Indonesia’s energy landscape has long been dominated by fossil fuels, primarily coal, oil, and natural gas. However, in the last decade, policy initiatives, technological advancements, and increasing environmental awareness have gradually shifted the focus towards renewable energy sources.

Current Energy Mix: Fossil Fuels vs. Renewables

 

Fossil fuels constituted 84.41% of Indonesia’s total energy supply (TES) in 2021, with coal accounting for the largest share at 36.15%, surpassing crude oil and refined oil products at 32.10 percent.

This heavy reliance on fossil fuels is a legacy of Indonesia’s abundant natural resources and the historical focus on economic growth and energy security. Oil and natural gas also play significant roles, though their shares have slightly fluctuated due to market dynamics and resource constraints.

On the other hand, renewable energy usage has grown significantly, with its share rising from 4.9% in 2015 to 11.3% in 2020. This increase can be attributed to the use of biofuels in the construction of off-grid power plants, including solar, geothermal, hydro, and hydropower facilities. As of 2024, the total share of all renewable energy sources, including geothermal, bioenergy, solar, wind, hydro, and others, is 14.5%.

Biomass is the most significant contributor among renewables, particularly in rural areas where it is widely used for cooking and small-scale industries. Geothermal energy, which Indonesia is a global leader in, is also crucial, followed by hydro, solar, and wind energy. While the contributions of solar and wind are currently modest, their growth rates are noteworthy and indicative of a broader shift towards cleaner energy.

Trends Over the Last 10 Years

 

Fossil Fuels: Coal production and consumption have risen, driven by robust domestic demand and lucrative export markets. The government’s focus on energy security and economic growth has favored coal, resulting in substantial investments in coal-fired power plants. Oil production has experienced a decline due to depleting reserves and aging infrastructure, while natural gas production has remained relatively stable. However, the global fluctuations in oil and gas prices have posed challenges for the industry.

Renewables: The use of biomass has increased steadily, supported by advancements in technology and its widespread availability, especially in rural areas. Indonesia has seen a significant increase in geothermal energy production, driven by substantial investments and supportive policies. The country is now one of the world’s largest geothermal energy producers. However, starting from a low base, solar and wind energy have experienced rapid growth. Government initiatives, international investments, and decreasing technology costs have driven this growth.

Fig 1: Energy mix trend in Indonesia, Source: IEA (2022), “World energy statistics,” IEA World Energy Statistics and Balances (database).

Expected Trends for the Next 10 Years

 

Fossil Fuels: The share of coal in Indonesia’s energy mix is expected to decrease gradually as the government implements measures to reduce carbon emissions and transitions to cleaner energy sources. Oil production will likely continue declining, while natural gas may see a slight increase due to new field developments and investments in liquefied natural gas (LNG) infrastructure.

Renewables: Continued growth in biomass usage is expected, particularly with technological advancements that improve efficiency and sustainability. Significant expansion of geothermal energy production is projected and driven by ongoing projects and new explorations. Solar and wind energy sources are anticipated to grow substantially, supported by falling costs, technological advancements, and government targets to increase the share of renewables in the energy mix.

Factors Affecting Current Trends

 

Several factors have influenced the current trends in Indonesia’s energy landscape. Historically, subsidies for fossil fuels have hampered the growth of renewable energy. However, recent policy shifts aim to promote renewables through incentives, regulatory support, and ambitious targets. The economic benefits of coal exports have heavily influenced energy policies. However, fluctuating global fossil fuel prices and the increasing cost-competitiveness of renewables are driving a more diversified energy approach. Improvements in renewable energy technologies and cost reductions have made them more competitive with fossil fuels, accelerating their adoption. Rising awareness of environmental issues and Indonesia’s international commitments to reduce carbon emissions have increased pressure to transition towards cleaner energy sources.

Recommendations for Increasing the Share of Renewables

 

Several key policies and activities are recommended to boost the adoption of renewable energy in Indonesia. Implementing tax breaks, subsidies, and feed-in tariffs specifically for renewable energy projects can make them more financially attractive. Developing a clear and stable regulatory framework that facilitates the development and integration of renewable energy into the national grid is crucial. Modernizing the electricity grid is essential to accommodate the variability of renewable energy sources and ensure reliable distribution. Supporting research and development in renewable energy technologies and storage solutions can improve efficiency and reliability, making renewables more competitive. Promoting educational programs and campaigns to raise awareness about the benefits of renewable energy can drive public and private sector support. Encouraging community-based renewable energy projects can foster local participation and ownership, leading to more sustainable and widely accepted energy solutions.

By implementing these policies and activities, Indonesia can significantly increase the share of renewable energy in its energy mix, contributing to a more sustainable and resilient future. The shift towards renewables is an environmental imperative and an economic opportunity, positioning Indonesia as a leader in the global transition to clean energy.

References:

Ministry of Energy and Mineral Resources, Indonesia. (2022). Annual Energy Report.

This Post was submitted by Climate Scorecard Indonesia Country Manager Netra Naik.