Global tensions demand a sooner vitality transition — why does Indonesia nonetheless depend on fossil gasoline imports?

The 12 months 2025 begins with persistent world geopolitical tensions. The battle between Ukraine and Russia drags on, battle within the Middle East is heating up, and the United States-China trade war continues. All of this might ship shockwaves by the worldwide vitality market — together with in Indonesia.

Indonesia nonetheless depends closely on imported crude oil and pure gasoline. In 2024, Indonesia spent US$36.28 billion on imported crude oil and pure gasoline — leaving it extremely susceptible to sudden value hikes brought on by battle or commerce tariffs.

When battle broke out in Ukraine in 2022, oil shot past US$100 a barrel — and Indonesia’s subsidy price range ballooned.

These geopolitical tensions ought to function a wake-up name to hasten the transition to renewable vitality. Beyond decreasing emissions, increasing home renewables would lower import dependence and bolster nationwide vitality safety.

Ironically, Indonesia’s latest diplomacy with the United States (US) has deepened its reliance on imported vitality, with President Prabowo Subianto approving US$15 billion (Rp244 trillion) in crude oil and LPG imports in change for decrease commerce tariffs.

These world shocks additional expose Indonesia’s deep dependence on imported fossil fuels, making the shift to renewables not only a local weather necessity however a strategic crucial for vitality safety and financial resilience.

Rooftop photo voltaic: A fast resolution caught in limbo

Rooftop photo voltaic is among the many quickest methods to scale up renewable vitality. To spur adoption, the federal government has launched laws such because the 2021 rooftop solar grid rule, the 2024 reform and quota regulation, and the 2024 local content rule for solar projects.

However, these laws have drawn sharp criticism. The 2021 regulation capped the capability of rooftop photo voltaic that might hook up with PLN, the state electrical energy firm. Meanwhile, the 2024 quota regulation abolished the net-metering scheme, which had allowed households to offset electrical energy payments by feeding extra energy again into the grid.

These restrictions have discouraged public adoption of rooftop photo voltaic, slowing down Indonesia’s progress towards its renewable vitality objectives.

Australia affords a powerful instance: it leads the world in rooftop photo voltaic adoption by federal subsidies beneath the Small-scale Renewable Energy Scheme, complemented by state-level rebates and interest-free mortgage applications.

As a end result, rooftop photo voltaic set up prices might be lowered to 70% of market prices, making photo voltaic panels inexpensive for households and small companies.

Expanding large-scale renewables and infrastructure

Beyond rooftop photo voltaic, Indonesia should speed up large-scale tasks just like the Cirata Floating Solar Plant, and develop electrical energy infrastructure for transport and business.

This is vital provided that industry (45.94%) and transport (36.11%) — each account for the majority of nationwide vitality consumption — are nonetheless closely depending on coal, pure gasoline, and oil.

Expanding the nationwide grid and constructing electrical automobile (EV) charging networks are vital for enabling a clean transition to wash, electricity-based business and transport.

Scaling up renewable gasoline manufacturing

Not all sectors can readily swap to electrical energy; aviation, maritime, and heavy business will proceed to stay reliant on chemical fuels.

Indonesia should additionally scale up renewable gasoline manufacturing — together with inexperienced hydrogen, ammonia, methanol, bioethanol, sustainable aviation gasoline, and biodiesel — making certain they’re produced utilizing renewable electrical energy and sustainable feedstocks, whereas avoiding deforestation by prioritising waste-based sources.

PLN has begun creating a hydrogen provide chain for business and fuel-cell autos — certainly one of its largest initiatives is the Garuda Green Hydrogen (GH2), a partnership with Saudi vitality large ACWA Power, set to function in 2026. The hydrogen can be transformed into ammonia to assist Indonesia’s home fertiliser business.

Other hydrogen tasks underway embrace Gresik Green Hydrogen (ACWA Power and Pupuk Indonesia), Jambi Green Hydrogen (Sembcorp and Transgasindo), Kujang Green Ammonia (Pupuk Indonesia and Fortescue Future Industries), and East Sumba Solar/Fuel Cell (HDF Energy). All tasks are scheduled to start operations between 2026 and 2027.

Indonesia has additionally begun producing sustainable aviation fuels. State-owned oil firm Pertamina’s Cilacap Refinery began output of Bioavtur J2.4 in 2021 — a 2.4% palm oil-based mix with fossil jet gasoline — with a capability of 9,000 barrels per day. The expertise was developed by Pertamina Research and Technology Innovation (RTI) and Institut Teknologi Bandung (ITB) since 2010.

Pertamina can be creating new services to provide sustainable fuels — together with gasoline, jet gasoline, and diesel from used cooking oil — at its refineries in Cilacap, Plaju, and Sungai Gerong.

All this demonstrates that Indonesia has each the capability and sources to advance renewable vitality — so why does it nonetheless lean so closely on imports?

Strengthening multilateral cooperation

The greatest problem in Indonesia’s vitality transition is financing. To handle this, Indonesia should strengthen multilateral cooperation, significantly with its Asia-Pacific neighbours, together with ASEAN members and Australia.

Incentives like tax holidays can attract overseas buyers, whereas streamlined licensing reforms will ease the stream of overseas capital.

Funding may be mobilised by partnerships with world establishments such because the Quad coalition (Australia, India, Japan, and the United States), the International Energy Agency (IEA), the Asian Development Bank (ADB), and the World Bank.

Indonesia has additionally agreed to export 3.4 GW of clean electricity to Singapore till 2035, backed by US$30-50 billion in photo voltaic investments, plus one other US$2.7 billion for photo voltaic panel and battery manufacturing.

The program is projected to generate US$4-6 billion in annual overseas change income.

Pertamina has additionally provided SAF to Virgin Australia through the Bali International Air Show on September 18-19, 2024.

By prioritising three key actions — accelerating electrification, advancing renewable fuels, and strengthening multilateral cooperation — Indonesia has a significant alternative to fast-track its vitality transition.

Stronger vitality safety wouldn’t solely shield Indonesia from world shocks but additionally lay the muse for sustainable financial development within the a long time to return.

Denny Gunawan, Research Associate, ARC Training Centre for the Global Hydrogen Economy, Particles and Catalysis Research Laboratory, UNSW Sydney; Ari Pasek, Professor, Institut Teknologi Bandung; James Christian, Business Manager at NSW Decarbonisation Innovation Hub, UNSW Sydney, and Wibawa Hendra Saputera, Lecturer in Department of Chemical Engineering, Institut Teknologi Bandung

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