INDONESIA: Government Regulation No. 79/2014 of 2014 Concerning the National Energy Policy

Meta Data
Draft: 
No
Revision of previous policy?: 
No
Effective Start Year: 
2014
Effective End Year: 
2050
Scope: 
National
Document Type: 
Overarching Policy
Economic Sector: 
Energy, Power
Energy Types: 
All, Coal, Power, Nuclear, Renewable, Bioenergy, Geothermal, Hydropower, Solar, Wave and Tidal, Wind, Other
Issued by: 
President of the Republic of Indonesia
Source: 
Grantham Research Institute at LSE (BH)
Grantham Research Institute at LSE (EN)
File: 
Government Regulation No. 79/2014 of 2014 (BH)
Government Regulation No. 79/2014 of 2014 (EN)
Overall Summary: 
The National Energy policy is set to provide the direction of national energy management to achieve energy independence and national energy security to support national sustainable development. In particular, it focuses on re-establishing Indonesia’s energy independence by re-directing energy resources from export to the domestic market, and aims to rebalance the energy mix towards indigenous energy supplies. This includes minimising oil consumption and nuclear energy, whilst increasing the exploitation and consumption of renewables and coal, and optimising gas production and consumption. Targets include a share of renewable energy in the energy mix of not less than 23% in 2025 and at least 31% in 2050 provided that its economical fulfilled; and an electrification rate of around 100% by 2020.
Access
Bi-, multi-lateral mechanisms to expand access: 
(1) The strengthening of funding as referred to in paragraph (3) shall be conducted at least by: a. enhancing the role of national banks in the financing of oil and gas production nationwide, Renewable Energy development activities, and Energy-saving programs; b. applying depletion premium of fossil Energy towards Energy development; and/or c. providing specific budget allocations by the Government and/or Regional Governments to accelerate equitable access to electricity and Energy.
Energy access priorities: 
The Energy Independence and national Energy Security as referred to in Article 5, shall be achieved by realizing: [...]c. availability of Energy and fulfilment of domestic Energy Sources demand. [...].---(1) Availability of Energy to meet the national demand shall be realized by: a. increasing exploration of the resources, potential and/or proven Energy, both fossil type and New Energy and Renewable Energy; b. increasing Energy production and Energy Sources in the country and/or from overseas; c. increasing the reliability of the production, transportation, and distribution system of Energy Supply; [...].
Energy access action plan: 
The development and strengthening of the Energy infrastructure and access of people to Energy shall be performed by the Government and/or Regional Governments [...] by: a. improving the ability of domestic industry in the provision of Energy infrastructure; b. developing infrastructure while supporting coal industry which includes transportation, stockpiling, and blending to achieve an efficient market and enable to supply domestic demand continuously; c. accelerating the provision of supporting infrastructure for oil and gas production, refining fuel, Energy transportation and distribution, transmission systems, and distribution of Energy; d. accelerating the provision of supporting infrastructure for New Energy and Renewable Energy; e. providing access for people to obtain Energy information transparently and to obtain Energy easily; and f. facilitating access of people to obtain information on the development and strengthening of Energy infrastructure.---The development of energy infrastructure shall take into account the geographical condition of Indonesia which are mostly composed of marine waters, by strengthening the infrastructure of the exploration, production, transportation, distribution, and transmission within the archipelago areas.
Energy access targets: 
a. achievement of Electrification Ratio of 85% (eighty five percent) in 2015 and close on 100% (one hundred percent) in 2020; b. achievement of the household gas utilization ratio of 85% (eighty five percent) in 2015; [...].
Clean cooking solutions: 
[...] achievement of the household gas utilization ratio of 85% (eighty five percent) in 2015 [...]
Consumer subsidies: 
Subsidy shall be provided by the Government and Regional Governments. Subsidy as referred to in paragraph (1) shall be provided in terms of: [...] [...] Provision of subsidy as referred to in paragraph (1) shall be targeted appropriately to groups of less fortunate people. [...].---(1) The Government and Regional Governments shall provide incentive for the development, exploitation, and utilization of Renewable Energy in particular for the small scale and located in remote areas until its economical value be competitive with the conventional Energy.
Efficiency
EE priorities: 
National energy policy shall be the policy on Energy Management based on the principles of fairness, sustainability, and environmental sound aimed to create Energy Independence and national Energy Security.---The Energy Independence and national Energy Security as referred to in Article 5, shall be achieved by realizing: [...] d. management of Energy Resources in an optimal, integrated and sustainable way; e. efficient Energy Utilization in all sectors; [...].---Energy Buffer Stock [...] shall be provided to ensure the national Energy Security alligned with the national Energy efficiency policy, particularly through the policy on appropriate-targeted fuel oil and electricity subsidies.---Energy Conservation shall be conducted from the upstream side through downstream side, to include management of Energy Resources and the entire stages of exploration, production, transportation, distribution, and utilization of Energy and Energy Sources.---Management of Energy Resources[...]shall be directed to ensure that the supply and utilization of Energy Resources while maintaining and improving the quality of value and diversity of the Energy Resources.---Energy Resources Conservation shall be performed by sectoral approach, at least to adjust it to the national spatial plan and the carrying capacity of the Environment.---(1) To perform Energy Resources Conservation as referred to in paragraph (3), Energy Supply shall use sustainable Energy Resources.
EE targets: 
Energy Elasticity achievement shall be less than 1 (one) in 2025 that comply with the economic growth; reduction in final Energy Intensity of 1% (one) percent per year up to 2025; [...].
EE action plans: 
Producer and consumer of Energy shall be obliged to perform Energy Conservation and efficiency of Energy Resources management so as to ensure availability of Energy in the long term.---Energy Conservation in the industrial sector shall be conducted by taking into account the competitiveness. ---(1) The Government and/or Regional Government by virtue of its respective authority shall set a guideline and implementation of Energy Conservation policy in particular in the field of Energy saving, at least covering the following: a. obligation of standardization and labelization of all equipment of the Energy users; b. obligation of Energy management including Energy audit to Energy users; c. obligation for using efficient power generating technology and Energy conversion equipment; d. socialization on Energy saving culture; e. realizing investment climate for developing Energy services business as investor and provider of Energy in efficient way; f. to accelerate the application and/or transfer to efficient mass transportation system, both urban and intercity transportation; g. to accelerate the implementation of electronic road pricing so as to reduce the traffic congestion triggered by private vehicle; and h. target-setting on fuel consumption in the transportation sector shall be measureable and gradually conducted so as to increase efficiency. ---The Government and/or Regional Government by virtue of its respective authority shall be obliged to perform Energy Diversification to increase Energy Resources Conservation and National Energy Security and/or the regions. (1) Energy Diversification [...] shall be performed at least through: a. acceleration of supply and utilization of diverse type of New Energy Sources and Renewable Energy Sources; b. acceleration of substituting fuel oil with gas in the residential and transportation sectors; c. acceleration of utilizing electric power for the propulsion of motor vehicles; d. increased utilization of low rank coal for mine mouths steam power plant, gasified coal and liquified coal; and e. increased utilization of medium and high rank coals for domestic power plant.
EE financial incentives: 
The Government shall provide incentive to the producers and consumers of Energy who perform Energy Conservation and Energy efficiency obligation and give disincentive to those who do not implement Energy Conservation and Energy efficiency.
Renewable Energy
RE targets: 
a. optimal Primary Energy mix shall be achieved: 1. the role of the New Energy and Renewable Energy at least 23% (twenty three percent) in 2025 and to be at least 31% (thirty one percent) in 2050 provided that its economical fulfilled;
RE action plans: 
The Government shall encourage and strengthen the development of Energy Industry in order to accelerate the achievement of Energy Supply and Energy Utilization target, strengthening the national economy and absorption of employment. [...] by [...] b. uprise of the development of production equipment industry and utilizers of Renewable Energy in the country; c. improvement of the domestic capacity to support the exploration of geothermal and electric power supporting industry; d. encouragement of the system and components industry for equipment of solar power plant installation and power generating from the energy of hydro kinetic ocean and ocean thermal; e. increasing local content in the national Energy Industry; f.development of the component/equipment industry for wind power plant installation through small and medium enterprises and/or national industry; [...].
RE prioritization, portfolio standards: 
The Government shall set Renewable Energy market, including a minimum quota of electricity, liquid fuels, and gas sourced from New Energy and Renewable Energy.
RE feed-in tariffs: 
(1) The Government actualize the electricity market at least through [...] c. application of feed in tariff mechanism in setting the selling price of Renewable Energy; and
RE capital subsidy, grant, or rebate: 
The Government and Regional Governments shall provide fiscal and nonfiscal incentives to encourage diversification program of Energy Sources and development of Renewable Energy. ---The Government and Regional Governments shall provide incentive for the development, exploitation, and utilization of Renewable Energy in particular for the small scale and located in remote areas until its economical value be competitive with the conventional Energy. ---The Government shall provide incentive to the producers and consumers of Energy who perform Energy Conservation and Energy efficiency obligation and give disincentive to those who do not implement Energy Conservation and Energy efficiency.---The Government shall provide incentive to private institutions or individuals who develop the core technology in the field of New Energy and Renewable Energy.
RE reductions in taxes: 
(1) The Government and Regional Governments shall provide fiscal and nonfiscal incentives to encourage diversification program of Energy Sources and development of Renewable Energy.
Environment
Energy environmental priorities: 
Priority of the national Energy Sources utilization shall be performed based on the overall considerations on the capacity, continuity, and the economy as well as the Environment impact. ---National Energy Management shall be aligned with the direction of the sustainable national development, preservation of natural resources, Energy Resources Conservation, and control of the Environment’s pollution.---Any activities in Energy Supply and Energy Utilization shall be obliged : a. performing prevention, dwindle, mitigation, and recovery of the impact, and compensation to the parties affected; b. minimizing the production of waste, reuse of waste in the production process, the use of waste for other benefits, and extract the elements that still have the benefits contained in the waste, while taking into account the social aspects, Environment and its economical; and c. prioritizing the use of environmental friendly technologies.---Any exploitation of nuclear installations shall be obliged to take into account the safety and the risk of accidents and bear all the indemnity to third parties who suffer losses caused by nuclear accident.
Decarbonization strategy: 
The Government and/or Regional Government by virtue of its respective authority shall be obliged to perform Energy Diversification to increase Energy Resources Conservation and National Energy Security and/or the regions. (1) Energy Diversification [...] shall be performed at least through: [...] b. acceleration of substituting fuel oil with gas in the residential and transportation sectors; c. acceleration of utilizing electric power for the propulsion of motor vehicles;[...].
Land use change for energy production purposes: 
(1) In realizing the availability of Energy for the national demand as referred to in paragraph (1), if there is an overlap of land use in Energy Supply then the precedence shall be the one that has higher national defense value and/or strategic value.
Pricing
Fossil fuel subsidies: 
Subsidy shall be provided by the Government and Regional Governments. [...] Reduction of subsidies for fuel oil and electricity shall be conducted gradually until the purchasing power of people is achieved.
Renewable energy subsidies: 
Subsidy shall be provided by the Government and Regional Governments. Subsidy as referred to in paragraph (1) shall be provided in terms of: a. application of Fair Economical as referred to in Article 20 paragraph (1) may not be performed; and/or b. Renewable Energy price as referred to in Article 20 paragraph (2) letter b is more expensive than the non-subsidized Energy prices of fuel oil. (2) Provision of subsidy as referred to in paragraph (1) shall be targeted appropriately to groups of less fortunate people. [...]
Energy pricing: 
(1) Energy Price shall be set on the basis of a Fair Economic value. (2) Renewable Energy Price shall be regulated based on: a. the calculation of the Renewable Energy price with the assumption to compete with Energy price deriving from petroleum Energy Sources prevailing in an area within a certain time, which is calculated to exclude the fuel oil subsidy; or b. the rational calculation of Energy prices for Renewable Energy supply from local sources, in order to secure the Energy supply in certain areas which are in the remote location, under developed facilities and infrastructure, vulnerable to weather disturbances, or are near to the territorial border lines of the Unitary States of the Republic of Indonesia. (3) The Government shall regulate the price of coal in the country until the establishment of an efficient market. (4) The Government actualize the electricity market at least through: a. price setting of certain Primary Energy such as coal, gas, water, and geothermal for power generation; b. setting of progressive electricity tariffs; c. application of feed in tariff mechanism in setting the selling price of Renewable Energy; and d. improvement of geothermal Energy Management by sharing the risk between electricity supply license holders and developers.
Energy Supply and Infrastructure
Energy supply priorities: 
The target of supply and utilization of Primary Energy and Final Energy shall be as follows: a. the fulfilment of Primary Energy supply in 2025 around 400 MTOE (four hundred million tonnes of oil equivalent) and around 1000 MTOE (one thousand million tonnes of oil equivalent) in 2050; b. the achievement of per-capita primary energy utilization around 1.4 TOE (one point four tonnes of oil equivalent) in 2025 and around 3.2 TOE (three point two tonnes of oil equivalent) in 2050; c. the fulfilment of power generation capacity provision around 115 GW (one hundred and fifteen giga watts) in 2025 and around 430 GW (four hundred and thirty giga watts) in 2050; and d. the achievement of per-capita electricity utilization around 2,500 KWh (two thousand five hundred kilo watt hours) in 2025 and around 7,000 KWh (seven thousand kilo watt hours) in 2050. ---(1) Availability of Energy to meet the national demand shall be realized by: a. increasing exploration of the resources, potential and/or proven Energy, both fossil type and New Energy and Renewable Energy; b. increasing Energy production and Energy Sources in the country and/or from overseas; c. increasing the reliability of the production, transportation, and distribution system of Energy Supply; d. reducing fossil Energy exports gradually especially for gas and coal and to set up the deadline to start stopping the exports; e. embodiying a balance between the increase rate of fossil Energy Reserves with a maximum production rate; and f. ensuring the security of the carrying capacity of Environment to ensure the availability of Energy Sources of water and geothermal.---a. utilization of Renewable Energy Sources of the in the form of hydropower, geothermal Energy, hydro kinetic ocean and ocean thermal energies, and wind Energy shall be directed to electric power; b. utilization of Renewable Energy Sources of solar Energy type shall be directed to electric power, and non electric power for industry, household, and transportation; c. utilization of Renewable Energy Sources of bio-fuel type shall be directed to substitute fuel oil especially for transportation and industry; d. utilization of Renewable Energy Sources of bio-fuel type shall be performed by keep maintaining food security; e. utilization of Renewable Energy of the biomass and waste type shall be directed for electric power and transportation; f. utilization of oil shall only be performed for transportation and commercial that are not yet substituted by other Energies or Energy Sources; g. utilization of natural gas Energy Sources for industry, electric power, household, and transportation, shall be prioritized for the use of those with highest added value; h. utilization of coal Energy Sources shall be for electric power and industry; i. utilization of New Energy Sources in the liquid form that is liquified coal and hydrogen shall be for transportation; j. utilization of New Energy Sources of solid and gas form shall be for electric power; k. utilization of liquid Energy Sources other than liquefied petroleum gas shall be directed to transportation sector; l. utilization of hydrokinetic ocean and ocean thermal Energy Sources shall be encouraged by constructing pilot projects that is connected to power grade as an initial step; m. increasing utilization of solar Energy Sources through the use of solar cell in transportation, industry, commercial building, and household; and maximization and obligation of utilizing solar Energy Sources shall be performed with the condition that all components and the solar Energy generating system from upstream to downstream shall be produced in stages in the country.---Utilization of the national Energy Resources shall be given the priority to meet the demand for Energy and raw material.---(1) Strategic Reserves [...] shall be regulated and allocated by the Government to ensure long-term Energy Security;---(1) Energy Buffer Stock as referred to in Article 13 letter b shall be provided to ensure the national Energy Security alligned with the national Energy efficiency policy, particularly through the policy on appropriate-targeted fuel oil and electricity subsidies.---(1) Business Entity and industry as Energy supplier shall be obliged to provide operational stock to ensure continuity of Energy supply.
Energy mix: 
a. optimal Primary Energy mix shall be achieved: 1. the role of the New Energy and Renewable Energy at least 23% (twenty three percent) in 2025 and to be at least 31% (thirty one percent) in 2050 provided that its economical fulfilled; 2. the role of oil shall be less than 25% (twenty five percent) in 2025 and to be less than 20% (twenty percent) in 2050; 3. the role of coal at least 30% (thirty percent) in 2025, and 25% (twenty five percent) at the minimum in 2050; and 4. the role of natural gas at least 22% (twenty two percent) in 2025 and at least 24% (twenty four percent) in 2050.---(1) To realize the economic balance of Energy as referred to in paragraph (1) letter a, priority of the national Energy development shall be based on the following principles: a. maximizing the use of Renewable Energy by taking into account the economic level; b. minimizing the use of oil; c. optimizing utilization of natural gas and New Energy; and d. using coal as the reliable national Energy supply. ---The Government and/or Regional Government by virtue of its respective authority shall be obliged to perform Energy Diversification to increase Energy Resources Conservation and National Energy Security and/or the regions.
Infrastructure development priorities: 
The development and strengthening of the Energy infrastructure and access of people to Energy shall be performed by the Government and/or Regional Governments [...] by: a. improving the ability of domestic industry in the provision of Energy infrastructure; b. developing infrastructure while supporting coal industry which includes transportation, stockpiling, and blending to achieve an efficient market and enable to supply domestic demand continuously; c. accelerating the provision of supporting infrastructure for oil and gas production, refining fuel, Energy transportation and distribution, transmission systems, and distribution of Energy; d. accelerating the provision of supporting infrastructure for New Energy and Renewable Energy; [...] f. facilitating access of people to obtain information on the development and strengthening of Energy infrastructure.---The development of energy infrastructure shall take into account the geographical condition of Indonesia which are mostly composed of marine waters, by strengthening the infrastructure of the exploration, production, transportation, distribution, and transmission within the archipelago areas.
Investment
Financial incentives for energy infrastructure: 
In order to achieve the growth target on Energy Supply as referred to in paragraph (1), the Government and/or Regional Governments shall provide adequate allocated funding for the development and strengthening of Energy infrastructure.(1) The Government and/or Regional Governments shall encourage the strengthening of funding to ensure the availability of Energy, equilization of Energy infrastructure, equal access of people to Energy , the development of national Energy Industry, and achievement the target of Energy Supply and Energy Utilization. (2) The Government shall encourage Business Entities and banks to finance the construction of infrastructure and Energy Utilization.
Local content requirement: 
The Government shall encourage and strengthen the development of Energy Industry in order to accelerate the achievement of Energy Supply and Energy Utilization target, strengthening the national economy and absorption of employment. [...] e. increasing local content in the national Energy Industry;
Electricity wholesale markets: 
The Government shall set Renewable Energy market, including a minimum quota of electricity, liquid fuels, and gas sourced from New Energy and Renewable Energy.
Governance
Energy management principles: 
National energy policy shall be the policy on Energy Management based on the principles of fairness, sustainability, and environmental sound aimed to create Energy Independence and national Energy Security.---The Energy Independence and national Energy Security as referred to in Article 5, shall be achieved by realizing: a. Energy Resources as a national capital development and not as a mere exports commodity; b. Independent Energy Management; c. availability of Energy and fulfilment of domestic Energy Sources demand; d. management of Energy Resources in an optimal, integrated and sustainable way; e. efficient Energy Utilization in all sectors; f. access of people to Energy in a fair and equitable way; g. development of domestic technological capability, Energy Industry, and Energy services to be independent and improve human resource capacity; h. creation of employment; and i. preservation of the Environment functions.---Energy Sources and/or Energy Resources shall be intended to be capital development for the greatest welfare of the people, by optimizing their use for national economic development, the creation of value added in the country and absorption of manpower.---(1) Priority of Energy development shall be carried out by way of: a. developing Energy by taking into account the balance of the economical of Energy, security of Energy supply, and preservation of the Environment functions; b. prioritizing Energy Supply to the people who do not have the access yet to Energy of electricity, household gas, and Energy for transportation, industry, and agriculture; c. developing Energy by prioritizing local Energy Resources; d. developing Energy and Energy Resources shall be prioritized to meet domestic energy demand; and e. developing the industry of high Energy demand shall be prioritized to the region which is rich with Energy Resources.---National Energy Management shall be aligned with the direction of the sustainable national development, preservation of natural resources, Energy Resources Conservation, and control of the Environment’s pollution. (1) The National Energy Management activities shall be obliged to take into account health, occupational safety, and social impact factors while maintaining the Environment functions.---The Government shall encourage and strengthen the development of Energy Industry in order to accelerate the achievement of Energy Supply and Energy Utilization target, strengthening the national economy and absorption of employment. ---The Government and/or Regional Governments in setting the Energy Supply growth target shall take into account the economic growth target.
National policy structure: 
(1) The Government and/or Regional Government by virtue of its respective authority shall set a guideline and implementation of Energy Conservation policy in particular in the field of Energy saving, at least covering the following: a. obligation of standardization and labelization of all equipment of the Energy users; b. obligation of Energy management including Energy audit to Energy users; c. obligation for using efficient power generating technology and Energy conversion equipment; d. socialization on Energy saving culture; e. realizing investment climate for developing Energy services business as investor and provider of Energy in efficient way; f. to accelerate the application and/or transfer to efficient mass transportation system, both urban and intercity transportation; g. to accelerate the implementation of electronic road pricing so as to reduce the traffic congestion triggered by private vehicle; and h. target-setting on fuel consumption in the transportation sector shall be measureable and gradually conducted so as to increase efficiency. ---The National energy policy shall be the ground of formulating National Energy Master Plan and National Electricity Master Plan.
Energy institutional structures: 
(1) The Government and/or Regional Government shall perform institutional strengthening to ensure the achievement of the objectives and targets of the Energy Supply and Energy Utilization. (1) least by: a. improving the institutional system and services of the Government and Regional Governments bureaucracy and increased inter- agencies coordination in the field of Energy in order to accelerate the decision-making, licensing process, and development of Energy infrastructure; b. enhancing cooperation and coordination among research institutions, universities, industry, policy makers, and the community in order to speed up mastery and Energy Utilization; c. improving institutional accountability by adjusting the functions and authority of the central and regional level institutions; d. improving the capability of human resources in the field of Energy in the regions in Energy Management; e. strengthening the capacity of the organizations at the regency/city level which shall be responsible for planning, development and Energy Management in rural areas; and/or f. regionalization of electrical Energy supply in order to reduce disparities in electrical Energy supply outside Java.
M&E of policy implementation: 
The National Energy Council shall perform supervision on the implementation of the intersectoral national energy policy.
Technology
Clean energy technology priorities: 
National energy policy shall be the policy on Energy Management based on the principles of fairness, sustainability, and environmental sound aimed to create Energy Independence and national Energy Security.---The Energy Independence and national Energy Security as referred to in Article 5, shall be achieved by realizing: [...]; g. development of domestic technological capability, Energy Industry, and Energy services to be independent and improve human resource capacity; [...].---(1) Any activities in Energy Supply and Energy Utilization shall be obliged : [...]prioritizing the use of environmental friendly technologies.---Any exploitation of nuclear installations shall be obliged to take into account the safety and the risk of accidents and bear all the indemnity to third parties who suffer losses caused by nuclear accident. ---Research, development, and application of Energy technology activities shall be directed to support the national Energy Industry. Funding for research, development and application of Energy technology as referred to in paragraph (1) shall be facilitated up to commercial stage by: a. the Government and/or Regional Governments in accordance with their respective authority; and b. Business Entity.---The Government and/or Regional Governments shall encourage the creation of a climate for utilization and in favour of the results of research, development, and application of national Energy technology.
Clean energy technology deployment: 
The Government shall provide incentive to private institutions or individuals who develop the core technology in the field of New Energy and Renewable Energy.
Industrialization support: 
(1) Strengthening the development of the Energy Industry as referred to in paragraph (1) shall include: [...] a. development of the component/equipment industry for wind power plant installation through small and medium enterprises and/or national industry; b. provision of greater opportunities to the national companies in managing oil, gas, and coal; and c. development of Energy Industry in the country through the purchase of factory license.