How Indonesia’s coal policies left its own citizens in the dark
A wave of power outages across Indonesia’s Java island has left millions of residents and business owners in the dark, igniting public fury and raising questions as to how the world’s largest coal exporter is failing to keep its own lights on. The answer, analysts say, lies less in a coal shortage t
By Resty Woro Yuniar
A wave of power outages across Indonesia’s Java island has left millions of residents and business owners in the dark, igniting public fury and raising questions as to how the world’s largest coal exporter is failing to keep its own lights on.
The answer, analysts say, lies less in a coal shortage than in the rules and incentives governing who gets to buy it, at what price and when.
Hours-long blackouts since last week have disrupted the lives and businesses of millions of subscribers of Indonesia’s state-owned utility firm PLN in Java, the centre of the US$1.5 trillion economy.
PLN attributed these outages to technical problems at two large power plants on the island operated by independent producers.
“[The two plants] were forced [offline] to disconnect from the Java electricity system,” PLN President Director Darmawan Prasodjo told reporters on June 19. He said PLN was facing a coal supply gap, especially for the medium-ranked coal used by its power plants.
According to the Energy and Mineral Resources Ministry, coal accounted for 64.87 per cent of Indonesia’s total electricity generation as of April.
Social media has been flooded with complaints about the outages, including from Dena Putri Siswati, whose house in West Java’s Bogor suffered a three-hour blackout from 4pm to 7pm local time on June 18. During the outage, she missed a message from a recruiter about a potential interview for an administrative position at a mining company.
“Apparently the recruiter wanted to have a quick call with me around 5.30pm, but I only got his message at 5.46pm, as my Wi-fi was down and my mobile phone had no signal because of the power outage,” Dena told This Week in Asia.
After the power returned, the 24-year-old contacted the recruiter about another interview opportunity, but “he has not responded to this day”.
“I’m just annoyed. Why did PLN not tell us about the power outage? It was a pretty good company that I’d been [waiting] to hear from for the past two weeks. I was hoping that I could get the job,” said Dena, who had been job-hunting for two months.
Marjiin, owner of a small garment business in the East Javanese town of Pasuruan, told Kompas on Sunday that “daily outages” forced him to use a backup generator, which drove up his operational costs.
On Monday, PLN said one plant was back online, so that “rolling blackouts can be reduced significantly”.
In a statement on Monday, Darmawan said coal supplies that met the plant requirements “began flowing last week, strengthening the resilience of the electricity system on Java island”.
Indonesia exported 390.93 million tonnes of thermal coal last year, worth US$24.48 billion, down from 405.76 million tonnes in 2024, according to statistics agency BPS.
The country accounted for half of the world’s thermal coal shipments, with China, India, and the Philippines being its top buyers last year, said trade data tracker and analytics firm Kpler.
Coal crunch
The electricity crisis in Java comes on the heels of a massive, three-day blackout that crippled Sumatra last month, triggering concerns about the reliability of the country’s power sector.
Bahlil Lahadalia, minister of energy and mineral resources, said on June 15 that PLN was short of 20 million tonnes of coal earmarked for electricity generation this year, having secured only 134 million tonnes out of the required 154 million tonnes.
Fabby Tumiwa, chief executive of the Institute for Essential Services Reform, said “probably more than half of coal-fired power plants in the Java-Bali network have [coal reserves] to cover less than 10 days of operation”.
According to Fabby, the root of the problem is the Domestic Market Obligation (DMO) policy, which caps the coal price PLN pays domestic producers at US$70 per tonne – far below the international market price of above US$120 per tonne, as of Tuesday.
Under DMO, Indonesian coal producers must sell a quarter of their total output to meet domestic needs, such as supplying electricity plants, nickel smelters, or cement production.
Fabby said many producers preferred to export their coal for profit, since they “only have to pay a fine” if they did not supply domestically.
Ahmad Zuhdi Dwi Kusuma, associate principal at the Energy Shift Institute, points to a regulatory ambiguity that allows domestic industry to buy coal at above US$70 per tonne.
“Companies can sell 25 per cent of their coal output to nickel smelters, who can buy above US$70 per tonne, and it would be counted towards meeting their DMO quotas. On paper, the miners have no problem,” Ahmad said.
The government’s move to cut miners’ annual production (RKAB) to 600 million tonnes for this year, down from 790 million tonnes last year, also led to coal scarcity, he added.
Delayed approvals also played a role, Ahmad said, noting that as of March, the Ministry of Energy and Mineral Resources had approved RKAB proposals for only 300 million tonnes of coal.
“Without approval, miners cannot mine. Delayed approval causes ripple effects such as delayed contracts and [equipment] leasing. This is one of the fundamental governance errors causing our current coal shortage,” Ahmad said.
President Prabowo Subianto’s decision to streamline exports of top commodities, including coal, under the supervision of state-owned Danantara Sumberdaya Indonesia also made “miners wait and hold operations” for clearer government direction, Ahmad said.
Singgih Widagdo, chairman of the Indonesian Mining and Energy Forum, suggested raising the DMO to “above US$80 per tonne” to help PLN compete for coal and prevent the depletion of reserves for power plants.