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
As the country’s investment climate deteriorates, the China Chamber of Commerce in Indonesia (CCCI) took the unusual step of writing directly to President Prabowo Subianto to complain about shifting regulations, nickel quota cuts, royalty hikes and alleged extortion. This raises troubling questions: Is the government losing control of policy consistency or quietly yielding regulatory authority to its largest investor?
In the letter, Chinese investors laid out a familiar catalog of concerns, arguing that the investment environment in Indonesia had become increasingly difficult to navigate due to inconsistent regulations and heavy-handed enforcement. The investors criticized what they described as excessive and non-transparent law enforcement, where authorities possessed overly broad discretionary powers that created uncertainty for businesses.
They also raised allegations of corruption, extortion and a growing reliance on expensive “third-party intermediaries” to resolve licensing and operational disputes. At the same time, they alleged that successive hikes in royalties, taxes, tax inspections and multimillion-dollar fines had created panic among mining and downstream processing companies. These concerns were further amplified by the government’s mandatory foreign exchange retention policy, requiring exporters to keep 50 percent of their export proceeds in domestic banks for one year, which investors said disrupted liquidity and long-term operational flexibility.
Much of their frustration centered on Indonesia’s nickel sector, where Chinese firms dominate much of the downstream smelter and battery supply chain. For example, investors protested the government’s decision to slash nickel ore quotas more than 70 percent, arguing that it could reduce production by roughly 30 million tonnes a year and severely disrupt the downstream industrial ecosystem.
They also criticized the new formula for calculating the mineral benchmark price (HPM), which they claimed caused nickel ore prices to surge as much as 200 percent, thereby worsening operational losses across the supply chain. The investors noted that these policies threatened existing projects, would discourage future investment and put more than 400,000 jobs linked to the sector at risk.
Aside from mining, investors also complained about tighter visa rules for foreign workers, which they described as increasingly costly and restrictive for technical and managerial personnel. Other issues related to proposed export levies, reduced electric vehicle incentives and curbs to tax relief in special economic zones, all of which contributed to a growing sense of regulatory unpredictability, they said.
At its core, the CCCI’s concerns reflect a deeper shift in Indonesia’s economic direction under the current administration. Policies such as mandatory retention of foreign exchange earnings in state-owned banks, tighter control over mineral exports, mandates for downstream industries and rising state intervention suggest that Indonesia is moving away from its traditionally liberal foreign exchange regime toward a model based more on state capitalism.
Ultimately, the controversy surrounding the CCCI’s letter is not merely about nickel quotas or royalty hikes. It reflects a broader tension between the government’s ambition to assert greater control over Indonesia’s natural resources and its continued dependence on foreign capital to sustain industrialization. The government wants to move the country up the value chain, strengthen domestic financial liquidity and reduce reliance on external forces, but these goals require long-term investor confidence: something that cannot exist without regulatory consistency and credible governance.
