Indonesia Positions Renewable Energy as Buffer Against Global Energy Volatility
Rising global energy prices, driven by escalating tensions in the Middle East, have reinforced Indonesia’s push to accelerate renewable energy development and reduce dependence on imported fossil fuels. With oil prices trading above US$100 per barrel in late March 2026, the government is framing the transition as both an economic necessity and a long-term strategy for energy security, climate resilience, and sustainable growth.
According to Antara News, concerns over potential supply disruptions through the Strait of Hormuz have prompted many countries to prioritise energy efficiency and diversification. In Indonesia, President Prabowo Subianto has described the situation as a “blessing in disguise”, arguing that the pressure of global instability is accelerating efforts to achieve food and energy self-sufficiency.
Renewable energy as a strategic policy response
The government views renewable energy expansion as a core pillar of its response to global volatility. Indonesia has significant untapped potential across solar, wind, hydro, geothermal, and biomass resources, including energy derived from agricultural and forestry waste. However, renewables currently account for around 15.75 percent of the national energy mix.
To address this gap, the government has set a target of increasing the renewable energy share to between 17 and 21 percent by 2026. President Prabowo has appointed Energy and Mineral Resources Minister Bahlil Lahadalia to lead the National Energy Transition Acceleration Task Force, with a mandate to speed up policy delivery and infrastructure development.
Solar power and decentralised access
A key focus of the task force is a planned 100-gigawatt solar power programme, prioritising installations in schools and villages. Despite estimated national solar potential of 3,217 gigawatts, actual deployment remains limited, prompting renewed attention to investment and project execution.
Large-scale solar projects are also being accelerated in remote regions to improve equitable access to clean energy. This infrastructure-driven approach mirrors broader public investment efforts, including those supporting connectivity and services outlined in Indonesia’s digital infrastructure expansion.
Geothermal and bioenergy development
Indonesia’s geothermal capacity, currently exceeding 2.6 gigawatts, is positioned as a stable, low-emissions backbone for the national grid. Alongside this, the government is expanding bioenergy initiatives, including biodiesel and bioethanol, to curb fuel imports and reduce pressure on foreign exchange reserves.
These efforts align with wider state capacity-building initiatives, where coordinated policy execution has also been evident in areas such as payment system reform and human capital development.
Fuel blending policies and economic considerations
High oil prices have accelerated discussions around Indonesia’s biodiesel blending mandates. While the country currently enforces a B40 requirement—comprising 40 percent palm oil-based biodiesel and 60 percent petroleum diesel—the government is assessing a potential move to B50.
Coordinating Minister of Economic Affairs Airlangga Hartarto has stated that the transition to B50 requires careful evaluation of price differentials between crude palm oil, biodiesel, and fossil diesel in both domestic and international markets. Technical studies and vehicle trials are ongoing, alongside monitoring of supply readiness across the industry.
Industry representatives argue that existing capacity is sufficient. The Palm Oil Agribusiness Strategic Policy Institute estimates national biodiesel production capacity at around 22.5 million kilolitres, supported by projected 2025 crude palm oil output of approximately 57 million tonnes. However, increased domestic allocation could temporarily affect export volumes, a trade-off acknowledged by policymakers.
Bioethanol and longer-term energy security
Beyond biodiesel, the government plans to introduce a mandatory 20 percent bioethanol blend in gasoline (E20) by 2028. Bioethanol production is scheduled to begin in 2027 in Merauke, South Papua, drawing on sugarcane cultivation under the national food estate programme.
To improve competitiveness, the Energy and Mineral Resources Ministry is seeking to streamline licensing for excise exemptions on fuel-grade ethanol. Current excise duties of Rp20,000 (US$1.20) per litre apply to both domestic and imported ethanol, presenting a cost barrier to wider adoption.
Collectively, these measures signal a policy shift that treats renewable energy not only as a response to short-term geopolitical risks, but as a structural component of Indonesia’s economic resilience and long-term development strategy.
