Indonesia’s Financially Sustainable Electricity Sector

The report evaluates the Indonesian power sector using the Financial Sustainability Electricity Sector (FSES) framework. It finds that while generation capacity and reliability are improving, the sector remains heavily dependent on government subsidies and coal, with renewable energy deployment lagging behind official targets.

• Government subsidies are essential for the financial viability of PT Perusahaan Listrik Negara (PLN) because electricity tariffs are set below the level required to recover operational costs. In 2014, subsidies accounted for 34 per cent of total operational revenue, amounting to IDR 99 trillion (USD 8 billion).
• The distribution of electricity subsidies is skewed toward urban areas with higher population densities, such as Java and Jakarta, which contradicts the government's goal of increasing electricity access in remote, underserved regions like Papua or Maluku.
• Indonesia has improved its ability to meet electricity demand, with the capacity-to-demand factor approaching two by 2014 and a reserve margin oscillating around 33 per cent. However, significant regional disparities persist in power outage frequency and duration (SAIDI and SAIFI coefficients).
• The Indonesian power sector is heavily reliant on coal, which represented over 50 per cent of total generation capacity in 2014. Despite targets to increase renewables to 23 per cent by 2025, the share of renewable capacity in the total mix actually decreased from 16 per cent in 2006 to 10 per cent in 2014.
• The government's '35 GW program' (FTP-3) aims to add significant capacity by 2019 through a mix of PLN and private independent power producers (IPPs), but the program has faced a slow start due to land rights, tender issues, and local opposition.
• Indonesia's electrification rate reached 81.7 per cent in 2014, but achieving near-universal access by 2020 remains challenging as 10.4 million households lacked electricity in 2016, with 46 per cent of those located in Java.

APA

Lontoh, L., Sanchez, L., Bridle, R., & Christensen, L. T. (2016). Indonesia’s Financially Sustainable Electricity Sector. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/indonesia-financially-sustainable-electricity-sector.pdf

Chicago

Lontoh, Lucky, Lourdes Sanchez, Richard Bridle, and Lasse Toft Christensen. Indonesia’s Financially Sustainable Electricity Sector. International Institute for Sustainable Development, 2016. https://www.iisd.org/system/files/publications/indonesia-financially-sustainable-electricity-sector.pdf.

Wikipedia

{{cite report |last1=Lontoh |first1=Lucky |last2=Sanchez |first2=Lourdes |last3=Bridle |first3=Richard |last4=Christensen |first4=Lasse Toft |title=Indonesia’s Financially Sustainable Electricity Sector |publisher=International Institute for Sustainable Development |date=September 2016 |url=https://www.iisd.org/system/files/publications/indonesia-financially-sustainable-electricity-sector.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lontoh2016indonesias, author = {Lontoh, Lucky and Sanchez, Lourdes and Bridle, Richard and Christensen, Lasse Toft}, title = {{Indonesia’s Financially Sustainable Electricity Sector}}, institution = {International Institute for Sustainable Development}, year = {2016}, month = sep, url = {https://www.iisd.org/system/files/publications/indonesia-financially-sustainable-electricity-sector.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }