The Indonesian government has signaled a decisive shift in its national energy strategy, emphasizing the urgent need to diversify the country’s energy portfolio away from its heavy reliance on coal. Speaking at his office in Jakarta, the Coordinating Minister for Maritime and Resource Affairs, Rizal Ramli, underscored that while coal has historically been the backbone of Indonesia’s power generation, the future of the nation’s energy security depends on the rapid development of New and Renewable Energy (Energi Baru Terbarukan or EBT). The minister’s remarks come at a critical juncture as Indonesia seeks to balance its ambitious industrial growth targets with international environmental commitments and the practical necessity of creating a more resilient energy infrastructure.
Minister Ramli revealed that the government is currently engaged in intensive internal discussions to identify the systemic bottlenecks that have historically hindered the expansion of renewable energy projects. Despite years of rhetoric regarding the potential of Indonesia’s natural resources, the actual implementation of non-coal energy projects has remained sluggish. The minister noted that the transition to cleaner energy sources—such as geothermal, hydroelectricity, and solar power—is no longer a matter of choice but a strategic necessity for the nation’s long-term economic health.
The Stagnation of Renewable Energy Development
During the press briefing, Rizal Ramli pointed out a stark disconnect between Indonesia’s vast renewable potential and its current energy output. He observed that while the country possesses some of the world’s most significant reserves of geothermal and hydro energy, the number of operational plants remains disproportionately low. "We are discussing, still in the phase of deep discussion, though there have been many speeches and lectures stating that Indonesia must diversify its energy from coal to other sources, including renewables," Ramli stated. He acknowledged that despite the high-level discourse, the "fact on the ground" shows that very few alternative energy facilities have actually been constructed.
This lack of progress is particularly evident in the geothermal sector. Indonesia is situated on the "Ring of Fire," granting it an estimated 40% of the world’s total geothermal potential, roughly equivalent to 28,000 to 29,000 megawatts (MW). However, as of late 2015, only a small fraction of this potential has been tapped. Similarly, Indonesia’s vast river systems offer immense hydroelectric possibilities that remain largely underutilized in favor of faster, cheaper coal-fired thermal plants.
Pricing Mechanisms and Investment Barriers
A primary focus of the government’s current inquiry is the economic viability of renewable projects for private investors. Minister Ramli suggested that the sluggish growth in the EBT sector is likely rooted in unattractive pricing structures. For years, the Indonesian energy market has been dominated by coal because of its low upfront costs and the established supply chain within the archipelago. However, the feed-in tariffs and power purchase agreements (PPAs) offered to renewable energy developers have often failed to account for the high capital expenditure (CAPEX) required for geothermal and solar infrastructure.
"It is possible that the pricing is simply not attractive," Ramli remarked. "The pricing should be made attractive so that investors are willing to put their capital into geothermal and solar energy." The minister’s assessment reflects a broader concern within the investment community: that without a clear and profitable path to a return on investment, the private sector will continue to favor traditional fossil fuels. To rectify this, the Coordinating Ministry for Maritime and Resource Affairs is looking into ways to bridge the gap between the cost of production for renewables and the purchasing power of the state-owned electricity utility, Perusahaan Listrik Negara (PLN).
The Dominance of Coal in the 35,000 MW Program
The drive for energy diversification faces the challenge of the government’s own massive infrastructure goals. The Jokowi administration’s signature 35,000 MW electricity program, launched to prevent a looming power crisis and support industrialization, is heavily weighted toward coal. Coal-fired power plants (PLTU) are favored for this program because they can be built relatively quickly and provide a stable "baseload" of electricity at a lower cost per kilowatt-hour compared to many renewable alternatives.
However, critics and some government officials, including Ramli, have raised concerns that over-reliance on coal creates a "carbon lock-in" that will be difficult and expensive to reverse in the future. Furthermore, the global price of coal is subject to market volatility, and the environmental costs—ranging from local air pollution to international carbon taxes—are increasingly being factored into the long-term economic outlook. By diversifying the energy mix now, Indonesia aims to mitigate the risks associated with a mono-fuel economy.
Historical Context and the Global Shift
The push for energy diversification in late 2015 occurred against the backdrop of the upcoming United Nations Climate Change Conference (COP21) in Paris. Like many developing nations, Indonesia faced international pressure to reduce its carbon footprint. In its Intended Nationally Determined Contribution (INDC) submitted prior to the Paris Agreement, Indonesia committed to a 29% reduction in greenhouse gas emissions by 2030 relative to a business-as-usual scenario, or up to 41% with international assistance.
Achieving these targets is impossible without a fundamental shift in the energy sector, which is the second-largest contributor to Indonesia’s emissions after land use and forestry. The National Energy Policy (Kebijakan Energi Nasional or KEN), established in 2014, set an ambitious goal for renewable energy to make up at least 23% of the total primary energy mix by 2025. In 2015, the share of renewables stood at less than 7%, highlighting the massive scale of the transition required over the subsequent decade.
The Geothermal Advantage and Challenges
Geothermal energy is often cited as the most logical alternative for Indonesia because, unlike solar or wind, it provides a consistent baseload of power that is not dependent on weather conditions. This makes it a direct competitor to coal for large-scale industrial use. However, geothermal development is fraught with risks. The exploration phase is expensive and carries a high risk of failure; a company might spend millions of dollars drilling only to find a dry or low-pressure well.
Furthermore, many of Indonesia’s prime geothermal reserves are located in protected forest areas, leading to regulatory overlaps and environmental concerns. Minister Ramli’s office is reportedly looking into streamlining the permitting process and providing better geological data to investors to reduce the "upstream" risk. By improving the regulatory framework and ensuring that the "pricing is attractive," the government hopes to transform Indonesia into a global leader in geothermal energy.
Potential Implications for National Energy Security
The diversification of energy sources is not merely an environmental goal but a pillar of national security. By reducing its dependence on coal, Indonesia can protect itself from fluctuations in global commodity prices. While Indonesia is a major coal exporter, the domestic market obligation (DMO) requires a portion of production to be sold locally at capped prices. However, as domestic demand grows, the opportunity cost of not exporting that coal increases.
Moreover, a decentralized energy grid powered by diverse sources—such as micro-hydro in remote mountainous regions or solar farms in eastern Indonesia—can improve electricity access for the millions of Indonesians who still live off the grid. Transitioning to renewables allows for a more modular and localized approach to energy, reducing the need for massive, expensive transmission lines that are difficult to maintain across an archipelago of over 17,000 islands.
Reactions from Industry Stakeholders
While the government’s renewed focus on diversification has been welcomed by environmental groups and renewable energy developers, it has met with caution from the traditional energy sector. Representatives from the Indonesian Coal Mining Association (APBI) have previously noted that coal remains the most reliable and affordable way to meet the country’s immediate energy needs. They argue that clean coal technologies, such as supercritical and ultra-supercritical boilers, should be part of the "diversification" conversation to reduce emissions without abandoning a proven resource.
On the other hand, the Indonesian Renewable Energy Society (METI) has long called for a more level playing field. They argue that coal’s perceived "cheapness" is a result of indirect subsidies and the failure to price in environmental externalities. METI and other stakeholders are advocating for a dedicated Renewable Energy Law that would provide the legal certainty and financial incentives necessary to attract long-term foreign direct investment (FDI).
Conclusion: A Pivot Toward a Greener Future
The statements made by Minister Rizal Ramli signify a growing realization within the highest levels of the Indonesian government that the "business as usual" approach to energy is no longer tenable. The focus on "pricing" as a primary barrier suggests that the government is moving toward a more market-oriented strategy to solve the energy crisis. By addressing the financial concerns of investors and leveraging the country’s unique geological advantages, Indonesia aims to jumpstart a stalled transition.
As the discussions continue within the Coordinating Ministry for Maritime and Resource Affairs, the next steps will likely involve a revision of the feed-in tariff regulations and a more aggressive push to integrate renewables into the 35,000 MW program. The transition will not happen overnight, but the emphasis on seeking alternatives to coal marks the beginning of a new chapter in Indonesia’s journey toward energy independence and environmental responsibility. The success of this initiative will be measured not by the number of speeches delivered, but by the number of megawatts generated by the wind, the sun, and the heat of the earth in the years to come.
