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
The administration of Prabowo Subianto is reforming the disbursement of fuel and electricity subsidies to improve state budget efficiency. These subsidies have long been criticized for disproportionately benefiting upper-middle-class households, who consume more energy, rather than the poor and vulnerable groups they are intended to support. As a result, the government now aims to better target subsidy distribution and reduce its long-standing fiscal burden. The urgency to optimize subsidy spending has also grown amid rising expenditures for several major government programs.
Finance Minister Purbaya Yudhi Sadewa outlined the subsidy reform plan during a joint working meeting with state asset fund Daya Anagata Nusantara (Danantara) and House of Representatives Commission XI on Dec. 4. He acknowledged that the well-off, and even the ultra-wealthy, remain among the beneficiaries of energy subsidies. The reform aims to significantly reduce access for households in income deciles 8–10, redirecting support toward lower-income groups in deciles 1–4.
According to the National Integrated Social Economic Data (DTSEN), income deciles 1–5 cover individuals from extreme poverty to the middle-income bracket, while deciles 6–10 range from middle- to upper-income levels. The Finance Ministry has been given six months to finalize the subsidy distribution strategy, with the entire policy reform design expected to be completed jointly with Danantara within two years. Meanwhile, the Energy and Mineral Resources Ministry revealed that the reform will cover subsidies for liquefied petroleum gas (LPG) and electricity.
The subsidy reform will be formalized through a new presidential regulation (Perpres) that amends existing frameworks, including Perpres No. 117/2021, the third revision of Perpres No. 191/2014 on fuel provision, distribution and retail pricing, and Perpres No. 70/2023, which updates Perpres No. 104/2007 on the provision, distribution and pricing of 3-kilogram LPG cylinders.
On the financial administration side, the Finance Ministry has issued Ministerial Regulation No. 73/2025 on the provision, calculation, payment and accountability for compensation funds related to fuel pricing and electricity tariffs. Previously, compensation to Pertamina and PLN was disbursed quarterly or even semi-annually. Under articles 8 and 11 of the new regulation, Pertamina and PLN may now receive up to 70 percent of their compensation for subsidized fuel and household electricity tariffs following a monthly review by the Finance Ministry's Inspector General. The remaining portion will be disbursed after an annual audit by the Development Finance Comptroller (BPKP), as stipulated under Article 28. The initial compensation portion may also be adjusted based on overall budget conditions or previous audit findings from the Supreme Audit Agency (BPK).
Danantara CEO Rosan Perkasa Roeslani emphasized that energy subsidy reform would improve the cash flow of state-owned enterprises (SOEs) tasked with public service obligations. He noted that previous cooperation between Danantara and the Finance Ministry in shifting fertilizer subsidies toward a more market-based mechanism had progressed well.
As of October, realized government spending on subsidies reached Rp 314.9 trillion (US$18.91 billion), or 66.3 percent of the 2025 state budget allocation. This includes Rp 194.9 trillion in subsidies and Rp 120 trillion in compensation payments. Distribution of subsidized fuel reached 13,915 kiloliters (kL), or 72 percent of the 19,410 kL target; subsidized 3-kg LPG distribution reached 6.35 million kg (78 percent of the target); and electricity subsidies reached 42.5 million consumers, exceeding the target of 41.3 million.
Energy subsidy reform is necessary given the fiscal burden it imposes and the resulting constraints on priority government programs. However, overly aggressive cuts, an inherent risk amid current austerity, could have negative social impacts, weaken consumer spending and dampen economic growth. The government should explore ways to curb subsidy spending without introducing additional bureaucratic costs.
