New energy: Indonesia ready to welcome hydrogen

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia - Energi baru: Indonesia siap sambut hidrogen

16 April 2025

By Afiffah R. Nurdifa and Yanita Patriella

Bisnis, Jakarta – Indonesia is preparing to embrace the use of hydrogen as an alternative fuel to reduce the use of fossil energy domestically. Regulations and investment incentives are being prepared to ensure smooth development.

The Ministry of Energy and Mineral Resources is set to draft regulations as a legal foundation and incentives for the use of hydrogen in the country to support the development of this new energy ecosystem.

Minister of Energy and Mineral Resources, Bahlil Lahadalia, stated that the Government is working on regulations and incentives for hydrogen development in line with incoming investments. So far, the Government has been attracting investors by launching a hydrogen and ammonia roadmap.

"If asked about the regulations, we have only made regulations for electric vehicles, not yet for hydrogen. If there are many [investors], and we see the market potential, the Government must make adjustments," said Bahlil at the Global Hydrogen Ecosystem 2025 event on Tuesday (15/4).

According to him, the Government is also open to providing incentives for hydrogen development in the country. However, this will only be done when investment proposals are submitted to the Government.

Hydrogen development, Bahlil said, was previously considered when Hyundai planned to build an electric car factory in Karawang, West Java. "We just need to see which variables require Government intervention through incentives to make the investment feasible," he said.

He believes that the use of hydrogen can be a substitute for imported fuel oil. Currently, Indonesia's fuel oil consumption reaches 1.5 million barrels of oil per day.

Domestically, Bahlil said, hydrogen potential is supported by the reliability of raw materials such as coal, which has relatively large reserves. This means that gas potential could double in the next ten years.

"I will push for new gas wells to be prioritised for the domestic market and downstream, including hydrogen," he explained.

Moreover, hydrogen as green energy also requires renewable energy, which is abundant in Indonesia. "This could create around 300,000 jobs and generate approximately USD70 billion in foreign exchange [towards Indonesia's GDP in 2060]," he said.

The Ministry of Energy and Mineral Resources projects that global demand for green hydrogen will increase from USD500 billion in 2030 to USD11 trillion in 2050. The target is to produce 9.9 million tonnes per year (mtpa) of hydrogen by 2060 to meet the needs of the industrial sector (3.9 mtpa), transportation (1.1 mtpa), electricity (4.6 mtpa) and household gas networks (0.28 mtpa).

On the other hand, PT PLN (Persero) is also promoting the development of the hydrogen ecosystem in Indonesia by building the first hydrogen refuelling station (HRS) and offering price discounts for the fuel.

However, the domestic hydrogen ecosystem has not yet formed due to its limited use, mainly in industry and power plants.

PLN President Director, Darmawan Prasodjo, said that the company has been producing hydrogen as a cooling agent in power plant operations.

"We electrolyse water to get hydrogen to cool our power plants. It turns out we miscalculated, producing over 200 tonnes, using 75 tonnes and having an excess supply of 128 tonnes," explained Darmawan.

From this excess hydrogen supply, PLN plans to promote the hydrogen ecosystem by offering it as a cheaper fuel compared to general fuel oil.

He compared the costs: using a petrol car costs Rp1,300 per kilometre, an electric car with home charging costs around Rp300 per kilometre or Rp550 per kilometre at SPKLUs, while hydrogen costs only Rp550 per kilometre.

Production costs

Meanwhile, Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, said that price is a challenge for the adoption of green hydrogen in Indonesia. Currently, the production cost of green hydrogen ranges from Rp3.8 to Rp12 per kilogram, about four times more expensive than hydrogen from natural gas.

"To promote the use of green hydrogen, the price must be reduced in the next five years," he said.

Fabby mentioned three factors that will increase the competitiveness of green hydrogen. First, the production technology is becoming more mature. As solar and wind power plants become cheaper, the cost of electricity and electrolysis technology becomes more affordable, reducing the price of green hydrogen.

Second, global investment in green hydrogen continues to increase. In 2020, around 102 clean hydrogen projects globally reached final investment decisions worth about USD10 billion, increasing to 434 projects worth USD75 billion in 2024.

Third, green hydrogen provides economic benefits, such as job creation and increased energy security. Besides replacing gas and coal as energy sources, hydrogen also has the potential to become an export commodity and contribute to national foreign exchange.

According to the latest IESR study, the potential for renewable energy projects that can be developed and are financially viable is 333 gigawatts (GW). The potential for viable renewable energy projects across Indonesia can be used to produce green hydrogen if the electricity cannot be absorbed by PLN.

"The Government is expected to set targets for green hydrogen development in the next five years, aiming to increase production and create markets, as well as target reducing green hydrogen production costs to below USD2 per kilogram. Achieving this must be supported by policy frameworks and fiscal and financial incentives for green hydrogen production and use," he said.

To attract investment in green hydrogen, Fabby said, an ecosystem supporting the implementation of the National Hydrogen Strategy (SHN) is needed. IESR encourages the acceleration of the green hydrogen ecosystem in Indonesia through the formulation of a national hydrogen strategy and a green hydrogen development roadmap as a foundation for long-term policy direction in the low-carbon energy transition.

Then, set appropriate policy priorities to increase the competitiveness of green hydrogen prices to be more competitive than conventional energy sources. Next, develop governance systems and cross-sectoral policy frameworks to create a conducive ecosystem for the utilisation and development of green hydrogen.

Additionally, build a certification and guarantee of origin system for green hydrogen to ensure transparency, integrity and acceptance in international markets. Promote international cooperation as part of a global strategy to accelerate energy system transformation and open up low-carbon energy trade opportunities.

Next article: New chapter of IKN development

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