Indonesia Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in indonesia, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Energy
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Overview

Unit: USD millions

Table: total Market Size for Energy 
 2020202120222023 (est.)
Total Local Production9841,0271,0831,147
Total Exports787821866917
Total Imports4,7514,9605,2325,545
Imports from the U.S.708739780826
Total Market Size4,9485,1655,4505,776
Exchange Rate14,58214,30814,84914,849

Data Sources:  Global Trade Stats, Central Bureau of Statistics Indonesia and unofficial estimates. Average exchange rate of Indonesian rupiah to U.S. dollars from the World Bank.

Indonesia is actively exploring how it can diversify its energy production with renewable energy sources. Coal is the biggest energy source for electric power plants at 61% of the total use. The government has expressed interest in how it can adapt clean coal technology to reduce emissions from fossil-fuel powered plants. The power industry in Indonesia experienced a 6% annual growth in 2022, and according to the Ministry of Energy and Mineral Resources (MEMR) the electrification rate in Indonesia reached 99.63%. The East Nusa Tenggara and Maluku regions had the lowest electrification ratios, with 91% and 93% respectively according to MEMR data.

At the end of 2022, the total installed electric generation capacity was 81 Giga Watts. Of this, 48.04 GW (60.7%) was generated by state-owned electricity company PT Perusahaan Listrik Negara (PLN), 20.18 GW (26.5%) by independent power producers, 5.64 GW (7.7%) by operating permit holders, 3.58 GW (5.1%) by private power utilities and the remaining 55 MW (0.01%) by the government. The national transmission system consists of approximately 58,959 km of electrical lines and 77,514 Mega Volt Amperes of transmission transformer capacity. The distribution system includes approximately 946,101 km of transmission lines and 41,987 MVA of transformer capacity. The distribution system plans to further add approximately 456.5 km of lines by 2030.

Indonesia imported $5.4 billion of energy equipment in 2022, of which approximately 15% consisted of U.S.-origin products. Other major suppliers include China, Singapore, Japan, Korea, Malaysia, France and Germany.  Indonesian companies typically import U.S. products directly or through an agent/distributor in Singapore.

The smart power grid industry has increased in importance as Indonesia works to increase the electrification ratio with a particular focus on rural and remote areas in Eastern Indonesia. The initiative is in line with the government’s target to increase the renewable energy contribution to 25% of the energy mix by 2030, it is also in line with Indonesia’s smart city program covering 100 cities. Government regulations provide the regulatory framework for increasing private sector participation in transmission and distribution through microgrid licensing. U.S. firms would benefit from initiatives to replace costly diesel generation and leverage emerging microgrid deployment.

Challenges include the fact that the current Indonesian government administration has a general policy of strong national control over power generation and distribution, a lack of policy transparency, local content requirements and low cost or low-price preference over the quality.

Leading Sub-Sectors

U.S. companies are strong competitors in markets for turbines and turbine parts, transmission and distribution equipment, smart grid technology, microgrid equipment, energy saving and efficiency technologies, and emission reduction technology.

Opportunities

The new National Electric Generation Plan for 2021-2030 (RUPTL) forecasts that electricity demand in Indonesia will grow 4.9% annually.  According to RUPTL estimates, by 2030 electricity demand from 94.1 million customers will reach 445 terawatt hours (TWh) and the electrification ratio will reach 100% in 2022.

Achieving the target, first announced by President Jokowi in 2014, of adding 35 GW in power generation capacity would require a total investment of an estimated $72.9 billion U.S. dollars and the installation of 291 power plants, 732 transmission lines (75,000 set tower), and 1,375-unit substations. Even if the 35 GW plan is not fully achieved, the construction of power plants, transmission and distribution lines in Indonesia should bring commercial opportunities for U.S. companies. Areas of opportunity include the supply of equipment, coal emission technology, substations, transmission, transformers, smart metering and distribution equipment. In addition, electrification projects will create increased opportunities for renewables and gas, including clean and lower emissions coal technologies.

Indonesia’s MEMR has initiated a new policy regime under which renewable energy projects have to compete on a strictly economic basis. New regulations establish a benchmark cost for power generation within each region. So long as a project proposal is below 85% of the regional cost, PLN is authorized to accept the project through direct negotiation between the project developer and the offtaker. Also, Ministerial Regulation ESDM No. 38/2016 provides a regulatory framework to incentivize private companies to develop independent microgrid utilities in remote and underserved locations. Under 38/2016, a developer can theoretically combine a group of villages and communities into a bundled packet and apply for the issuance of a license to own and operate an independent utility concession. Indonesian political dynamics mean that the actual issuance of such a license is likely to be quite challenging.

The national energy plan sets an ambitious renewable energy target of a 23% contribution to Indonesia’s energy mix by 2025, ten percentage points higher from the current 13%. This creates opportunities in sub sectors such as solar, biofuel, waste-to-energy, and electric vehicles. The largest renewable energy resource in Indonesia with a potential of about 200 GW, solar power, such as rooftop solar photovoltaic technology, has been growing in demand from homeowners, government buildings, public facilities and commercial facilities. In addition, the Indonesia government is working on building floating solar projects especially on the island of Java as floating solar projects offer less challenges in terms of land acquisition. In the meantime, the Indonesian government has launched waste-to-energy projects in 12 cities across Indonesia, including some that are moving forward with tenders expected in the future. Although majority of the projects are not moving as fast as expected but a few waste-to-energy projects have progressed forward.

For biofuel, the government of Indonesia plans to develop green refinery facilities to leverage its vast palm oil resources as biofuel for industrial fuel needs. Since late 2018, biodiesel sold in Indonesia has had a 20% biofuel mix but in 2019, Indonesia became the first country in the world to implement a 30% biofuel ratio. Indonesia is also aiming to move towards electric vehicles, with a target of 20% of automobile sales being electric by 2025, and only electric vehicles driven by 2050. Presidential Regulation No. 55 of 2019 seeks to accelerate the growth of the electric vehicle industry. To support the growth of the electric vehicle industry, by 2030, PLN seeks to build 31,000 of public electric charge stations. With the abundant amounts nickel, as material for batteries and to support electric vehicle manufacturing, the Indonesia government has been encouraging foreign investors to invest in the Indonesian battery manufacturing industry. 

The U.S. Embassy in Jakarta established the U.S. Clean Energy Working Group for Indonesia in partnership with MEMR on March 2023 as a platform to support and showcase U.S. firms in the decarbonization and climate change technology spaces, including carbon capture and utilization systems (CCUS), small modular reactor technology, green hydrogen development, methane-free LNG, geothermal, hydropower, solar and green biofuels among others. The Working Group provides a forum for U.S. firms to engage with the Indonesian government and explore commercial opportunities in support of clean energy development in the Indonesian market. This aligns with the Just Energy Transition Partnership (JETP) and its mission to accelerate Indonesia’s transition toward a cleaner energy future towards reducing greenhouse gas emissions. JETP is a long-term effort, co-led by the United States and Japan, to help Indonesia transition away from fossil fuels and accelerate deployment of renewable energy and energy efficiency.  The partnership is funded by $10 billion of public money through the International Partners Group (G7 nations plus Denmark and Norway) and $10 billion from private banks. The U.S. Clean Energy Working Group participants include a coalition of renewable energy and clean technology stakeholders who share best practices and formulate strategies to leverage the expansion of Indonesia’s energy infrastructure in a sustainable manner.

Resources

Interested parties may contact Commercial Specialist Mario Simanjuntak at Mario.Simanjuntak@trade.gov