{"id":568902,"date":"2026-07-04T18:16:32","date_gmt":"2026-07-04T18:16:32","guid":{"rendered":"https:\/\/www.europesays.com\/ie\/568902\/"},"modified":"2026-07-04T18:16:32","modified_gmt":"2026-07-04T18:16:32","slug":"why-coal-rich-indonesia-cant-keep-the-lights-on","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/ie\/568902\/","title":{"rendered":"Why coal-rich Indonesia can’t keep the lights on"},"content":{"rendered":"

A wave of rolling blackouts across Indonesia in mid-2026 has exposed one of the country\u2019s biggest economic paradoxes: it is one of the world\u2019s largest coal producers, yet it has struggled<\/a> to secure enough fuel for its own power plants.<\/p>\n

Power outages across the Java-Bali grid \u2014 from South Tangerang and Depok to the University of Indonesia campus \u2014 are a stark warning<\/a> of deeper structural problems: weak governance in the upstream mining sector and a fragile downstream power system.<\/p>\n

The outages have triggered widespread public debate largely because they came despite Indonesia\u2019s enormous coal reserves. Government data \u2014 from the Mineral and Coal Resources and Reserves Balance Sheet \u2014 shows<\/a> the country holds 31.96 billion tons of coal reserves, including 17.54 billion tons of proven reserves.<\/p>\n

By nearly any measure, that should be more than enough to meet domestic power and industrial demand for decades. But the power system breakdown shows that abundant reserves don\u2019t automatically mean a reliable supply.<\/p>\n

The Java-Bali grid\u2019s problem isn\u2019t an overall coal shortage \u2014 it\u2019s a structural mismatch<\/a> in the output mix. Over the past several years, Indonesia has sharply increased output of low-calorific coal while production of medium- and high-calorific grades has steadily declined.<\/p>\n

That\u2019s a critical imbalance because most power plants run by state utility PLN need coal with calorific values of roughly 4,500 to 5,200 kilocalories per kilogram.<\/p>\n

A separate outage in East Kalimantan, Indonesia\u2019s top coal-producing province, initially sparked speculation<\/a> about supply shortages or failures in the Domestic Market Obligation, or DMO, policy.<\/p>\n

Local authorities and PLN, however, said the blackout was actually caused by simultaneous mechanical failures at the Handil and Tanjung Batu combined-cycle gas power plants, which knocked out about 250 megawatts of capacity and took roughly a month to repair.<\/p>\n

The distinction matters: Java-Bali\u2019s outages stem from fuel management failures compounded by upstream regulatory bottlenecks, while regions outside Java remain vulnerable<\/a> due to aging power plants and fragile transmission lines.<\/p>\n

Bureaucratic delays, distorted pricing<\/strong><\/p>\n

A closer look at the Java-Bali crisis shows the scale of the structural problem. PLN projects it will need 154 million tons of coal in 2026 but has locked in legally binding contracts for only about 134 million tons \u2014 a gap of 18 million to 20 million tons with no guaranteed alternative supply.<\/p>\n

That shortfall largely stems<\/a> from a damaging interaction between delays in the Ministry of Energy and Mineral Resources\u2019 approval of companies\u2019 Work Plan and Budget (RKAB) and long-standing distortions in domestic coal pricing.<\/p>\n

The Indonesian Mining Professionals Association, known as Perhapi, has warned<\/a> that signing contracts for 134 million tons doesn\u2019t guarantee the coal actually reaches power stations, since coal-fired plants need continuous, timely deliveries rather than one-time procurement deals.<\/p>\n

Delayed approvals and cuts to 2026 RKAB quotas have created<\/a> uncertainty over how much coal mining concession holders are legally allowed to produce each day. Without approved RKAB allocations before the fiscal year starts, mining companies lack the legal authority to extract and ship coal \u2014 disrupting domestic supply obligations.<\/p>\n

Administrative bottlenecks have been compounded by powerful export incentives tied to a widening price gap. Under regulations unchanged since 2018, coal supplied to domestic power plants under the DMO scheme is capped<\/a> at $70 per ton for high-calorific 6,322 GAR coal.<\/p>\n

Mining costs, meanwhile, have climbed sharply as mature concessions face stripping ratios of 8 to 12 \u2014 sharply raising diesel consumption, heavy-equipment rental costs and labor expenses.<\/p>\n

For many producers, the economics no longer add up: the cost of producing medium-calorific coal now often exceeds the DMO price ceiling, leaving little or no margin on sales to PLN and, in some cases, outright losses.<\/p>\n

Export markets, by contrast, remain far more lucrative. Indonesia\u2019s benchmark coal price stood at $121.83 per ton in June 2026 \u2014 a price gap of more than $50 per ton compared with the DMO ceiling.<\/p>\n

Combined with a weaker rupiah, which boosts export earnings in dollar terms, that gap gives mining companies a financial incentive few are willing to pass up.<\/p>\n

A regulatory mismatch<\/strong><\/p>\n

These regulatory inconsistencies point to a deeper conflict of interest between the government and the mining industry.<\/p>\n

The government has used the RKAB process to cap national coal production at 600 million tons, aiming to tighten global supply and support export prices \u2014 but that has also reduced the flexibility of domestic supply, making it harder to set aside enough medium-calorific coal for PLN power plants.<\/p>\n

At the same time, the requirement that every mining permit holder, or IUP, set aside at least 25% of production for the DMO \u2014 regardless of coal quality \u2014 has been called a fundamentally flawed regulatory approach by Publish What You Pay Indonesia.<\/p>\n

Many producers simply do not mine coal that meets PLN boiler specifications. Facing costly, cumbersome coal-blending requirements, many companies have concluded that paying modest administrative fines is cheaper than complying with the DMO.<\/p>\n

Against this backdrop, the government has launched one of the most ambitious overhauls in Indonesian mining history, making PT Danantara Sumberdaya Indonesia, or PT DSI, the country\u2019s sole coal export gateway starting June 1, 2026. The goal is to curb long-standing practices such as under-invoicing, transfer pricing and the leakage of export earnings overseas.<\/p>\n

The transition will happen in three phases. In the first, private exporters must route transactions through PT DSI under a nominee mechanism. In the second, set for late 2026, export approvals will hinge on verified compliance with DMO obligations. Full implementation is set for January 1, 2027, when PT DSI will operate under its own mining license and become the exclusive export intermediary.<\/p>\n

While the reform is expected to boost state revenue and improve oversight of export proceeds, it has also created real commercial uncertainty. Perhapi has questioned whether PT DSI can administer hundreds of active export contracts, many with complex commercial clauses, trade-finance arrangements and risk-management mechanisms.<\/p>\n

Coal export contracts potentially affected during the transition are worth an estimated $1.8 billion \u2014 about 32.7 trillion rupiah \u2014 in 2026 alone. The uncertainty has already led several overseas strategic partners to postpon investment decisions while they wait for greater clarity on how Danantara\u2019s centralized system will set export prices.<\/p>\n

The shift has also effectively shelved an earlier compensation-scheme proposal, first floated in 2022 and later reworked as the Government Institutional Partner, or MIP, scheme. It was designed to secure domestic coal supply by paying producers the difference between international market prices and the regulated DMO price whenever they supplied PLN.<\/p>\n

Though a draft presidential regulation was reportedly finalized by late 2024, the Ministry of Energy and Mineral Resources formally dropped the proposal at the end of 2025 in favor of stricter DMO requirements and direct production quota cuts through the RKAB system.<\/p>\n

Mining companies have expressed disappointment, arguing that without a credible compensation mechanism, supplying coal to the domestic market will remain financially unattractive as production costs continue to rise.<\/p>\n

Rethinking energy security<\/strong><\/p>\n

The government has taken several short-term steps to stabilize the Java-Bali power system. PLN secured an emergency shipment of 1.8 million tons of coal in July 2026, followed by a special allocation of 3 million tons a month from the Directorate General of Minerals and Coal between August and December.<\/p>\n

The additional supplies of medium- and high-calorific coal restored about 5 gigawatts of reserve capacity to the Java-Bali grid, effectively ending the rolling blackouts.<\/p>\n

Yet Indonesia\u2019s long-term energy security is far from assured. Global forecasts suggest Newcastle coal prices will stay relatively firm, between $149 and $155 a metric ton, through mid-2027 \u2014 meaning the big gap between international prices and Indonesia\u2019s fixed $70 DMO ceiling is likely to persist.<\/p>\n

Meanwhile, the International Energy Agency projects that global coal demand will peak before 2026 and then gradually decline as renewable energy expands rapidly in major consumer markets such as India and China.<\/p>\n

A future drop in international coal prices could eventually narrow the export and DMO cap price gap. But it won\u2019t eliminate Indonesia\u2019s risk of recurring power shortages unless the country overhauls its upstream governance. The recent crisis shows that reactive fixes are no longer sufficient.<\/p>\n

Three reform needs stand out. First, the Ministry of Energy and Mineral Resources should overhaul the RKAB approval process so production plans are fully reviewed and approved before each fiscal year begins, giving mining companies the legal certainty to plan production, arrange shipments and meet supply commitments without disruption.<\/p>\n

Second, the DMO pricing formula needs to be redesigned. Instead of a rigid price ceiling, the formula should be dynamic and responsive to actual production costs, including stripping ratios and other mining inputs, making it commercially viable again to supply the domestic market.<\/p>\n

Third, PT Danantara Sumberdaya Indonesia shouldn\u2019t act solely as Indonesia\u2019s single export gateway. It should also collect export levies and redistribute that revenue to compensate producers that supply PLN with primary fuel, aligning commercial incentives with national energy security goals.<\/p>\n

Without a coherent package of structural reforms, namely regulatory certainty, market-based pricing and incentives, and real transparent government oversight, Indonesia\u2019s energy security will remain hostage to competing bureaucratic and commercial interests.<\/p>\n

For a country endowed with some of the world\u2019s richest coal reserves, recurring power shortages aren\u2019t a matter of resource scarcity; they\u2019re a dark indication of policy failure.<\/p>\n

Ronny P. Sasmita, Ph.D, is senior analyst at the Indonesia Strategic and Economic Action Institution, a Jakarta-based think tank<\/p>\n","protected":false},"excerpt":{"rendered":"A wave of rolling blackouts across Indonesia in mid-2026 has exposed one of the country\u2019s biggest economic paradoxes:…\n","protected":false},"author":2,"featured_media":568903,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[174],"tags":[38936,79,242555,179,18,19,7088,242556,242557,242558,242559,17,242560],"class_list":["post-568902","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-block-3","tag-business","tag-dmo-policy","tag-economy","tag-eire","tag-ie","tag-indonesia","tag-indonesia-coal-industry","tag-indonesia-coal-price-caps","tag-indonesia-pln","tag-indonesia-power-outtages","tag-ireland","tag-pt-danantara-sumberdaya-indonesia"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116863079957883710","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/568902","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=568902"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/568902\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/568903"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=568902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=568902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=568902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}