Frank Okon

Indonesia is accelerating biofuel production and renewable energy development as soaring global oil prices—driven by the Middle East conflict—expose the country’s heavy reliance on fossil fuels.

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President Prabowo Subianto said Jakarta is moving urgently to strengthen energy security, including a major push into solar power. Speaking at a business forum in Tokyo, he said Indonesia aims to install 100 gigawatts of solar capacity within three years, calling the effort increasingly urgent given global instability.

At the same time, the government is pursuing a dual-track strategy: expanding clean energy while continuing to invest in oil, gas, and critical minerals needed for industrial development. In recent days, Indonesia signed multiple agreements with international partners, including Japan and South Korea, covering projects in liquefied natural gas (LNG), geothermal energy, solar power, and carbon capture.

A major component of Indonesia’s short-term response is biofuel. The government plans to roll out its B50 policy in July, requiring diesel to contain 50% biofuel derived from crude palm oil (CPO). Officials say the move could cut fossil fuel consumption by 4 million kilolitres annually and save up to 48 trillion rupiah (about $2.8 billion) in fuel subsidies.

The policy builds on earlier blending efforts. A 40% mix previously reduced diesel imports by 3.3 million kilolitres and cut emissions by nearly 39 million tonnes of CO₂ equivalent in 2025, according to government data.

The urgency is partly fiscal. Brent crude prices have surged above $100 per barrel—well beyond the $70 benchmark used in Indonesia’s national budget—putting pressure on state finances and subsidy programs.

Energy analysts say the Iran war has forced Indonesia to rethink its strategy. With around 85% of its energy still coming from fossil fuels, the country remains highly exposed to global supply shocks.

However, experts caution that the transition will take time. Fossil fuels remain essential not only for energy but also for industries such as petrochemicals and fertiliser production. “We won’t be able to eliminate them in five to 10 years,” said Fabby Tumiwa of the Institute for Essential Services Reform, emphasizing that oil and gas will remain part of the mix during the transition.

There are also practical challenges to scaling up biofuel. While Indonesia produces enough palm oil overall, distribution and pricing could become bottlenecks. When global prices rise, producers may prefer to export rather than supply the domestic market. Meeting B50 demand could require up to 18 million tonnes of CPO annually, potentially reducing exports if production does not increase.

Environmental concerns add another layer of complexity. Expanding palm oil production has long been linked to deforestation and carbon emissions, particularly when forests or peatlands are cleared for new plantations. Environmental groups warn that Indonesia’s biofuel push could worsen these impacts if not properly regulated.

Experts argue that stricter sustainability standards—such as ensuring palm oil comes from certified sources—will be critical if biofuel is to serve as a credible part of Indonesia’s clean energy transition.

Despite these challenges, the government sees the current crisis as a turning point. The combination of high oil prices, geopolitical risk, and energy insecurity is pushing Indonesia to accelerate its shift toward more diversified and domestically controlled energy sources.