Indonesia Seeking Energy Resilience Through the Bioenergy Program
The Iran War reveals the risks involved when countries are dependent on imports of energy to meet domestic demand. In the case of Indonesia, which subsidizes part of domestic energy consumption, skyrocketing crude oil prices threaten to push the government's budget deficit beyond the legal cap of 3 percent of gross domestic product (GDP). And so, it is time for action.
Besides tapping its own fossil fuel resources - Indonesia having an abundance of coal, crude oil and natural gas in its soil - the further development of renewable energy sources is crucial in order to safeguard a clean, productive and (energy) independent future. Once Indonesia significantly reduces the need for imports of (expensive) crude oil, liquified petroleum gas (LPG) and fuels such as gasoline, diesel and jet fuel, the government has much more spending power to invest in further social and economic development of the country.
Biodiesel - The Success Story
Indonesia already started this structural transition. Its biodiesel program - despite some challenges and setbacks - is performing well. This program, which was launched in 2008, involves the mandatory blending of petroleum diesel with palm oil-derived fatty acid methyl esters (FAME) to produce biodiesel. It began with a mandatory 2.5 percent biodiesel blend but has managed to raise this figure to 40 percent (B40 program) over almost a period of two decades. Reportedly, based on a statement by the Energy and Mineral Resources Ministry, this program saved around USD $40 billion in foreign exchange between 2020 and 2025. Quite comfortably, Indonesia has great access to palm oil, and thus it has the potential to be a global force in biofuel production. While the implementation of the B50 stage in 2026 was postponed, the country is already enjoying the fruits of this program.
Biodiesel is made for diesel engines. As these engines do not have spark plugs, they ignite fuel by squeezing it until it gets so hot that it explodes (compression ignition). With FAME having a high cetane number, which is a measure of how easily a fuel ignites under pressure, this works for diesel engines.
Bioethanol - The Next Frontier
Unfortunately, gasoline engines are a different story. If FAME is put into a Pertamax tank, the gasoline engine's spark plugs would not be able to ignite the heavy oil efficiently. Instead, it would damage the engine.
Therefore, bioethanol (an alcohol) would be the solution for gasoline engines (used in most passenger cars and motorcycles). This program has been started across a couple of big cities in Indonesia, but trails far behind its big brother (biodiesel program). The fuel in the current stage is called Pertamax Green 95, with a 5 percent bioethanol content.
The main problem is the feedstock availability. While in the case of biodiesel Indonesia has huge quantities of palm oil at its disposal, the story is different for bioethanol as the latter uses sugarcane (or starches). However, Indonesia struggles with sugar self-sufficiency. Indonesian President Prabowo Subianto's administration has identified Merauke (Papua) as the primary hub for bioethanol production, with massive investments in integrated sugarcane plantations and refineries, while there are also plans to use cassava, and aren (sugar palm) as secondary feedstocks to avoid over-reliance on a single crop.
A technical aspect is that undermines quicker progress of the bioethanol program is that, unlike diesel engines, gasoline engines require more precise calibration for higher ethanol blends.
Bioavtur - Securing the Skies
Besides biodiesel and bioethanol, another ambition of the Indonesian government is bioavtur (sustainable aviation fuel). Considering Indonesia is a huge Archipelago, air travel is often the more efficient choice. Even between big cities located on one island, many people prefer flying, leading to strong demand for air travel, hence for jet fuel. Interestingly enough, bioavtur can be made from used cooking oil or palm oil. And so, in terms of feedstock availability, the situation is safe for Indonesia.
This would also mean that Indonesia can save on foreign exchange. In 2024, Indonesia imported a total of 1.79 million kilolitres of avtur, which is a whopping 542 percent increase from jet fuel imports one year earlier, and is particularly painful in times when the price of jet fuel rises, as happened after the start of the Iran War. In fact, based on reports in international media, the increase in jet fuel prices has been much higher than the increase in gasoline and diesel prices because jet fuel is even more dependent on the passageway through the Strait of Hormuz.
Based on Indonesian sources, jet fuel prices for domestic flights across the Archipelago increased by around 70 percent, while for international flights the price increase is around 80 percent. For example, at Soekarno-Hatta International Airport, the price of jet fuel rose from IDR 13,656 per litre at the start of March 2026 to IDR 23,551 per litre at the start of April 2026.
For airline operators, rising jet fuel prices is a significant problem. Based on information from the Indonesia National Air Carriers Association (INACA), jet fuel accounts for around 40 percent of airlines' operational costs.
In line with President Prabowo's desire for Indonesia to become a significant bioavtur manufacturer, state-owned energy giant Pertamina held the groundbreaking ceremony for Indonesia's first sustainable aviation fuel refinery, in Cilacap (Central Java), in early 2026. This refinery is designed to produce 6,000 barrels of sustainable aviation fuel per day.