Sector

Energy

Indonesia possesses vast, distributed, and diverse energy resources. The country’s energy subsectors include gas, clean water, and electricity, with demand projected to increase to 464 terawatt-hours (TWh) by 2024 and further increase to 1,885 TWh by 2060. The use of renewable energy is a top priority and the government has set ambitious goals in the General Planning for National Energy (RUEN) and General Planning for National Electricity (RKUN) to integrate 23 percent renewable energy into the national energy mix by 2025. At least US$41.8 billion of investments are needed to fully realize the goal.

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Energy

Indonesia possesses vast, distributed, and diverse energy resources. The country’s energy subsectors include gas, clean water, and electricity, with demand projected to increase to 464 terawatt-hours (TWh) by 2024 and further increase to 1,885 TWh by 2060. The use of renewable energy is a top priority and the government has set ambitious goals in the General Planning for National Energy (RUEN) and General Planning for National Electricity (RKUN) to integrate 23 percent renewable energy into the national energy mix by 2025. At least US$41.8 billion of investments are needed to fully realize the goal.

Despite having a renewable energy potential estimated at around 3,000 gigawatts (GW), current utilization is merely about 12.74 GW or 3 percent. This renewable energy potential includes solar energy, which is widely spread across Indonesia, especially in East Nusa Tenggara, West Kalimantan, and Riau, with a potential of approximately 3,294 GW and utilization of 323 megawatts (MW). Another renewable energy, hydro energy, with a potential of 95 GW, is primarily found in North Kalimantan, Aceh, West Sumatra, North Sumatra, and Papua, with utilization reaching 6,738 MW.

Additionally, bioenergy, encompassing biofuel, biomass, and biogas, is distributed throughout Indonesia with a total potential of 57 GW and utilization of 3,118 MW. Wind energy (>6 m/s) found in East Nusa Tenggara, South Kalimantan, West Java, South Sulawesi, Aceh, and Papua has a substantial potential of 155 GW, with utilization of 154 MW.

Furthermore, geothermal energy, strategically located in the “Ring of Fire” region covering Sumatra, Java, Bali, Nusa Tenggara, Sulawesi, and Yogyakarta has a potential of 23 GW and utilization of 2,373 MW. Meanwhile, marine energy, with a potential of 63 GW, especially in Yogyakarta, East Nusa Tenggara, West Nusa Tenggara, and Bali, remains untapped.

Among the renewable energy sources and their potential, these projects entail significant investments. According to the Electricity Supply Business Plan (RUPTL) of the State Electricity Company (PLN), from 2021 to 2030, geothermal power plants require an investment of US$17.35 billion, large-scale solar power plants necessitate US$3.2 billion, hydropower plants require US$25.63 billion, and base renewable energy power plants require US$5.49 billion. Additionally, bioenergy power plants require an investment of US$2.2 billion, wind power plants US$1.03 billion, peaker power plants US$0.28 billion, and rooftop solar power plants IS$3 billion.

As of 2022, hydro and geothermal are the primary drivers of growth. Private entities had enhanced the capacity of hydro power by adding 603.66 MW in mini, micro, and standard hydro facilities, reaching a total of 2,459.72 MW. Meanwhile, the geothermal sector experienced a 412 MW increase over the last five years from the private sector, bringing the total capacity to 1,782.8 MW by 2022. Aside from these two renewable energy, sources solar energy has also presented significant opportunities, particularly given Indonesia's potential for floating solar systems on reservoirs and dams.

Furthermore, the country’s other national energy subsector of gas underscores Indonesia’s wealth in natural gas. Indonesia’s natural gas reserves are predominantly methane (80-95 percent), which can be used directly or processed into Liquefied Natural Gas (LNG). However, demand has greatly increased over the past decade for Liquefied Petroleum Gas (LPG). From 2018 to 2022, domestic LPG production reached between 1.9 to 2 million tons, which is insufficient to meet national needs, leading to increasing imports that reached 6.74 million tons in 2022.

Currently, the Energy and Mineral Resources Ministry is working to attract new investments for LPG refineries through a cluster-based business scheme for the construction or future development of new LPF refineries. The ministry has identified the potential of rich gas to produce an additional 1.2 million tons of LPG cylinders domestically.

Latest News

July 30, 2025

The deal on tariffs between Indonesia and the United States, as announced by President Donald Trump last week, has put Indonesia on the good side of Washington, shifting its position in the current big power rivalry away from China, at least momentarily.

For the last decade or so, Indonesia has been widely perceived to be leaning closer to China, some would say too close for comfort, that any shift away now would be welcomed in some quarters who are worried about Jakarta becoming too dependent, certainly economically, on the Asian giant that could undermine its claim to non-alignment.

When President Prabowo Subianto took over the helm in October, he further pushed Jakarta closer to Beijing, first by joining BRICS, an alliance of emerging economies that include China and Russia; and second, by making high-profile visits to Beijing and Moscow. He even had the audacity to turn down an invitation to attend the Group of Seven (G7) summit of Western major powers in Canada as a special guest in June, choosing to visit Russia instead.

In his posting on his Truth Social media on July 16, Trump said that following his phone conversation with Prabowo, the two had struck a “great deal” over tariffs.  But now that more details of the agreement have emerged, as provided by the US government, Indonesia may have given away too much.

Responding to critics, Prabowo said he had the national interest in mind, including protecting jobs at home, in the negotiations with Trump. He also said he was safeguarding Indonesia’s non-alignment status by striking the deal.

The deal means Indonesian exports to the US will be subject to a 19 percent tariff while all US exports, which include goods and services, into Indonesia will face zero tariffs. Jakarta has also pledged to remove all non-tariff barriers for US imports and to spend huge sums on US-made planes, agricultural products, and energy.

The agreement followed intensive negotiations going back to April when Trump threatened to impose a 32 percent tariff on all Indonesian exports, the rate which he calculated was necessary to cut the huge trade deficit with Indonesia, estimated at over US$18 billion in 2024.

The government has yet to explain the implications for the economy, including job gains and losses, but officials said the deal was better than the 20 percent that Vietnam got. The Philippines got 19 percent during the visit of President Ferdinand Marcos Jr. to Washington on July 24. In Southeast Asia, only Singapore had the better deal, with 10 percent.

It is not clear from any statement from either the Indonesian or the US governments whether Trump will impose an additional 10 percent tariff on any country that joined BRICS, which has been campaigning to reform the US-dominated global financial system and to reduce international trade’s dependency on the US dollar.

Indonesia joined BRICS in January and Prabowo made his debut at the group’s summit in Brazil earlier this month.

Indonesia applied to join the Organisation for Economic Co-operation and Development (OECD), a grouping of primarily wealthy industrial countries, before its decision to join BRICS. But while admission to BRICS was automatic, at least for Indonesia, accession to the OECD must go through a lengthy process requiring the government to adjust some of its policies.

The US is Indonesia’s second-largest export market after China, and more importantly, the exports include footwear, textiles, and electronics that employ hundreds of thousands of workers, as well as semi-processed raw materials, including crude palm oil.

It remains to be seen whether or not the tariff deal will actually shift Indonesia’s position closer to the center between the US and China. Much depends on the realization of the agreements and their implementation.

Many had assumed before his October inauguration that, given his military background, Prabowo would shift Indonesia closer to the US. As defense minister in 2019-2024 under president Joko “Jokowi” Widodo, he saw Indonesia engaging in more security cooperation with the US than with China, putting the brake on Indonesia from tilting too far toward China.

But Prabowo had also been blacklisted from visiting the US because of the poor human rights record of the Army’s Special Forces, which he commanded in the 1990s. The ban was only lifted when he became defense minister in 2019.

Where Indonesia-US relations are heading will become clearer when Prabowo visits Trump in the White House, currently scheduled for September.

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