Indonesia’s economy is fossil fuel intensive; coal, oil and natural gas supply three quarters of primary energy. Indonesia has significant domestic coal resources and was the world’s second largest producer of coal in 2020. Together with palm oil, which has historically been a major driver of deforestation, coal is Indonesia’s biggest export product. The use of coal (and oil) is also supported domestically through government subsidies and a cap on the price of coal.
The focus on coal as foundation for the country’s growing power system is set to continue: Indonesia operates 33 GW of coal-fired power plants and plans to double this capacity by this decade. Coal has already doubled its share in the power sector between 1990 and 2019, from ~30% to ~60%. Indonesia’s government owned distribution company, Perusahaan Listrik Negara’s (PLN) has committed to become carbon neutral by 2050, and Indonesia’s Ministry of Energy and Mineral Resources intends to retire coal-fired power plants that have been in operation for more than 20 years and stop building new coal-fired plants after 2023., However, Indonesia has still a 30 GW of coal-fired power pipeline under construction and the government continues to politically support and subsidise the expansion of its coal industry.
Indonesia’s vast renewable electricity energy potential remains largely untapped. The National Energy Plan emphasises resource diversification targeting an energy mix by 2025 of oil (25%), gas (22%), coal (30%), and new and renewable energy (23%). In response to missing its renewable capacity target of over 15 GW by 2019, the government has strengthened its support to renewables, with improvements to feed-in tariffs, net metering rules and by easing the administrative process for rooftop solar installations. However, the effect of these policies remains uncertain as renewables cannot compete with highly subsidised coal.
Use of biomass and its domestic cultivation is a critical component of the nation’s goal to achieve 23% renewables by 2025. Indonesia has a target to increase the share of biofuels in all fuels across all sectors by 30% by 2025. Timely achievement of this target is supported through policies and subsidies directed to biofuel producers to ensure 20% blending mandate, a levy on palm oil export., Given the historical connection between biofuel production from palm oil plantations and deforestation, it is unclear whether this would drive real emission reductions in Indonesia.
In transport sector, the 2017 Electric Vehicles Development Plan foresaw 3 million electric or hybrid two-wheelers and cars on Indonesia’s roads but it is unclear whether existing incentives will achieve these objectives. Indonesia is also strengthening public mass transit systems, particularly via the Jakarta MRT project.,