Entering the year 2025, the international geopolitical landscape is fraught with escalating tensions. Persistent conflicts continue to unfold, with the war in Ukraine and Russia not showing signs of relenting; moreover, the Middle East is a boiling cauldron of conflict. These dilemmas are further complicated by the ongoing trade war between China and the United States. All these global events are poised to cause ripples throughout the international energy market, with nations like Indonesia expected to feel the effect.
Indonesia’s energy landscape is heavily shaped by import dependency, especially in its crude oil and natural gas sectors. As of 2024, Indonesia had already expended upwards of US$ 36.28 billion on crude oil and natural gas imports alone. Such reliance on imports leaves the country susceptible to sharp price fluctuations due to elements beyond their control, such as war or trade tariffs.
In the fallout of the Ukraine conflict that began in 2022, the oil prices surged past a significant US$ 100 a barrel milestone. The dramatic increase in prices wreaked havoc on Indonesia’s subsidy budget, dramatically inflating it. These geopolitical turbulence must serve as a catalyst for faster transitions into renewable forms of energy.
Transitioning to renewable energy offers dual benefits – reducing Indonesia’s dependency on imported energy and fostering national energy security. The current global state of affairs lays bare Indonesia’s inherent vulnerability owing to its dependence on imported fossil fuels. The need to transform to renewable energy is, therefore, not only an environmental necessity but also a strategic way to bolster energy security and resilience of the Indonesian economy.
Among renewable energy solutions, rooftop solar projects have the potential for swift scalability. Eager to encourage adoption, the Indonesian government has enacted several regulations, including the 2021 rule related to rooftop solar grid, and the 2024 reform and quota regulation along with a local content rule specifically for solar initiatives implemented in 2024 itself.
However, these regulatory attempts have encountered firm opposition. Criticisms were lodged against the 2021 regulation for placing limits on the capacity of rooftop solar systems that could be connected to PLN, the state power company. Subsequently, the 2024 quota regulation discontinued the net-metering scheme, which had allowed households to balance electricity costs by returning surplus power back into the grid.
These regulatory restrictions have contributed to public hesitance regarding the adoption of rooftop solar energy, and this has significantly slowed down Indonesia’s progress towards its energy sustainability goals. While rooftop solar offers a viable path, Indonesia needs to also focus on ramping up larger renewable energy projects.
There is immense potential for bigger renewable energy projects like the Cirata Floating Solar Plant, alongside expansion of electricity infrastructure needed for industry and transportation. As the country transitions toward cleaner, electricity-based industries and transportation, the national grid expansion and establishment of electric vehicle charging networks are imperative.
Notwithstanding the efforts directed towards electrification, sectors like aviation, maritime, and heavy industry remain dependent on chemical-based fuels. To cater to these sectors, renewable fuel production such as green hydrogen, ammonia, methanol bioethanol, sustainable aviation fuel, and biodiesel must also be scaled up, with a focus on sustainable production methods.
The production of these renewable fuels should prioritize the use of renewable electricity and sustainable feedstocks, while crucially avoiding deforestation by preferring waste-based sources. Factoring in its substantial capacity and resources, Indonesia is seemingly well-placed for progressing the renewable energy agenda, yet import reliance persists. This raises the question – What is the primary roadblock?
One of the most significant hindrances in Indonesia’s journey towards energy transition is securing adequate financing. To address this hurdle, Indonesia needs to forge stronger multilateral relationships, especially with its neighboring Asia-Pacific countries including, but not limited to, ASEAN members and Australia.
Offering incentives like tax holidays could attract foreign investors to the renewable energy sector, while facilitating efficient licensing reforms could ease the injection of foreign capital into the country. Crucially, additional financing channels could be opened through collaborations with global entities such as the Quad coalition, the International Energy Agency, Asian Development Bank, and the World Bank.
For Indonesia, prioritizing its approach to hasten its energy transition could take the form of focusing on three key actions—speeding up electrification, promoting renewable fuels, and reinforcing multilateral cooperation. Seizing this opportunity could place Indonesia on a fast-track towards sustainable and secure energy practices.
Increasing energy security can provide a safety net for Indonesia, safeguarding it from unforeseen global shocks. More importantly, it can pave the way for sustainable economic growth for the country in the forthcoming decades.
In this critical juncture, the impetus is on Indonesia to navigate its energy transition adeptly. It’s clearer than ever that the country needs to refrain from undue dependency on foreign energy sources.
Undoubtedly, renewable energy holds the key to Indonesia’s journey towards energy independence, economic resilience, and sustainable growth. As the geopolitical situation continues to evolve worldwide, Indonesia’s timely and effective measures can shape its future in the international energy landscape.
The post 2025 Geopolitical Landscape to Impact Indonesia’s Energy Market appeared first on Real News Now.
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