Indonesia’s energy transition crossroads: New administration, old challenges

Indonesia ushered in a new presidential administration, and climate circles around the country and region are speculating what the Prabowo administration means for climate progress. 

Through the Paris Agreement and its Long-Term Strategy for Low Carbon and Climate Resilience 2050,  Indonesia has committed to be a net zero economy, indicating it can be a low-carbon economy by 2060 or earlier. 

Climate is not the only item on the administration’s agenda.

Balancing the social, economic and environmental needs of this growing economy, and in increasingly turbulent global political headwinds, present a challenge for any administration. 

The new government’s energy, food security, and environmental conservation targets reveal tensions due to each goal’s competing demands on its resources and policy choices. 

For instance, the administration’s ambitions for food self-sufficiency through expanding agricultural land, mainly through ‘food estate’ projects, risks encroaching on sensitive forested areas, including carbon-rich peatlands critical for climate mitigation.

At the same time, the administration’s aspiration to achieve energy self-sufficiency relies heavily on expanding domestic coal and fossil fuel production, a move that hinders Indonesia’s renewable energy targets and global commitments to reduce greenhouse gas emissions.

Energy security through renewable energy deployment

Achieving energy independence and combating the climate crisis are complementary goals in Indonesia.

The new government led by President-elect Prabowo Subianto and Vice President-elect Gibran Rakabuming Raka can prioritise energy security issues with clean energy utilisation.

In the next five years to 2029, accelerating the clean energy transition will be critical to achieving net zero emissions targets and supporting sustainable national economic growth.

In the last decade, Indonesia has made some progress in getting renewable projects off the ground and reducing its dependence on fossil fuels.

The country’s renewable mix has grown from around 5.35 per cent in 2014 to 13.1 per cent by the end of 2023.

Progress in phasing out coal has also been showcased by the Indonesian government’s signing of the Global Coal to Clean Power statement at COP26 (2021) and securing the Just Energy Transition Partnership [PDF 149kb] in the following year during Indonesia’s G20 Presidency.

This shift can reduce air pollution, improve public health, and leverage Indonesia’s significant renewable resources while creating jobs in sustainable industries and stabilising long-term energy costs as global demand for clean energy grows.

However, ambition waned in the final years of the Jokowi administration.

Institute for Essential Services Reform (IESR) Energy System Transformation Program Manager Deon Arinaldo, speaking at the Energy Transition Policy Development Forum at the Purnomo Yusgiantoro Center (PYC) on 24 October, noted that the draft National Energy Policy (KEN) RPP shows how the targets and ambitions of the energy transition have eroded.

‘Energy is one of the drivers of sustainable economic growth,’ Arinaldo said.

‘In the next five years, accelerating the clean energy transition will be critical to achieving net zero emissions targets and supporting sustainable national economic growth,’ Guntur Sutiyono, who leads Climateworks’ Indonesia office, said.

‘It presents an opportunity for the new Prabowo administration, which is aiming for ambitious economic growth.’  

Robust renewable energy targets and net zero commitments will signal to investors globally that Indonesia is devoted to creating a sustainable and resilient economy.

Attracting investment is critical, as more research and development are needed for low-carbon technologies like battery systems and green hydrogen and ammonia production to support a successful energy transition.

Responsible growth of an extractive economy

Indonesia is the world’s largest exporter of thermal coal and rich in critical minerals.

To date, its economic growth has been linked to extractive industry. In a net zero global economy, Indonesia’s critical minerals, like nickel, will be in high demand. Its thermal coal will no longer have a market.

Nickel and other extractive industries come at high environmental and social risks that will need to be closely managed and mitigated. 

Sustaining economic growth through these industries and achieving an equitable energy transition must be based on high environmental standards.  

A sustainable mineral sector requires substantial investment in local workforce skills, fair labour practices, and safe working environments.

Mining companies can also adopt and implement responsible mining practices, such as third-party audits to verify adherence to social and environmental standards, and use digital tracing (e.g. blockchain) to provide transparent reporting on mineral sourcing.

Both can contribute to a more just and sustainable energy transition that respects human and environmental needs.

A supported transition needs to extend beyond mining to consider local workers whose jobs and livelihoods are affected by environmental impacts of extractive industry.

The government can ensure community members, including women, Indigenous peoples, and persons with disabilities, can maintain their livelihood and receive fair compensation by providing social protection to those affected, as well as mitigate displacement from mining, especially in regions like Central Sulawesi and North Maluku.

Uniquely at risk and uniquely powerful 

Indonesia is located in one of the world’s most vulnerable regions to climate harm and extreme weather. It has everything to gain from strong and swift climate action and much to lose should global warming exceed the 1.5 degree Celsius limit.

Rich in resources and critical minerals, Indonesia can be a global low-carbon technology and manufacturing hub. Regional supply chain alliances will strengthen its competitive advantages.

Together, the region has the resources, infrastructure and know-how to become a powerhouse in the low-carbon global economy.

As the largest economy in Southeast Asia, Indonesia can lead this energy and economic transformation.

First, it must reclaim that mantle by affirming its commitment and contributions to global targets and goals.

How does it do this?

In the latest draft of PLN’s power development plan (RUPTL) 2024–2033, Indonesia’s state-owned electricity company aims to add 33.2 GW of renewables, nearly 70 per cent of the total 47.1 GW the PLN says is needed.

If the draft plan goes through, it will be PLN’s greenest RUPTL by far, translating the global target of tripling renewables by 2030 into the national plan.

Further, a cornerstone of Indonesia’s approach is to reduce energy intensity by 1 per cent annually through regulations that promote energy conservation and efficiency.

The government has implemented mandatory minimum energy performance standards (MEPS) for appliances and equipment, like air conditioners and refrigerators, and is looking to broaden to other common energy-intensive products, like washing/drying machines and electric stoves.

Beyond commitments like these, the government needs a plan to achieve them and its net zero emission target.

Accelerating the decommissioning of power plants and protecting and repairing vital ecosystems – including marine ecosystems – that act as carbon sinks would be powerful cornerstones of a national decarbonisation strategy.

Will Prabowo’s administration seize the opportunity to lead Southeast Asia’s green transition?

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