Indonesia’s Energy Policy Briefing

The document analyzes Indonesia's energy landscape in 2020-2021, noting a decline in fuel and LPG subsidies due to lower international prices and reduced consumption. It highlights a contradictory policy direction where the government provides fiscal and non-fiscal incentives for coal derivatives to replace LPG imports, while renewable energy projects face significant delays in financial closing and regulatory uncertainty. The briefing also details the role of floating solar PV and Green Sukuk in the energy transition, alongside the macroeconomic impact of the pandemic on state revenue and the power sector's capacity projections.

• Fuel and LPG subsidies decreased significantly in 2020 due to lower international oil prices and reduced domestic consumption. Transport fuel subsidies fell by 41% (from IDR 30.06 trillion in 2019 to IDR 17.70 trillion in 2020), and LPG subsidies dropped by 56% (from IDR 54.15 trillion in 2019 to IDR 23.50 trillion in 2020).
• Indonesia is promoting coal derivatives, such as dimethyl ether (DME), as an alternative to reduce LPG imports and subsidies. The government has introduced fiscal and non-fiscal incentives, including the possibility of a 0% royalty for producers expanding into derivatives and business permits that are no longer limited to 20 years.
• Renewable energy deployment is struggling with regulatory uncertainty and financial hurdles. Between 2017 and 2018, 36% of 75 signed renewable energy power purchase agreements (PPAs) had not reached financial closing, and nearly 7% were terminated. From 2018 to 2020, the average annual PPA signing rate dropped to 188.3 MW, down from a previous average of 500 MW.
• Floating solar photovoltaic (PV) projects have emerged as a key tool for increasing renewable generation by bypassing land acquisition issues, with one project achieving a record low bid price of USD 3.68 cents/kWh.
• The power sector remains dominated by coal, with a 48% share in the projected mix. The state electricity company, PT PLN, has reduced its capital expenditure from IDR 100 trillion to IDR 53.39 trillion, which is expected to delay several electricity projects.
• Indonesia has utilized Green Sukuk (specifically the second series ST007) to raise capital for low-emission economy projects, including energy and renewable energy, as part of its commitment to reduce global carbon emissions.

APA

Suharsono, A., Lontoh, L., & Maulidia, M. (2021). Indonesia’s Energy Policy Briefing. International Institute for Sustainable Development. https://www.iisd.org/system/files/2021-03/indonesia-energy-policy-briefing-february-2021-en.pdf

Chicago

Suharsono, Anissa, Lucky Lontoh, and Martha Maulidia. Indonesia’s Energy Policy Briefing. International Institute for Sustainable Development, 2021. https://www.iisd.org/system/files/2021-03/indonesia-energy-policy-briefing-february-2021-en.pdf.

Wikipedia

{{cite report |last1=Suharsono |first1=Anissa |last2=Lontoh |first2=Lucky |last3=Maulidia |first3=Martha |title=Indonesia’s Energy Policy Briefing |publisher=International Institute for Sustainable Development |date=February 2021 |url=https://www.iisd.org/system/files/2021-03/indonesia-energy-policy-briefing-february-2021-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{suharsono2021indonesias, author = {Suharsono, Anissa and Lontoh, Lucky and Maulidia, Martha}, title = {{Indonesia’s Energy Policy Briefing}}, institution = {International Institute for Sustainable Development}, year = {2021}, month = feb, url = {https://www.iisd.org/system/files/2021-03/indonesia-energy-policy-briefing-february-2021-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }