The Government of Indonesia has issued Government Regulation No. 40 of 2025 on National Energy Policy (“GR 40/2025”), officially repealing Government Regulation No. 79 of 2014 (“GR 79/2014”). This updated policy framework reflects major shifts in national and global energy dynamics, including Indonesia’s ambition to become an advanced economy by 2045, rapid technological progress, and the rising importance of new and renewable energy (NRE).
Unlike GR 79/2014, which outlined policies for 2014–2050, GR 40/2025 extends the timeline to 2060 to align with Indonesia’s Net Zero Emissions (NZE) target. While the four core energy policies remain—ensuring energy availability, optimizing energy use, prioritizing energy development, and maintaining energy reserves—GR 40/2025 provides more detailed implementation guidance and introduces several new supporting policies. This newsletter highlights key additions under GR 40/2025.
Energy Mix Target
GR 40/2025 presents a far more ambitious and structured pathway for Indonesia’s energy mix compared to GR 79/2014. Previously, GR 79/2014 set minimum NRE targets of 23% by 2025 and 31% by 2050, while oil and coal were expected to maintain significant shares of the energy mix.
Under GR 40/2025, the energy mix aligns directly with Indonesia’s decarbonization and NZE goals. The regulation targets an NRE share of:
· 19–23% by 2030
· 36–40% by 2040
· 53–55% by 2050
· 70–72% by 2060
Meanwhile, oil is expected to fall to 3.9–4.7% and coal to 7.8–11.9% by 2060.
GR 40/2025 also introduces detailed targets for individual energy sources—including solar, hydro, wind, biomass, geothermal, hydrogen, ammonia, and nuclear—reflecting Indonesia’s shift towards a diversified low-carbon energy system. This marks a major transition from GR 79/2014’s focus on energy security to a new focus on rapid decarbonization, climate resilience, and green economic growth.
Electricity Export–Import Policy
As part of measures to secure national energy availability, GR 40/2025 modifies the framework for electricity exports and imports. Although MEMR Regulation No. 11 of 2021 (“MEMR Reg 11/2021”) remains in force, GR 40/2025 introduces clarifications, including:
· Cross-border electricity transactions must be conducted by (i) state-owned electricity companies of the exporting/importing country, or (ii) entities appointed to represent that country.
Under MEMR Reg 11/2021, integrated electricity supply business license (IUPTLU) holders— including PLN and private companies—may obtain licenses for cross-border electricity sales or purchases.
Although GR 40/2025 reinforces PLN’s central role, it does not completely rule out participation from other licensed and government-appointed entities. The regulation also reaffirms that domestic electricity needs must always take priority.
Electricity Export–Import Swap Transactions
GR 40/2025 aligns with MEMR Decree No. 5.K/TL.01/MEM.L/2025 (RUKN 2025) by permitting electricity exports and imports through swap transactions based on sales and purchase agreements. Swaps may occur:
· between different energy sources; or
· between energy sources and other commodities.
However, neither regulation provides guidance on contractual mechanisms or operational models for such transactions.
Decarbonization Requirements for Non-Renewable Energy Industries
GR 40/2025 introduces decarbonization as a core supporting policy aimed at reducing emissions from the energy sector. Non-Renewable Energy industries must comply with:
1. NRE portfolio standards, and/or
2. Emission-reduction technologies.
Industries unable to meet NRE portfolio standards must obtain renewable energy certificates (RECs).
Although GR 40/2025 does not explain the standards in detail, it defines them as minimum NRE-sourced electricity requirements for businesses generating power from non-renewable sources.
The draft New and Renewable Energy Bill (NRE Bill) provides further clarity, including:
· mandatory compliance with renewable energy portfolio standards for new PPAs signed after the Bill’s enactment,
· alignment of renewable energy use with national targets,
· periodic reporting obligations, and
· government compensation for state-owned electricity companies like PLN if required to purchase RECs.
Since the NRE Bill has not yet been enacted, compensation mechanisms remain pending.
Development of Green Energy and Circular Economy
GR 40/2025 introduces new provisions on Green Energy and the Circular Economy.
Green Energy includes clean, environmentally friendly energy sources. Its development must prioritize:
· economic growth balanced with sustainable energy availability,
· alignment with national energy policies,
· support for decarbonization programs,
· international cooperation on innovative green energy infrastructure,
· accelerated electrification in remote and underserved regions,
· energy security and fair pricing, and
· expansion of green energy businesses and workforce skills.
The regulation also promotes the Circular Economy through:
· waste reduction,
· reuse within production processes,
· resource efficiency,
· repurposing waste, and
· recycling of materials with remaining economic value.
Development of Non-Renewable Energy
Non-renewable energy sources such as coal, oil, and natural gas may continue to be developed when NRE sources cannot fully meet national needs. All exploration, extraction, and processing activities must employ low-carbon technologies, including energy efficiency improvements, renewable/low-carbon inputs, and carbon capture and storage (CCS/CCUS).
New Energy: Hydrogen, Ammonia, and Nuclear
GR 40/2025 expands the definition of “New Energy” to include hydrogen, ammonia, and nuclear energy.
· Hydrogen and ammonia should preferably be produced using renewable sources and efficient technologies. Production using non-renewable sources must incorporate low-carbon technologies.
· Nuclear power plants must comply with strict safety, security, fuel supply, and radioactive waste management requirements, and must be located in geologically safe, low-population areas that are not designated for food production.
Carbon Tax and Local Content
For the first time, GR 40/2025 incorporates carbon tax and local content policies into national energy planning. These measures consolidate earlier rules, such as MEMR Regulation No. 11/2024 and Presidential Regulation No. 98/2021.
GR 40/2025 provides that:
· carbon tax may be gradually applied to non-renewable energy use, and
· energy-related businesses must prioritize local components, including local technology, materials, manpower, and financing.
Institutional Provisions
The regulation strengthens coordination and financing for the energy transition, mandating collaboration between the Central Government, Bank Indonesia, and the Financial Services Authority (OJK). Businesses and other stakeholders are also expected to contribute to energy transition funding.
Government Incentives
GR 40/2025 outlines fiscal and non-fiscal incentives to support NRE supply, development, and utilization. These may include:
· tax exemptions or reductions,
· import duty relief,
· licensing facilitation,
· technical assistance and training, and
· other financial support.
Additional measures—such as guarantees, financing, or compensation—may also be provided to state-owned and private entities involved in the sector.
