. The results indicate that Merauke offers the most favorable wind potential, with an estimated mean levelized cost of energy of 95.08 USD/MWh, compared to 129.06 USD/MWh in Janeponto and 127.66 USD/MWh in Rote Island. Investment viability analysis reveals that all three sites are commercially unviable under current market conditions without compatible incentives, with Merauke showing a mean NPV of − 194 million USD and IRR of 7.5%, Janeponto exhibiting NPV of − 640 million and IRR of 1.9%, and Rote Island demonstrating NPV of − 264 million and IRR of 1.8%. To achieve commercial feasibility, the analysis indicates that Merauke requires 15–25% capital grants combined with 20–30% loan guarantees, while Janeponto and Rote Island require substantially higher incentive levels of 35–45% for both capital grants and loan guarantees due to their deeper water conditions and lower wind resources.