Indonesia’s Industrial Energy Efficiency Gains Reach Just 2%, Fiscal Incentives Key to Accelerating Progress
Jakarta, 8 September 2026 — Energy savings in Indonesia’s industrial sector currently stand at just around 2% of total energy consumption, well below international best practices of 3–5%. Developing effective incentives and financing mechanisms to drive greater energy savings remains a key challenge that has yet to be fully addressed.
Nearly 500 companies have now reported their energy management data through the online energy management reporting system (POME), managed by the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE) under Indonesia’s Ministry of Energy and Mineral Resources (ESDM). The energy savings achieved so far are equivalent to avoiding the need for thousands of megawatts of additional coal-fired power generation capacity. While this may appear significant, the progress is still not ambitious enough to drive substantial improvements in energy efficiency across Indonesia’s industrial sector.
This gap is one of the key findings of the Regulatory Mapping Study on Energy Efficiency in the Industrial and Building Sectors, conducted by the Sustainable Energy Transition in Indonesia (SETI) Consortium. The study found that while Government Regulation No. 33 of 2023 on Energy Conservation mandates energy management, regular energy audits, and the provision of incentives and disincentives for the central government, local governments, the industrial sector, and buildings, implementation on the ground still needs to be strengthened. This is particularly the case in harmonizing implementing regulations and developing adequate financing mechanisms and incentive schemes.
“The mandatory energy management program has demonstrated clear results. The energy savings achieved by the industrial sector are significant, contributing to lower CO₂ emissions while also reducing the state budget’s exposure to energy compensation costs. Going forward, with stronger incentives in place, I am confident that businesses will be further encouraged to invest in energy efficiency,” said Gigih Udi Atmo, Director of Energy Conservation at the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE), Ministry of Energy and Mineral Resources (ESDM).
To close the gap and bring energy savings closer to the 3-5% benchmark, a discussion session facilitated by SETI’s financial consultant recommended strengthening three key areas of intervention: tax incentives, such as accelerated depreciation and equal VAT treatment for direct investment, energy service purchases, and leasing; a stronger non-fiscal ecosystem, including standardized energy audits, baselines and verification, and underwriting guidelines for financial institutions; and the development of financing business models tailored to Indonesia’s regulatory context, including Guaranteed Savings ESCO, Energy/Cooling/Lighting-as-a-Service, and selected leasing or lease-purchase schemes.
Johannes Anhorn, Coordinator for Industrial and Building Sector Decarbonization at the GIZ Energy Programme Indonesia & ASEAN, emphasized that the main challenge lies not in the strength of existing regulations, but in harmonizing their implementation across sectors.
“This is entirely understandable and necessary, and I believe Indonesia already has the instruments needed to develop a regulatory framework that ensures and maintains such harmonization,” he said. He also underscored GIZ’s role as a partner in supporting the harmonization process among the Ministry of Energy and Mineral Resources, Ministry of Finance, Ministry of Industry, Ministry of Public Works, and financial authorities such as the Financial Services Authority (OJK) and Bank Indonesia.
The study’s findings and recommendations were discussed at an interministerial coordination forum attended by the Coordinating Ministry for Economic Affairs, the Ministry of National Development Planning (Bappenas), the Ministry of Finance, the Ministry of Industry, the Ministry of Public Works, Bank Indonesia, and the Environmental Fund Management Agency (BPDLH). The forum followed a series of preparatory meetings held since December 8, 2025. Participants agreed on several priority issues, including the need to harmonize energy efficiency regulations, clarify tax treatment across different financing models, establish minimum credit assessment standards for financial institutions, and define eligibility criteria for environmental funding support for energy efficiency projects.
Editor’s Note
About Sustainable Energy Transition in Indonesia (SETI)
The SETI project is funded by the International Climate Initiative (IKI) of Germany’s Federal Ministry for the Environment, Climate Action, Nature Conservation and Nuclear Safety (BMUKN), in partnership with the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE) of Indonesia’s Ministry of Energy and Mineral Resources (ESDM). The project is implemented by a consortium comprising GIZ, the Institute for Essential Services Reform (IESR), WRI Indonesia, Yayasan Indonesia CERAH, the Fraunhofer Institute, and LPEM FEB UI. SETI focuses on renewable energy and energy conservation, with two main areas of work: industrial and building sector decarbonization.
