Indonesia – an Energy Snapshot

With the third highest reserves of natural gas in Asia Pacific after China, the third highest coal production in the world and oil production that averaged 692,000 barrels per day (B/D) in 2020, Indonesia relies heavily on its domestic fossil fuel reserves for its energy. Its LNG export market share is the second largest in Asia Pacific.

Coal, oil and gas accounted for more than 89% of its primary energy in 2021 with renewable energy production remaining low despite enormous potential for solar, wind, hydropower and geo-thermal power.

Given Indonesia’s current status as the world’s fourth-most populous nation and projections that it will be the world’s fourth-biggest economy by 2050, its ability to transition to a lower carbon economy is crucial in Asia achieving its region-wide climate targets.

The country has committed to achieve net zero carbon emissions by 2060 but says it will need USD200 billion per annum in investment in the next decade and over USD1 trillion annually after that to get there. In this regard, Indonesia’s ambitions received a boost with the announcement at the November 2022 G20 of a Just Energy Transition Partnership (JETP) that will provide $US20 billion over the next three to five years to accelerate the country’s move towards renewable energy.

A total of $10 billion of public money for the JETP will be mobilised by an International Partner Group – comprising France, Germany, the United Kingdom, the United States of America, and the European Union – and at least $10bn of private finance will be mobilised and facilitated by the Glasgow Financial Alliance for Net Zero Working Group.

The JETP funding will help support the Indonesian government’s long-term National Energy Plan (RUEN), which prioritises the expansion of renewable energy, mainly for power generation, as part of the country’s climate change commitments under the Paris Agreement. Coal will maintain a significant portion of the national energy mix for power generation, despite government plans to slowly reduce its relative usage through to 2050.

The share of natural gas in the primary energy mix is expected to increase from 17.8% in 2013 to 22.4% in 2025 and 24% in 2050. The Indonesian government says by 2050 all production will be used domestically.

The government plans to expand renewable energy significantly from 4.1% of the energy mix in 2013 to 23% in 2025 and 31.2% in 2050. This is motivated both by Indonesia’s commitments to the Paris Agreement to reduce greenhouse gas (GHG) emissions by 29% unconditionally BAU, and 41% with international support, by 2030, and by the government’s desire to better leverage Indonesia’s abundant renewable energy sources, including geothermal, hydropower and solar.

Most projections estimate just 15% of the energy mix will be sourced from renewables by 2025 due to continuing head winds that include pricing and contractual uncertainty despite efforts to improve incentives for investment in the sector. Parliament prioritised the passage of the New and Renewable Energy Bill in 2021, a new presidential regulation has re-introduced more favourable FITs for all renewable power plants and the government is also exploring ‘unbundling’ electricity infrastructure and services[1] to increase competition and attract more foreign investors.

A presidential decree from President Joko Widodo, issued in September 2022, instructed government agencies to prepare a road map for renewable energy development and the gradual phasing out of coal-fired power plants. State utility PLN has been instructed to accelerate retirement timelines for its coal-fired power generation as part of the decree.

While only one carbon capture, utilisation and storage project has so far been approved in Indonesia, it is expected to be a major tool in the country’s decarbonisation efforts. Research suggests Indonesia could potentially store as much as 3 billion metric tonnes of CO2 and ANGEA members ExxonMobil, Chevron and JGC have collaborated on CCS with state-owned energy provider Pertamina.

More than a dozen CCS projects are in the study and preparatory stage in Indonesia, most of which are expected to be operational by 2030. The Ministry of Energy and Natural Resources (ESDM) has publicly recognised the suitability of geological conditions for storage and CCS/CCUS regulations for Indonesian upstream operations announced in April were among Asia’s first.

[1] There are two types of unbundling in the electricity sector: vertical and horizontal unbundling. Vertical unbundling is the separation of generation, transmission, distribution and retail functions. This form of unbundling separates the competitive segments of electricity generation and retail, where private sector firms can enter, from the uncompetitive segments of transmission and distribution which are natural monopolies and require a single company to manage the grid system. Horizontal unbundling refers to the separation of these functions (and assets) into multiple entities that compete with one another or provide services in different areas.

ANGEA is an industry association representing LNG and natural gas producers, energy buyers, suppliers and companies in APAC. Based in Singapore, it works in partnership with governments and societies across the region to deliver reliable and secure energy solutions that achieve national economic, energy security, social and environmental objectives and meet global climate goals.

Photo of Jakarta by Afif Ramdhasuma on Unsplash