Open Access

ARTICLE

ENERGY SECURITY, FISCAL CONSTRAINTS, AND THE POLITICAL ECONOMY OF RENEWABLE ENERGY TRANSITION IN INDONESIA

Issue Vol. 2 No. 2 (2025): Volume 2 Issue 2 --- Section Articles --- Published Date: 2025-09-15

Abstract

Indonesia’s energy transition occupies a uniquely complex position within global debates on climate change mitigation, energy security, fiscal sustainability, and political economy. As the world’s fourth most populous country, a major coal producer, and an emerging middle-income economy, Indonesia faces a structural dilemma: the imperative to decarbonize its energy system while maintaining affordable electricity, macroeconomic stability, and political legitimacy. This article develops a comprehensive and theoretically grounded analysis of Indonesia’s energy transition by integrating perspectives from energy security theory, fossil fuel subsidy reform, public finance, and renewable energy political economy. Drawing exclusively on the provided references, the study examines how excess electricity supply, fiscal pressures on the state budget, state-owned utility debt dynamics, and entrenched fossil fuel interests have shaped renewable energy policy outcomes in Indonesia. Particular attention is given to the delayed issuance of renewable energy presidential regulations, the role of PLN as a vertically integrated monopoly utility, and the political contestation surrounding feed-in tariffs and subsidy reforms.

Methodologically, the article employs qualitative policy analysis and institutional interpretation, synthesizing secondary data from government planning documents, media reports, international energy commentaries, and peer-reviewed economic studies. Rather than treating Indonesia’s energy challenges as purely technical, the study situates them within broader socio-political and economic structures, emphasizing how distributional concerns, fiscal risk aversion, and energy affordability narratives constrain policy ambition. The findings demonstrate that Indonesia’s renewable energy transition is not primarily hindered by technological feasibility, but by a governance regime shaped by fiscal conservatism, subsidy path dependence, and risk-averse political leadership.

The discussion advances theoretical insights into energy transition governance in developing economies, highlighting how energy security and fiscal stability are often framed in opposition to climate goals, despite their potential complementarities. The article concludes by arguing that Indonesia’s transition trajectory reflects a broader pattern across fossil fuel–dependent developing countries, where decarbonization is mediated through concerns over state budgets, utility balance sheets, and social stability. By providing an in-depth, citation-grounded analysis, this study contributes to the literature on energy policy, development economics, and political economy, offering lessons for policymakers seeking to reconcile renewable energy expansion with fiscal and political realities.

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