Indonesia’s 8th President Prabowo (left) and Vice President Gibran (right) take office, aiming to lead Indonesia towards energy self-sufficiency. (Photo: Prabowo Subianto’s Facebook)
Indonesia’s new President Prabowo Subianto and Vice President Gibran Rakabuming Raka were officially sworn in on the 20th, with ambitions to transform Indonesia into a “green energy superpower” and achieve national energy self-sufficiency.
Despite being a major coal producer and the world’s largest palm oil exporter with considerable potential for bioenergy, Indonesia faces unique challenges and opportunities in its energy transition. Under Prabowo’s leadership, what shape will this transformation take?
Who is Prabowo Subianto?
Born in 1951, Prabowo Subianto is the son of a prominent Indonesian economist and politician. Choosing a military career over his family’s political legacy, he graduated from the Indonesian Military Academy and joined the special forces, eventually rising to the rank of general. During his time in the military, he married the daughter of former President Suharto, though they divorced in 1998 after 15 years.
Prabowo’s close ties to Suharto enabled his rapid military ascent, yet he didn’t enter the presidential race until founding the Great Indonesia Movement Party (Gerindra) in 2008. After two unsuccessful bids against former President Joko Widodo, Prabowo pivoted to an alliance, securing the role of Defense Minister. This year, alongside Jokowi’s son Gibran, he ascended to the presidency.
During his campaign, Prabowo presented a grandfatherly image but carries a controversial past. His involvement in anti-Chinese riots in 1988 and suppression of East Timor’s independence movement led to his dismissal from the military and a 20-year ban from entering the U.S., which lifted only in 2020.
Indonesia’s net zero goals: Bioenergy, carbon credits as key strategies
Indonesia, the world’s third-largest coal producer after China and India, relies heavily on coal for electricity, accounting for 66% of its power generation in 2022. Renewable energy, by contrast, contributes less than 20%, prompting the country to lower its targets for the coming year. Indonesia faces considerable hurdles in reaching net-zero emissions by 2060—an ambition now challenged by the new administration.
To achieve energy self-sufficiency, Prabowo aims to expand bioenergy use, capitalizing on Indonesia’s palm oil resources. His goal is to implement a B50 policy by 2025, requiring diesel fuel to contain 50% palm oil biodiesel. This measure seeks to cut fuel imports and reduce fossil fuel emissions.
Former President Jokowi had stated that Indonesia would need $1 trillion in investment to achieve net-zero. To meet this massive financial need, Prabowo plans to tap into carbon credit markets. His climate policy advisor, Ferry Latuhihin, has announced the establishment of a green fund, leveraging Indonesia’s vast tropical rainforests to generate carbon credits, thereby easing the nation’s fiscal burden.
Indonesia, home to over 40% of the world’s nickel reserves, essential for electric vehicles, also plans to continue Jokowi’s ban on raw nickel exports. Instead, the new administration will focus on developing downstream nickel industries, which the campaign's deputy chairman, Eddy Soeparno, ties to economic and sustainable development, aiming to boost Indonesia’s GDP growth by 8%.
Challenges and opportunities in Indonesia’s energy transition
Moving away from coal: A daunting path
Indonesia’s coal-dominated energy structure creates challenges for a swift transition. Firdaus Cahyadi, head of 350.org's Indonesia team, cited data from the mining watchdog organization JATAM, pointing out that Indonesia team
leader for climate organization 350.org, Prabowo’s ties to coal—both as a shareholder in several coal companies and through allies in the coal sector—complicate his commitment to change.
Indonesia is the world’s largest exporter of thermal coal, used for power generation. Research from the Institute for Essential Services Reform (IESR) reveals that coal revenue constitutes 20% of Muara Enim’s local government budget in South Sumatra and 27% in Paser, East Kalimantan. Phasing out coal without alternatives could strain local budgets.
While coal remains vital to Indonesia’s revenue and energy security, carbon capture, utilization, and storage (CCUS) offers a potential pathway for emission reduction. Currently, Indonesia has two operational CCUS projects, with the possibility of developing services to sequester foreign carbon emissions as a new revenue source.
In response to global decarbonization pressures and financing challenges, some Indonesian coal companies have diversified their portfolios. Harum Energy, for instance, is shifting towards nickel mining, while Indika Energy has ventured into electric motorcycles and solar power, aiming to halve its coal revenue by next year. According to the Institute for Energy Economics and Financial Analysis (IEEFA), five out of Indonesia’s seven major publicly-listed coal producers have invested in diversification.
Scaling palm oil-based biofuel: A test of feasibility
Prabowo has claimed that adopting B50 biodiesel could save Indonesia $20 billion annually on fuel imports. Despite EU bans on imports of palm oil linked to deforestation, Prabowo views this as an advantage, bolstering Indonesia’s self-sufficiency in energy.
Technically, moving from B35 to B50 is challenging, requiring at least a year of testing. B50 would also increase demand for crude palm oil, risking shortages and complicating large-scale commercialization. Edi Suhardi, a sustainability analyst with the Indonesian Palm Oil Association (GAPKI), suggests the government consider allowing palm cultivation in Papua to boost production and spur economic development.
The palm oil sector is also hindered by regulatory fragmentation. Tungkot Sipayung, executive director of the Palm Oil Agribusiness Strategic Policy Institute (PASPI), noted that Indonesia’s palm oil policies are set by 17 different ministries, with a total of 34 related regulations in place. During his campaign, Prabowo promised to establish a unified palm oil authority to streamline oversight.
Aldwin Yusgiantoro, Energy, Climate, and Resources Director at consultancy BowerGroupAsia, anticipates that state-owned and local businesses will gain influence in the pursuit of energy self-sufficiency, as national policies tend to prioritize local firms. Foreign investment will be crucial for capital and technology, helping propel industry development.
A future of ambitious spending and foreign investment
Experts predict Prabowo’s administration will significantly increase spending on energy infrastructure and renewable projects. However, with limited fiscal resources, Indonesia will need to reallocate funds and attract foreign investment, potentially through initiatives like the Just Energy Transition Partnership (JETP), which pledges $20 billion in funding.
Domestically, balancing the interests of the coal sector with renewable energy development will be a significant challenge for the new government. Time will tell if Prabowo’s team can implement effective reforms to drive the energy transition forward.
Sources: Al Jazeera, The Diplomat, Antara, Financial Times, Tanahair, Tempo, Reuters, Channel News Asia, Palm Oil Magazine
