Indonesia’s Energy Policy Briefing

This policy briefing by the International Institute for Sustainable Development (IISD) examines energy policy developments in Indonesia as of February 2021, focusing on the impact of the COVID-19 pandemic on macroeconomic indicators, fuel subsidies, the coal sector, and renewable energy progress.

• Indonesia's economy contracted by 2.07% in 2020 due to the COVID-19 crisis, leading to a budget deficit of approximately 5.7% of GDP in 2020. The government projected a rebound in GDP growth of between 4.5% and 5.5% for 2021.
• Fuel subsidies decreased significantly in 2020 due to lower international oil prices and reduced consumption. Transport fuel subsidies fell 41% (from IDR 30.06 trillion in 2019 to IDR 17.70 trillion in 2020), and LPG subsidies dropped 56% (from IDR 54.15 trillion in 2019 to IDR 23.50 trillion in 2020).
• The Indonesian government is promoting 'coal downstreaming' to create coal derivatives, such as dimethyl ether (DME), to reduce reliance on imported LPG. Fiscal incentives include the possibility of a 0% royalty for producers expanding into derivatives, and non-fiscal incentives such as removing the 20-year limit on coal mining business permits.
• The power sector remains heavily dependent on coal, with coal-fired plants holding a 48% share in the projected capacity through 2028. The 35,000 MW electricity project had only reached 24% realization (8,400 MW) as of August 2020, with completion now projected for 2028–2029.
• Renewable energy progress is lagging, with only 10.4 GW (2.4%) of a 442 GW potential utilized. Between 2018 and 2020, the average rate of signed Power Purchase Agreements (PPAs) was 188.3 MW per year, significantly lower than the previous average of 500 MW per year.
• Floating solar photovoltaic (PV) projects are being used to bypass land acquisition hurdles, with one project achieving a record low bid price of USD 3.68 cents/kWh. Additionally, the government is targeting 70 MW of rooftop PV capacity in 2021, up from 13.4 MW in 2020.
• Renewable energy investment is hindered by a lack of regulatory certainty, specifically the pending finalization of the Presidential Regulation on the Purchase Price of Electricity from Renewable Energy Sources, which awaits Ministry of Finance approval.

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} }