Indonesia’s Financially Sustainable Electricity Sector

This report evaluates the financial sustainability of Indonesia's electricity sector using the Financial Sustainability Electricity Sector (FSES) framework. It examines the state-owned utility PT Perusahaan Listrik Negara (PLN), the role of government subsidies, the expansion of generation capacity through Fast Track Programmes, and the challenges of transitioning to renewable energy while achieving universal electricity access.

• Government subsidies are essential for the financial viability of the state-owned utility PT Perusahaan Listrik Negara (PLN), as electricity tariffs are set below the level required to recover operational costs. In 2014, subsidies contributed 34 per cent of total operational revenue, amounting to IDR 99 trillion (USD 8 billion).
• Electricity subsidies are disproportionately allocated to urban areas with higher population densities, such as Java and Jakarta, rather than to remote regions where electrification rates are lowest and unit costs of supply are higher.
• Indonesia has improved its power supply reliability, with the capacity-to-demand factor approaching two in 2014 and a reserve margin oscillating around 33 per cent. However, significant regional disparities persist in power outage durations (SAIDI) and frequencies (SAIFI), with SAIDI values ranging from under half an hour in Batam to over 14 hours in Central Java.
• The government's Fast Track Programmes (FTP) aim to add 35 GW of capacity by 2019, with a heavy reliance on private independent power producers (IPPs). However, the 35 GW plan (Phase III) experienced a slow start, adding only 223 MW between May 2015 and the report's publication due to land rights issues, tender problems, and local opposition.
• Despite targets to increase the share of renewable energy to 23 per cent by 2025 and 31 per cent by 2050, the actual share of renewables in the total capacity mix decreased from 16 per cent in 2006 to 10 per cent in 2014. Coal remains the dominant source, representing nearly 60 per cent of total electricity generation in 2014.
• Indonesia aims for near-universal electricity access by 2020, having reached an electrification rate of 81.7 per cent in 2014. However, 10.4 million households remained without access in 2016, with 46 per cent of those households located in Java and 23 per cent in eastern regions.

APA

International Institute for Sustainable Development (n.d.). Indonesia’s Financially Sustainable Electricity Sector. https://www.iisd.org/system/files/publications/indonesia-financially-sustainable-electricity-sector.pdf

Chicago

International Institute for Sustainable Development. Indonesia’s Financially Sustainable Electricity Sector. n.d. https://www.iisd.org/system/files/publications/indonesia-financially-sustainable-electricity-sector.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Indonesia’s Financially Sustainable Electricity Sector |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{internationalinstituteforsustainabledevelopmentndindonesias, author = {{International Institute for Sustainable Development}}, title = {{Indonesia’s Financially Sustainable Electricity Sector}}, institution = {International Institute for Sustainable Development}, url = {https://www.iisd.org/system/files/publications/indonesia-financially-sustainable-electricity-sector.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }