What National Energy Policy Framework Exists Under PP 79/2014?

Executive Summary

PP 79/2014 established Indonesia's National Energy Policy (Kebijakan Energi Nasional/KEN) for the 2014-2050 period, setting ambitious targets for renewable energy development, energy mix optimization, and energy intensity reduction. The regulation mandates that renewable energy reach 23% of the primary energy mix by 2025 and 31% by 2050, while reducing energy intensity by 1% annually. This framework represents Indonesia's comprehensive approach to energy security, sustainability, and climate commitments. However, the regulation has been superseded by PP 40/2025, which adjusts targets based on implementation realities and revised climate commitments extending to 2060.

Source: BPK Regulation Database - PP 79/2014

1. Regulatory Overview and Legal Framework

Regulation Identification

Regulation: Peraturan Pemerintah Nomor 79 Tahun 2014 tentang Kebijakan Energi Nasional (Government Regulation No. 79 of 2014 on National Energy Policy)

Issuing Authority: President of the Republic of Indonesia

Publication: State Gazette (Lembaran Negara) 2014 No. 300, Supplement to State Gazette (Tambahan Lembaran Negara) No. 5609

Effective Date: October 17, 2014

Document Length: 25 pages

Current Status: Superseded by PP 40/2025 (effective 2025)

Legal Basis and Authority

PP 79/2014 was enacted under the authority of UU 30/2007 on Energy, which mandates the formulation of a National Energy Policy to ensure energy security, sustainability, and optimal resource utilization. The regulation was developed by the National Energy Council (Dewan Energi Nasional/DEN) and approved by the House of Representatives (DPR RI) before being issued as a Government Regulation.

The legal hierarchy positions this regulation as the implementing framework for Indonesia's energy sector strategy, providing concrete targets and policy directions derived from the parent energy law. It serves as the foundation for subsequent implementing regulations, national and regional energy general plans (RUEN/RUED), and sectoral energy policies.

Regulatory Scope and Objectives

PP 79/2014 establishes the comprehensive National Energy Policy framework for the 2014-2050 period, encompassing both primary policy directions and supporting policy mechanisms. The regulation's fundamental objective is to achieve energy independence (kemandirian energi) and national energy security (ketahanan energi nasional) through principles of justice, sustainability, and environmental awareness.

The scope covers four main policy areas: (1) energy availability for national needs, (2) energy development priorities, (3) utilization of national energy resources, and (4) national energy reserves. Supporting policies address energy conservation, resource conservation, energy diversification, environmental protection and safety, energy pricing and subsidies, infrastructure and public access, energy technology research and development, and institutional and financing arrangements.

Regulatory Purpose and Intent

The regulation aims to provide a clear, long-term roadmap for Indonesia's energy sector transformation, balancing economic development needs with environmental sustainability and energy security imperatives. Key purposes include:

1. Optimal Energy Mix Achievement: Establishing specific targets for the composition of Indonesia's primary energy supply, reducing dependence on fossil fuels while increasing renewable energy utilization
2. Energy Intensity Reduction: Mandating systematic improvement in energy efficiency across all economic sectors to support sustainable growth
3. Energy Security Enhancement: Ensuring adequate energy reserves and diversified supply sources to meet national needs under various scenarios
4. Climate Commitment Alignment: Contributing to Indonesia's greenhouse gas emission reduction targets through increased renewable energy deployment
5. Investment Guidance: Providing clear policy signals to domestic and international investors regarding Indonesia's energy sector priorities and targets

The regulation explicitly recognizes that renewable energy targets are subject to economic viability ("sepanjang keekonomiannya terpenuhi"), acknowledging the need to balance ambition with practical implementation constraints.

2. Key Definitions and Legal Concepts

Core Terminology from Pasal 1

PP 79/2014 Pasal 1 establishes foundational definitions for Indonesia's energy sector framework:

Energi (Energy):

"kemampuan untuk melakukan kerja yang dapat berupa panas, cahaya, mekanika, kimia, dan elektromagnetika"

Translation: "the capacity to do work, which can be in the form of heat, light, mechanical, chemical, and electromagnetic [energy]"

Sumber Energi (Energy Source):

"sesuatu yang dapat menghasilkan Energi, baik secara langsung maupun melalui proses konversi atau transformasi"

Translation: "something that can produce Energy, either directly or through conversion or transformation processes"

Sumber Daya Energi (Energy Resources):

"sumber daya alam yang dapat dimanfaatkan, baik sebagai Sumber Energi maupun sebagai Energi"

Translation: "natural resources that can be utilized, either as Energy Sources or as Energy"

Energi Baru (New Energy):

"Energi yang berasal dari Sumber Energi Baru"

Translation: "Energy derived from New Energy Sources"

Sumber Energi Baru (New Energy Sources):

"Sumber Energi yang dapat dihasilkan oleh teknologi baru, baik yang berasal dari Sumber Energi Terbarukan maupun Sumber Energi tak terbarukan, antara lain nuklir, hidrogen, gas metana batubara (coal bed methane), batubara tercairkan (liquified coal), dan batubara tergaskan (gasified coal)"

Translation: "Energy Sources that can be produced by new technology, whether derived from Renewable Energy Sources or non-renewable Energy Sources, including nuclear, hydrogen, coal bed methane, liquefied coal, and gasified coal"

Sumber Energi Terbarukan (Renewable Energy Sources):
According to UU 30/2007 (referenced in PP 79/2014):

"sumber energi yang dihasilkan dari sumber daya energi yang berkelanjutan jika dikelola dengan baik, antara lain panas bumi, angin, bioenergi, sinar matahari, aliran dan terjunan air, serta gerakan dan perbedaan suhu lapisan laut"

Translation: "energy sources produced from sustainable energy resources if managed properly, including geothermal, wind, bioenergy, solar, water flow and waterfalls, and ocean current movement and temperature differences"

Energi Primer (Primary Energy):

"energi yang diberikan oleh alam dan belum mengalami proses pengolahan lebih lanjut"

Translation: "energy provided by nature that has not undergone further processing"

Bauran Energi Primer (Primary Energy Mix):
The composition and proportion of various primary energy sources (fossil fuels, renewables, new energy) utilized to meet national energy needs.

Konservasi Energi (Energy Conservation):

"upaya sistematis, terencana, dan terpadu guna melestarikan Sumber Daya Energi dalam negeri serta meningkatkan efisiensi pemanfaatannya"

Translation: "systematic, planned, and integrated efforts to conserve domestic Energy Resources and improve the efficiency of their utilization"

Intensitas Energi (Energy Intensity):

"jumlah total konsumsi Energi per unit produk domestik bruto"

Translation: "total Energy consumption per unit of gross domestic product"

Critical Legal Concepts

Economic Viability Principle (Keekonomian):
The regulation explicitly conditions renewable energy targets on economic viability. Pasal 9 includes the phrase "sepanjang keekonomiannya terpenuhi" (as long as economic viability is met), recognizing that renewable energy deployment must be economically sustainable and not compromise national economic development.

Energy Independence (Kemandirian Energi):
The capacity to meet national energy needs primarily through domestic energy resources and production, reducing dependence on energy imports and external energy supply vulnerabilities.

National Energy Security (Ketahanan Energi Nasional):
A state where energy supply is adequate, affordable, accessible, and reliable to support economic activities and social welfare under various circumstances, including crisis situations.

Primary Energy vs. Final Energy:
The regulation distinguishes between primary energy (energy from natural sources before conversion) and final energy (energy delivered to end consumers after conversion and transmission). Targets and statistics reference both categories depending on context.

3. Compliance Requirements and Obligations Matrix

National Energy Policy Structure (Pasal 2-3)

The National Energy Policy consists of two complementary policy categories:

Pasal 3 - Main Policies (Kebijakan Utama):
a. Energy availability for national needs
b. Energy development priorities
c. Utilization of national energy resources
d. National energy reserves

Pasal 3 - Supporting Policies (Kebijakan Pendukung):
a. Energy Conservation, Energy Resource Conservation, and Energy Diversification
b. Environmental protection and safety
c. Energy pricing, subsidies, and incentives
d. Infrastructure and public access to Energy and Energy Industry
e. Energy technology research, development, and application
f. Institutional arrangements and financing

Policy Implementation Period (Pasal 4)

The National Energy Policy established in PP 79/2014 is implemented for the period from 2014 to 2050, providing a 36-year strategic planning horizon for Indonesia's energy sector transformation.

Compliance Requirements Matrix

Conditional Requirements and Economic Viability

Critical Caveat (Pasal 9):
The renewable energy targets (23% by 2025, 31% by 2050) include the condition "sepanjang keekonomiannya terpenuhi" (as long as economic viability is met). This provision allows for flexibility in achieving renewable energy targets if economic conditions, technological readiness, or cost competitiveness constraints prevent full target achievement.

Enforcement Mechanisms

While PP 79/2014 establishes policy targets rather than directly enforceable obligations on private entities, implementation is enforced through:

1. Sectoral Regulations: Subsequent ministerial regulations and technical standards implementing specific policy directions
2. RUEN/RUED Alignment: National and regional energy plans must align with KEN targets and directions
3. Budget Allocation: Government energy spending priorities must reflect KEN policy directions
4. Licensing and Permitting: Energy project approvals consider alignment with KEN targets
5. Parliamentary Oversight: Annual reporting to DPR on KEN implementation progress

4. Sectoral Impact Analysis and Affected Parties

Government Institutions

Ministry of Energy and Mineral Resources (KESDM):
Primary implementing agency responsible for translating KEN policy directions into sectoral regulations, programs, and projects. Must coordinate renewable energy development, fossil fuel production management, energy efficiency programs, and infrastructure development to achieve KEN targets. The ministry faces significant pressure to balance ambitious renewable energy targets with energy security and economic development imperatives.

National Energy Council (Dewan Energi Nasional/DEN):
Strategic policy formulation body responsible for monitoring KEN implementation, recommending policy adjustments, coordinating RUEN development, and reporting to the President and DPR on energy sector progress. DEN's role is critical in assessing whether economic viability conditions are met for renewable energy targets and recommending policy revisions when needed.

State Electricity Company (PT PLN):
Must fundamentally transform its generation portfolio to meet renewable energy mandates while maintaining grid stability and affordable electricity supply. PLN faces massive capital requirements for renewable energy integration, grid modernization, and capacity expansion from 115 GW (2025 target) to 430 GW (2050 target).

Provincial and Local Governments:
Required to develop Regional Energy General Plans (RUED) aligned with RUEN and KEN targets. Local governments play critical roles in renewable energy project site permitting, community engagement, and local energy access programs.

Energy Sector Businesses

Coal Industry:
Faces long-term demand trajectory shift despite maintaining significant share through 2050. While coal remains at 30% (2025) and 25% (2050) of primary energy mix, the absolute volume growth may be limited, requiring industry adaptation toward higher-value products, carbon capture technologies, or diversification into renewable energy.

Oil and Gas Industry:
Subject to declining share mandates (oil below 25% by 2025, below 20% by 2050). Companies must manage declining domestic production fields while potentially transitioning toward natural gas (which maintains 22-24% share) and renewable energy investments. The economic viability caveat may provide some flexibility but long-term trajectory is clear.

Renewable Energy Developers:
Primary beneficiaries of KEN policy direction, with massive market opportunity from 23% (2025) to 31% (2050) renewable energy targets. However, actual market development depends on implementation of supporting policies (feed-in tariffs, renewable energy purchase obligations, grid access guarantees) and achievement of cost competitiveness.

Power Generation Companies (IPPs):
Must align new capacity development with renewable energy priorities. Coal IPPs may face shortened asset lifespans or stranded asset risks. Renewable energy IPPs benefit from policy support but face grid integration challenges and PPA negotiation complexities with PLN.

Industrial and Commercial Energy Users

Energy-Intensive Industries:
Subject to energy intensity reduction mandate (1% annually through 2025) and likely energy efficiency standards. Industries including cement, steel, petrochemicals, pulp and paper, and textiles must implement energy management systems, efficiency improvements, and potentially fuel switching to lower-carbon alternatives.

Commercial and Institutional Sectors:
Expected to contribute to national energy conservation goals through building efficiency standards, equipment efficiency requirements, and energy management practices. May face mandatory energy audits and efficiency disclosure requirements in implementing regulations.

Residential Energy Consumers

Households:
Benefit from expanded electricity access (2,500 kWh per capita by 2025, 7,000 kWh per capita by 2050) but may face electricity tariff adjustments as subsidies are rationalized and renewable energy costs are internalized. Energy efficiency standards for appliances and residential buildings will affect household purchasing decisions.

Financial Institutions and Investors

Infrastructure Investors:
Face massive investment opportunities in renewable energy projects, grid infrastructure, and energy efficiency programs. Estimated total investment requirements for achieving KEN targets exceed hundreds of billions of dollars through 2050. Clear policy framework provides investment certainty, though economic viability conditions introduce some uncertainty.

Development Finance Institutions:
Play critical role in financing renewable energy and energy efficiency projects, particularly during early market development when commercial financing may be limited. Policy framework justifies concessional financing and risk mitigation instruments.

Environmental and Climate Implications

Greenhouse Gas Emissions:
Successful implementation of renewable energy targets (23% by 2025, 31% by 2050) and energy intensity reduction (1% annually) would significantly reduce Indonesia's energy sector carbon emissions compared to business-as-usual trajectory. However, continued reliance on coal (25-30% through 2050) means energy sector will remain significant emissions source requiring complementary mitigation measures.

Local Environmental Quality:
Transition from fossil fuels to renewable energy reduces local air pollution, water consumption, and environmental degradation associated with extraction and combustion. However, large-scale renewable energy projects (hydropower, geothermal, bioenergy) introduce their own environmental and social impacts requiring careful management.

5. Implementation Challenges and Policy Gaps

Achievement Gap: Target vs. Reality

2025 Renewable Energy Target: Unlikely to be Met
As of end-2023, Indonesia's renewable energy share in the primary energy mix reached only 13.29%, far below the 23% target for 2025. The National Energy Council acknowledged this gap and initiated revision of PP 79/2014 (subsequently resulting in PP 40/2025), adjusting the 2025 target to 17-19% to reflect implementation realities.

The massive gap between target (23%) and achievement (~13%) reveals fundamental implementation challenges:
- Renewable energy project development timelines exceed initial expectations
- Cost competitiveness gaps between renewable energy and coal-fired power
- Grid integration technical and financial barriers
- Permitting and land acquisition delays for renewable projects
- Limited domestic renewable energy manufacturing and supply chain capacity

Energy Intensity Reduction: Slow Progress
While the 1% annual energy intensity reduction target appears modest, achieving consistent annual improvements requires sustained effort across all economic sectors. Indonesia's energy intensity has shown irregular patterns, with some years showing improvement and others showing deterioration, indicating inconsistent policy implementation and economic structure shifts.

Economic Viability Condition: Double-Edged Sword

The "sepanjang keekonomiannya terpenuhi" (economic viability condition) in Pasal 9 provides necessary flexibility but also creates implementation ambiguity:

Positive Aspects:
- Recognizes legitimate constraints on renewable energy deployment when costs are prohibitive
- Prevents economically destructive forced renewable energy adoption
- Allows policy adjustment based on technological and market developments

Negative Aspects:
- Creates loophole for weak implementation when political will is insufficient
- Provides justification for continued fossil fuel dependence
- Reduces policy certainty for renewable energy investors if condition is interpreted broadly
- May undermine Indonesia's international climate commitments

The lack of clear definition for "economic viability" and specific criteria for invoking this condition leaves room for interpretation and potential misuse.

Infrastructure and Investment Gaps

Capital Requirements Vastly Exceed Mobilization
Achieving the 115 GW (2025) and 430 GW (2050) power generation targets requires hundreds of billions of dollars in investment. Current investment flows in renewable energy remain far below required levels. State budget constraints limit PLN's capacity to finance transition, while private investment faces regulatory uncertainties and risk perception challenges.

Grid Infrastructure Inadequacy
Indonesia's transmission and distribution infrastructure is inadequate for large-scale renewable energy integration. Renewable energy sources (solar, wind, run-of-river hydro) often require substantial grid reinforcement and energy storage solutions not reflected in current infrastructure plans.

Regional Disparities
Energy infrastructure and access remain highly concentrated in Java-Bali, while outer island regions face energy poverty and isolation. The national targets in PP 79/2014 do not adequately address regional disparities or provide specific mechanisms for accelerating energy access in remote areas.

Policy Coordination and Implementation Fragmentation

Weak Inter-Agency Coordination
Energy policy implementation involves multiple ministries (ESDM, Finance, Environment, Public Works), state-owned enterprises (PLN, Pertamina, PGN), and local governments. PP 79/2014 provides overall policy direction but lacks strong coordination mechanisms, resulting in fragmented implementation and sometimes contradictory sectoral policies.

RUEN Implementation Delays
The National Energy General Plan (RUEN), which should translate KEN into concrete programs and projects, faced significant delays in development and approval. RUEN was only finalized in 2017 through Presidential Regulation 22/2017, three years after PP 79/2014 enactment, losing valuable implementation time.

Subsidy and Pricing Distortions
Continued fossil fuel subsidies undermine renewable energy competitiveness and energy efficiency incentives. While PP 79/2014 includes energy pricing policy as a supporting policy element, actual subsidy reform has been politically challenging and inconsistent, distorting market signals contrary to KEN objectives.

Technological and Supply Chain Constraints

Limited Domestic Renewable Energy Manufacturing
Indonesia lacks strong domestic manufacturing capacity for renewable energy technologies (solar panels, wind turbines, batteries), increasing project costs and import dependence. PP 79/2014 includes technology development as a policy element but implementation of domestic industry support has been insufficient.

Workforce Skills Gaps
Renewable energy sector requires different technical skills than traditional fossil fuel sector. Indonesia's education and training systems have not yet fully adapted to renewable energy workforce requirements, creating human capital constraints on sector growth.

Superseding Regulation: PP 40/2025

Policy Evolution and Adjustment
PP 79/2014 has been superseded by PP 40/2025, which adjusts targets and extends the planning horizon to 2060 in alignment with Indonesia's net-zero carbon commitment. The new regulation reflects lessons learned from PP 79/2014 implementation challenges:

• Adjusted 2025 renewable energy target from 23% to 17-19% (recognizing implementation realities)
• Extended 2060 renewable energy target to 70-72% (aligning with net-zero commitments)
• Adjusted 2030 renewable energy target to 23% (shifted from 2025)
• Enhanced provisions for just energy transition and regional customization

The revision acknowledges that PP 79/2014's targets, while aspirational, exceeded near-term implementation capacity given economic, technological, and institutional constraints.

Recommendations for Improved Implementation

Strengthen Economic Viability Criteria:
Establish clear, transparent criteria and methodologies for assessing economic viability of renewable energy options, including comprehensive cost-benefit analysis frameworks that account for externalities, long-term price trajectories, and energy security benefits.

Accelerate Infrastructure Investment:
Dramatically scale up public and private investment in grid infrastructure, energy storage, and renewable energy generation through enhanced fiscal incentives, risk mitigation instruments, de-risking mechanisms, and streamlined permitting processes.

Reform Energy Pricing and Subsidies:
Implement gradual but consistent fossil fuel subsidy reform while providing targeted support for renewable energy and energy efficiency. Establish carbon pricing mechanisms to internalize climate costs and level the playing field for clean energy.

Enhance Policy Coordination:
Strengthen DEN's authority and resources to coordinate implementation across government agencies, SOEs, and local governments. Establish clear accountability mechanisms and regular monitoring and evaluation systems.

Build Domestic Capacity:
Invest in domestic renewable energy manufacturing, technology development, and workforce training to reduce costs, create jobs, and build long-term sectoral competitiveness.

Customize Regional Approaches:
Recognize regional diversity in energy resources, development levels, and needs. Provide flexibility for regions to develop customized pathways to achieve national targets while ensuring minimum access and equity standards.

Prepared by: CRPG Research Team
Publication Date: November 26, 2025
Regulation Source: BPK Regulation Database - PP 79/2014

Sources:
- BPK Regulation Database - PP 79/2014
- Renewable Energy Indonesia - Energy Policy
- Leks&Co Blog - Legal Framework for Renewable Energy
- Hukumonline - Revision of National Energy Policy

Disclaimer

This article was AI-generated under an experimental legal-AI application. It may contain errors, inaccuracies, or hallucinations. The content is provided for informational purposes only and should not be relied upon as legal advice or authoritative interpretation of regulations.

We accept no liability whatsoever for any decisions made based on this article. Readers are strongly advised to:

• Consult the official regulation text from government sources
• Seek professional legal counsel for specific matters
• Verify all information independently

This experimental AI application is designed to improve access to regulatory information, but accuracy cannot be guaranteed.