Indonesia

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GH2 Country Portal – Indonesia

Green hydrogen vision

In 2021, the Indonesian government showed a stronger commitment to achieve net zero emissions by 2060, exceeding the enhanced national determined contribution (e-NDC). The e-NDC targets a total emission reduction of 951 MT CO2eq by 2030 without international assistance. The energy sector is expected to account for 12% of this total reduction. In 2021, emissions from the energy sector were approximately 600 million tonnes of CO2-eq, with power generation comprising 40%.  

The transport and industry sectors made up 25% of total energy emissions. The use of low carbon and emerging technologies, such as CCUS and hydrogen, is anticipated to play a critical role in meeting the net zero target by 2060, with hydrogen offering a viable path for decarbonizing Indonesia's energy system due to its abundant renewable energy potential.   

“The Indonesian government is developing green hydrogen as a renewable energy source to achieve its carbon neutrality target by 2060” - Yahya Rachmana Hidaya, Director of Energy, BAPPENAS 

National Strategy

In mid-December 2023, the Directorate General of New, Renewable Energy and Energy Conservation, under Indonesia's Energy and Mineral Resources Ministry, published the National Hydrogen Strategy report. 

Andriah Feby Misna, the head of the directorate, has stated that hydrogen is expected to be one of the main contributors to Indonesia's energy transition as well as become one of the government's main strategies in implementing the road map to Net Zero Emission by 2060. According to the roadmap, demand is expected to grow beginning in 2030. The transportation sector will incorporate green hydrogen in 2031, followed by its use in the industrial sector by 2041, substituting natural and fossil gas for high-temperature heating processes. Misna further stated that Indonesia plans to initiate with low-carbon hydrogen and then shift to green hydrogen once the economics of the projects can compete with other energy sources, aiming to establish a hydrogen economy. 

The strategy will serve as a reference framework for other organizations across the government to formulate supportive policies. The nearest-term impact would be to enable state-owned entities such as national oil company Pertamina, fertilizer company Pupuk Indonesia and state utility PLN to move forward on pilot projects to produce and consume low-carbon hydrogen. 

Capacity and capacity targets

Indonesia's hydrogen strategy has three pillars: reduce reliance on fossil fuels to ensure energy security, develop the domestic hydrogen market, and export hydrogen and its derivatives to the global market, Misna said. 

Indonesia currently consumes around 1.75 million mt/year of hydrogen, primarily as a raw material for the fertilizer, ammonia, and oil refining sector, according to the report. 

Misna said hydrogen development in Indonesia is still at the research and pilot-project stage, and the industry is projected to grow after 2030 with wider usage in vehicles, power generation, energy storage, and decarbonizing hard-to-abate sectors like shipping, aviation, steel production, manufacturing and long-haul transportation. 

The document also cited Indonesia's strong potential for abundant renewable energy resources to produce hydrogen, with a total potential for new and renewable energy (NRE) at around 3,689 GW, out of which only 0.3% has been utilized so far. 

While no firm target is mentioned, a demand forecast from Pertamina under two scenarios ranges from 0.9 million mt/year to 8 million mt/yr for low-carbon hydrogen by 2040, and a demand forecast from IEA shows about 800 Peta Joule (approximately 5.6 million mt) by 2060. Total electricity generation from hydrogen production is expected to be around 220 terawatt‐hours by 2060, almost as much as the current total demand in all sectors, according to the IEA. 

“Indonesia's state-owned Pertamina is looking to renewable energy sources such as hydrogen to meet its target of adding 10GW of clean energy power generation capacity by 2026, in line with its green transition plan for 2050” (Argus Media) 

Impact Targets

According to the NZE modelling provided by the Ministry of Energy and Mineral Resources, demand for low-carbon hydrogen from various industries is expected to increase between 2031 and 2060. 

Low-carbon hydrogen transportation will begin with 26,000 barrels of oil equivalent (or 0.04 TWh for road trucks) in 2031 and grow to 52.5 million barrels of oil equivalent (89 TWh for shipping and trucking) in 2060, the report said. 

The usage of low-carbon hydrogen in the industrial sector will begin with 2.8 TWh in 2041 and expand to 79 TWh in 2060. Out of this, the metal, ceramics, and paper industries are expected to reach 29 TWh by 2060. The hydrogen strategy reasserts PLN and IEA's decarbonization roadmap, where 220 TWh of electricity generation through hydrogen by 2060 will replace gas-based plants and coal co-firing. 

Policy spotlight/ Projects 

  • The government is making strides towards clearer policies to speed up permitting and registration. New KBLI (standard industrial classification) codes for the low-carbon hydrogen industry are set to roll out in 2025. The government is also working on national standards and above ministerial level regulations (Peraturan Pemerintah) for low-carbon hydrogen. The national hydrogen strategy suggests several incentives, including tax credits, tax holiday and research grants for green and low-carbon hydrogen. However, this represents just the beginning of the policy-making process – so far none of the options are binding or tied to specific policies. 

  • Last October 2024, Sembcorp Industries, through its subsidiary Sembcorp Utilities Pte Ltd, and PT PLN Energi Primer Indonesia, announced a joint development agreement for a green hydrogen production facility in Sumatra, Indonesia. This facility aims to produce 100,000 Mt of green hydrogen annually and is set to become the largest of its kind in Southeast Asia, creating a regional hub linking Sumatra, the Riau Islands and Singapore. 

  • PT PLN (Persero), along with its subsidiaries PLN Energi Primer Indonesia (PLN EPI) and PLN Indonesia Power (PLN IP), restated its commitment to promoting renewable energy in Indonesia. This dedication was highlighted by signing the Head of Terms (HoT) for the Green Hydrogen Purchase Agreement with PT Pupuk Indonesia (Persero) and ACWA Power at the Indonesia International Sustainability Forum (IISF) 2024. Under this agreement, PT Pupuk Indonesia will serve as the purchaser of the green hydrogen. Rahmad Pribadi, President Director of Pupuk Indonesia, emphasized the significance of this partnership in securing a consistent supply of green hydrogen, essential for the manufacture of green ammonia. This green ammonia is crucial to produce urea and NPK fertilizers, thereby guaranteeing a sustainable source for the national fertilizer sector. 

Financing

  • One of the state-owned enterprises leading the charge in green hydrogen investment is PT Pertamina, which has already allocated $11 billion toward its green energy development targets. 

  • The Indonesian government aims to attract private sector investments in green hydrogen development, targeting US$25.2 billion (Rp395.58 trillion) by 2060. This initiative is part of broader efforts to prevent an energy crisis in the industrial sector and facilitate carbon dioxide reduction. 

     

Government green hydrogen lead

  • The Ministry of Energy & Mineral Resources 

  • Ministry of National Development Planning [BAPPENAS] 

Comments

The Indonesian government recognises the need to urgently wind down the production and use of coal, oil and gas, while at the same time provide affordable energy for a rapidly growing population and economy. It will be significant challenge for the government to execute progressive policies and enable a swift shift away from fossil fuels to renewables and green hydrogen across the whole nation.