Profile of Energy Sector in Indonesia


Energy sector is one of the emission sources that contribute to global warming. The massive fossil fuel extraction and combustion are pointed as the main reason for the temperature rise.  Indonesia as one of the largest GHG emitters in the world places its energy sector as the second largest GHG contributor after its land-based sector according to the calculation carried out in 2000 (SNC, 2010). The Indonesia’s National Action Plan for Greenhouse Gases Emission Reduction (RAN-GRK) put three sectors namely energy (production and consumption of energy), transportation and industry under energy. It means that the emissions of energy in Indonesia will occur in those three sectors.  

The emission is generated through combustion of fossil fuels. At the supply side, refineries and power plants processed the fossil fuels to meet the energy demands. The electricity and processed fossil fuels from refineries and power plants will further be utilized by the transport, industry, household and service sectors. Transport sector is the mobile user of processed fossil fuels, meanwhile the industry, household and service sectors use both electricity and processed fossil fuels. (See Figure 1).

According to the Indonesia Second National Communication under the UNFCCC (refers to as SNC), CO2 emissions from energy sector increases substantially from 2000 to 2005. In 2000, the energy sector emitted approximately 200,000 gG CO2 which further reached 300.000 gG in 2005 which means the CO2 emissions increased more than 50% within a half decade period. From 2000 to 2005, Electricity and Petroleum consistently shared the largest CO2 emissions, followed by industries and transportation (SNC, 2010). 

Indonesia is currently facing the so-called energy trilemma. Such trilemma refers to energy security, climate change goals and energy poverty reduction (An environmental perspective on energy development in Indonesia, 2012). It reflects the current situation of Indonesia in meeting the need of energy. The current electrification rate is 68% and it is targeted to increase by 90 % in 2020 (RUPTL PLN, 2011). Such target might be able to address the energy poverty but it is going to contradict with the climate change goals if the energy supply will still be dominated by fossil fuels. In addition, the heavy reliance on fossil fuels to meet the energy demands will pose a challenge on energy security since the fossil fuel is finite source.  


In general, the challenges of energy development in Indonesia are:

  1. High subsidy for fossil fuels. Since 2000, Indonesia has transitioned from a robust energy exporter to an importing nation. Continuous subsidy along with the rise of production cost caused Indonesia to be disable to meet its own energy demand (Renewable Energy Market Assessment Report: Indonesia, 2010). Furthermore, the heavy subsidy  on fossil fuels enables the price of fossil fuel to remain low. Accordingly, the situation triggers high consumption of fossil fuel which ultimately emit GHG as the result of fossil fuel combustion.
  2. Weak policy incentives for renewable energy (Renewable Energy Market Assessment Report: Indonesia, 2010). Although Indonesia has various sources of alternative energy i.e. biogass, geothermal, wind and solar, the energy generation using those sources do not show a significant improvement due to the lacking of policy as well as financial incentives for those who are interested to develop renewable energy.
  3. High initial investment in renewable energy. Some renewable energy alternatives such as solar  and wind require high initial investment which is hard to be initiated in the absence of policy support and political feasibility.
  4. Low power tariff offered by State Owned Electricty Company (PLN) causes the investment in the power sector to be low, so that there has been a lack of capacity especially outside Java in the last few years (Guidelines for Implementing Greenhouse Gas Emission Reduction Action Plan, 2011).

With 26% target of emission reduction, the Government of Indonesia aims at mitigation actions in three areas through its National Action Plan (RAN-GRK) that relates with energy i.e.: promoting energy saving, alternative and renewable energy resource development and shifting to low-emission transport modes (Guidelines for Implementing Greenhouse Gas Emission Reduction Action Plan, 2011).


Bridging climate change mitigation and fulfilling the energy demand is visible and beneficial. The increasing demand of energy should be perceived as a leeway to introduce the more environmentally-friendly energy sources. In the transportation sector, the development of a more integrated low-emissions transport mode is an opportunity to reduce emission in transportation sector.  Along with those mitigation actions, community involvement should be fully taken into account to ensure that those low energy initiatives are sustainable. Ultimately, the shift to low emission energy mode will not only provide benefits in terms of mitigation, but also improving livelihood aspect such as health benefits in form of good air quality and healthy environment. Improving local economic growth can also be manifested through mobilizing resources tocommunity-based energy generation. Indonesia is currently on its way to achieve those objectives and RAN-GRK is the first step towards those goals. 

Copyright 2012.

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