Risk of energy policy disruptions in Indonesia low amid presidential elections

The risk of major changes to Indonesia's energy policy is low amid the upcoming presidential elections with candidates largely focused on maintaining stability and energy security, and a general inclination toward stronger climate policies including support for renewables.

The three Indonesian presidential candidates -- Prabowo Subianto, Anies Baswedan and Ganjar Pranowo -- have mentioned energy-related issues in their election manifestos, but energy is not a topic of deep polarization and there was no mention of bans on oil or gas exports, or ideological views on nationalizing energy assets.

It is projected that the country's energy policies will remain unchanged, Komaidi Notonegoro, analyst at Indonesia's energy think-tank Reforminer Institute, said, adding that all candidates were advocating for energy transition without providing details on how to accomplish it.

He said Indonesia's long-term energy transition will remain challenging, leading to an increase in imports amid growing energy consumption.

Policy continuity

The candidature of the current Minister of Defense, Prabowo Subianto, alongside Gibran Rakabuming Raka, the son of Indonesian President Joko Widodo, has shown support for green policies balanced with continuing the policies of the incumbent Jokowi administration.

The Prabowo-Gibran pair backs setting up petroleum refineries, ethanol plants, gas receiving infrastructure and gas transmission/distribution networks, either by state-owned companies or the private sector.

They have committed to reducing dependence on fossil fuels while making Indonesia a green energy superpower through renewables and bioenergy, implement schemes to tap domestic reserves and revise regulations that hinder new energy investment.

Prabowo said he would continue the biodiesel and bio-aviation fuel programs from palm oil, continue developing bioethanol from cassava and sugar cane and meet 2029 B50 biodiesel and E10 ethanol blending targets.

He has also talked about accelerating the decarbonization plan to achieve net-zero emission targets, developing carbon sinks and carbon offsets, and continuing the program to retire coal-fired power plants based on equity.

"If we address the issue of carbon, then we must also address carbon taxes, carbon storage and carbon capture. Moving forward, our agenda should focus on promoting the transition toward green energy. We must no longer rely on fossil fuels. We will continue to promote green energy based on renewable resources," Gibran said at the vice-presidential debate on Jan. 21.

"Prabowo has pledged to continue key policies from Jokowi's era, such as down-streaming, creation of new capital city Nusantara, conditional cash transfers and targeted subsidies," Bank of America said in a report.

"If he wins, he is likely to overlay these with a ramp-up in social assistance programs, as well as more protectionist policies aimed at driving military modernization and also strengthen food, water and energy security," BoFA added.

Energy reforms

The second candidature is of the former governor of Jakarta, Anies Baswedan, and Muhaimin Iskandar, a member of the parliament.

BoFA said policies could see the greatest shake-up if Anies wins, given his opposition to some of Jokowi's current programs.

"However, his approach could also be more market-oriented and welcomed by the business community. Observers also noted that a greater push for institutional reforms and stronger governance may augment better for Indonesia's longer-term growth potential," the bank said.

The energy policies in Anies-Muhaimin's election manifesto were mostly unchanged from programs under the Jokowi government – strengthening the governance of energy imports, particularly in oil and gas downstream, to curb speculation and keep fuel prices affordable; ensuring stable fuel inventories and proper import planning to obtain the best prices; and orient production and export plans toward national interests.

The duo said they will sign international partnerships with energy-producing countries to maintain energy supplies, use enhanced oil recovery to boost domestic output and move ahead on delayed agreements such as the flagship Masela project.

Anies plans to introduce a renewable energy program backed with cheaper financing and technology transfer, and look at carbon trading and carbon exchanges to secure inexpensive foreign funding.

The third presidential candidate is the former governor of Central Java Ganjar Pranowo and his running mate Mahfud MD, former Minister of Law and Human Rights.

Out of the three, the Ganjar-Mahfud pair has provided the least details on energy and was generally committed to reducing greenhouse gas emissions by cutting air pollution from vehicles and industries and working toward net-zero.

"Ganjar is seen leaning toward stability, and thus least likely among the three candidates to "rock the boat." Being a member of PDIP -- which is under the leadership of former President Megawati Sukarnoputri -- policies and priorities are more likely to be aligned to the interest of the party, which traditionally favors social welfare and SOEs (state-owned enterprises)," BoFA said.

Indonesia's main oil and gas SOE is Pertamina, which looks after the country's upstream and downstream resources, while its subsidiary Perusahaan Gas Negara (PGN) is focused on the gas business. They work alongside Perusahaan Listrik Negara (PLN), which oversees the electricity sector.