The year 2025 begins with persistent global geopolitical tensions. The war between Ukraine and Russia drags on, conflict in the Middle East is heating up, and the United States-China trade war continues. All of this could send shockwaves through the global energy market — including in Indonesia.

Indonesia still relies heavily on imported crude oil and natural gas. In 2024, Indonesia spent US$36.28 billion on imported crude oil and natural gas — leaving it highly vulnerable to sudden price hikes caused by war or trade tariffs.

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

These geopolitical tensions should serve as a wake-up call to hasten the transition to renewable energy. Beyond reducing emissions, expanding domestic renewables would cut import dependence and bolster national energy security.

Ironically, Indonesia’s recent diplomacy with the United States (US) has deepened its reliance on imported energy, with President Prabowo Subianto approving US$15 billion (Rp244 trillion) in crude oil and LPG imports in exchange for lower trade tariffs.

These global shocks further expose Indonesia’s deep dependence on imported fossil fuels, making the shift to renewables not just a climate necessity but a strategic imperative for energy security and economic resilience.

Rooftop solar: A quick solution stuck in limbo

Rooftop solar is among the fastest ways to scale up renewable energy. To spur adoption, the government has introduced regulations such as the 2021 rooftop solar grid rule, the 2024 reform and quota regulation, and the 2024 local content rule for solar projects.

However, these regulations have drawn sharp criticism. The 2021 regulation capped the capacity of rooftop solar that could connect to PLN, the state electricity company. Meanwhile, the 2024 quota regulation abolished the net-metering scheme, which had allowed households to offset electricity bills by feeding excess power back into the grid.

These restrictions have discouraged public adoption of rooftop solar, slowing down Indonesia’s progress toward its renewable energy goals.

Australia offers a strong example: it leads the world in rooftop solar adoption through federal subsidies under the Small-scale Renewable Energy Scheme, complemented by state-level rebates and interest-free loan programs.

As a result, rooftop solar installation costs can be reduced to 70% of market prices, making solar panels affordable for households and small businesses.

Expanding large-scale renewables and infrastructure

Beyond rooftop solar, Indonesia must accelerate large-scale projects like the Cirata Floating Solar Plant, and expand electricity infrastructure for transport and industry.

This is critical given that industry (45.94%) and transport (36.11%) — both account for the bulk of national energy consumption — are still heavily dependent on coal, natural gas, and oil.

Expanding the national grid and building electric vehicle (EV) charging networks are critical for enabling a smooth transition to clean, electricity-based industry and transport.

Scaling up renewable fuel production

Not all sectors can readily switch to electricity; aviation, maritime, and heavy industry will continue to remain reliant on chemical fuels.

Indonesia must also scale up renewable fuel production — including green hydrogen, ammonia, methanol, bioethanol, sustainable aviation fuel, and biodiesel — ensuring they are produced using renewable electricity and sustainable feedstocks, while avoiding deforestation by prioritising waste-based sources.

PLN has begun developing a hydrogen supply chain for industry and fuel-cell vehicles — one of its largest initiatives is the Garuda Green Hydrogen (GH2), a partnership with Saudi energy giant ACWA Power, set to operate in 2026. The hydrogen will be converted into ammonia to support Indonesia’s domestic fertiliser industry.

Other hydrogen projects underway include 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 projects are scheduled to begin operations between 2026 and 2027.

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

Pertamina is also developing new facilities to produce sustainable fuels — including gasoline, jet fuel, and diesel from used cooking oil — at its refineries in Cilacap, Plaju, and Sungai Gerong.

All this demonstrates that Indonesia has both the capacity and resources to advance renewable energy — so why does it still lean so heavily on imports?

Strengthening multilateral cooperation

The biggest challenge in Indonesia’s energy transition is financing. To address this, Indonesia must strengthen multilateral cooperation, particularly with its Asia-Pacific neighbours, including ASEAN members and Australia.

Incentives like tax holidays can draw in foreign investors, while streamlined licensing reforms will ease the flow of foreign capital.

Funding could also be mobilised through partnerships with global institutions such as 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 also agreed to export 3.4 GW of clean electricity to Singapore until 2035, backed by US$30-50 billion in solar investments, plus another US$2.7 billion for solar panel and battery manufacturing.

The program is projected to generate US$4-6 billion in annual foreign exchange revenue.

Pertamina has also supplied SAF to Virgin Australia during 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 major opportunity to fast-track its energy transition.

Stronger energy security would not only protect Indonesia from global shocks but also lay the foundation for sustainable economic growth in the decades to come.

This article is republished from The Conversation, a nonprofit, independent news organization bringing you facts and trustworthy analysis to help you make sense of our complex world. It was written by: Denny Gunawan, UNSW Sydney; Ari Pasek, Institut Teknologi Bandung; James Christian, UNSW Sydney, and Wibawa Hendra Saputera

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Denny Gunawan has received funding from the Australian Government Department of Foreign Affairs and Trade (DFAT) Australia-Indonesia Institute and is also affilated with Ikatan Ilmuwan Indonesia Internasional (I-4).

Ari Pasek menerima dana dari The World Bank, UNDP, Kemendiktisainstek, PLN

James Christian has received funding from the Australian Government Department of Foreign Affairs and Trade (DFAT) Australia-Indonesia Institute Fund.

Wibawa Hendra Saputera has received funding from the Palm Oil Fund Management Agency (BPDPKS) Research Grant, the National Research and Innovation Agency (BRIN)-Indonesia Endowment Fund for Education (LPDP), and the Australian Government’s Global Science and Technology Diplomacy Fund.