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
Indonesia may face a tax revenue shortfall this year, as recent data show the country had realized only 74.62 percent of its annual tax target as of November, underscoring mounting difficulties in sustaining revenue growth amid global and domestic economic headwinds. The World Bank Group (WBG) has projected Indonesia's tax ratio, the share of tax revenue in gross domestic product (GDP), to fall to 9.4 percent in 2025, down from 10.1 percent in 2024. The downward trend is a worrying signal for future state spending, particularly as the government rolls out costly flagship programs that risk widening the fiscal deficit.
The Finance Ministry reported that tax revenue realization reached Rp 1.63 quadrillion (US$97.62 billion) as of November 2025, well below the Rp 2.19 quadrillion target set in the 2025 state budget. This underperformance occurred despite gross tax revenue rising 1.9 percent year on year, as higher VAT restitution and other adjustments pushed net tax revenue growth into a 3.25 percent contraction.
The revenue weakness is also reflected in the World Bank's latest outlook, which projects Indonesia's tax ratio to remain in single-digit territory at 9.4 percent in 2025 and 9.7 percent in 2026. The declining tax ratio is expected to weigh on overall state revenue, prompting the government to raise its fiscal deficit projection to 2.8 percent of GDP, edging closer to the 3 percent legal ceiling stipulated in Indonesia's fiscal rules.
The Supreme Audit Agency (BPK) has identified several structural and administrative factors contributing to the tax shortfall. First, Government Regulation (PP) No. 14/1997 contains a loophole that allows capital gains from shares traded on the negotiated market to be taxed at prices below prevailing market values, eroding potential revenue. Second, PP No. 49/2022 permits input VAT in coal mining activities to remain creditable while most coal output, largely export-oriented, is subject to a zero VAT rate, resulting in chronic VAT overpayments and rising restitution claims. Third, the Directorate General of Taxes' information system is unable to directly detect discrepancies between VAT and income tax payment data and taxpayer and withholding agent reports, delaying the realization of Rp 6.12 trillion in VAT and Rp 85.13 billion in income tax.
To mitigate the potential shortfall, Finance Minister Purbaya Yudhi Sadewa said the government was considering front-loading tax collection, a measure previously applied to Article 25 Income Tax (PPh 25) in 2017, which shifted future tax payments into the current fiscal year. However, business groups have criticized the proposal for risking liquidity pressures that could dampen economic activity. Several analysts have also warned that front-loading could distort the 2025 tax base and weigh on revenue performance in 2026.
In parallel, the Finance Ministry has rolled out measures to keep the 2025 budget deficit below the 3 percent threshold. Purbaya said the government has channeled Rp 200 trillion in excess state funds to state-owned banks to stimulate private sector activity and support tax revenue generation. The ministry has also secured Rp 4.5 trillion from unspent budget allocations, as several ministries and agencies recorded spending rates below 90 percent.
The government has also introduced short- and long-term fiscal adjustments. The annual excise tax hike on cigarettes was lifted earlier in 2025, reducing excise revenue in the short term but potentially optimizing long-term excise revenue since cigarette excise made up about 96.2 percent of total excise revenue. Micro, small, and medium enterprises (MSMEs), which are not individual-run businesses businesses or sole proprietorships were required to shift to the standard income tax system with progressive rates based on net taxable income instead of the 0.5 percent allowance.
Going forward, front-loading tax collection should be treated as a last resort, given its potential adverse effects on business activity and future revenue realization. In line with the BPK's findings, the Finance Ministry could prioritize reforms to capital gains taxation, the VAT framework and the infrastructure supporting the Coretax integrated reporting system. Tax incentives should also be reviewed to eliminate schemes that deliver limited investment or formalization benefits. Over the longer term, rebuilding public trust and voluntary compliance will be critical to strengthening Indonesia's tax base.
