Indonesia faces significant energy production issues despite abundant domestic resources

Although Indonesia is the world’s largest coal exporter and the third-largest exporter of LNG, almost 33% of its people lack access to electricity.

Poor transport links across the archipelago and consistent underinvestment in power generation capacity have left the country well behind its peers.

Companies operating in Indonesia have been plagued by significant power shortages

In polls conducted by the Asia Foundation in 2010 and 2011, almost half of the 13,000 companies surveyed reported experiencing power outages at least three times a week.

While some companies have resorted to diesel generators, this adds significantly to their costs and requires them to procure and store their own fuel.

Indonesia’s capacity to address this issue will rely largely on three factors: reducing subsidies, fighting corruption, and implementing a new land law

Reforming Indonesia’s current fuel subsidies will free funds for the state utility to invest in new power plants.

Reducing corruption at lower levels of government will help prevent officials from holding up projects.

The successful implementation of Indonesia’s new land law will speed the development of new power projects.