Navigating Indonesia’s Energy Landscape: From Fossil Fuels to Renewables
Fossil Energy Production
Historically, most of the energy in Indonesia has been produced by fossil energy, such as coal and crude oil. Recent sudden social, political, economic, and environmental changes have led to a global energy crisis. The surge in global gas prices has caused a shift in demand for coal exports. One of the world‘s largest coal producers, Indonesia achieved 95 per cent of its coal and mining sector state revenue target in Q1 2022.
To avoid the drawbacks of unprecedented price hikes in coal, the Indonesian government secures its national coal supply for the power system by setting a domestic market obligation (DMO) of US$70/tonne, three times lower than the global price. A 77.5 trillion rupiah subsidy for fuel oil and LPG was allocated from the public purse in 2022. This regulation and subsidy insulated Indonesia from the global energy crisis. Without the subsidy, Pertamax (a high-octane fuel oil produced by state energy company Pertamina), which was priced at 13,900 rupiahs per litre would have increased to 17,950 rupiahs per litre, as of July 2022 (Institute for Essential Services Reform (IESR), Indonesia Energy Transition Outlook 2023, Jakarta: IESR, 2022, p 16).
Government Measures During the Global Energy Crisis
At the G20 summit, Just Energy Transition Partnership (JETP) coalition countries committed to mobilising US$20 billion over the next three to five years to accelerate emissions reduction in the energy sector. The partnership will later develop an investment plan that aims to reach peak emissions by 2030 and net-zero emissions in the energy sector by 2050, which includes doubling the renewable energy generation to at least 34 per cent by 2030 and early retirement of coal power plants.
Transition to Renewable Energy
This commitment is in line with Indonesia‘s plan to transition to renewable energy, such as geothermal, solar, wind, etc. Indonesia has great renewable energy potential and has begun to develop power plants sourced from renewable energy, for example, geothermal power plants, hydroelectric dams, and solar power plants that are already operational in Indonesia.
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