Jakarta, January 30, 2025 – Indonesia has 3,687 GW of renewable energy potential, a significant asset for developing green hydrogen. The Institute for Essential Services Reform (IESR) recognizes green hydrogen as a key solution for accelerating decarbonization in industry and transportation, particularly in energy-intensive sectors that require high-temperature combustion, heavy equipment operations, and long-distance land and sea transportation.
Since 2023, Indonesia has had a National Hydrogen Strategy (SHN) as part of its efforts to utilize hydrogen in achieving decarbonization by 2060 or sooner. However, the SHN has yet to outline a detailed strategy for accelerating the development of green hydrogen, which is produced through water electrolysis using renewable energy sources.
As the Ministry of Energy and Mineral Resources works on a roadmap for low-carbon hydrogen and ammonia deployment, IESR urges the government to prioritize a dedicated green hydrogen roadmap to ensure sustainable and competitively priced green hydrogen production in Indonesia by 2030.
To support this goal, IESR, in collaboration with the British Embassy in Jakarta under the Green Energy Transition Indonesia (GETI) project, organized a Focus Group Discussion (FGD) on “Identifying the Green Hydrogen Market in Indonesia” on January 23, 2025, in Jakarta.
Fabby Tumiwa, Executive Director of IESR, emphasized that Indonesia should harness its vast renewable energy potential to meet domestic energy needs while producing green hydrogen and ammonia for local use and export. He highlighted that the 2025-2030 period is crucial for establishing an ecosystem that enhances the economics of green hydrogen, making it competitive with hydrogen produced from the steam methane reforming (SMR) process using natural gas.
By 2023, Indonesia’s hydrogen consumption was estimated at 1.75 million tons per year, with 88 percent used for urea production, 4 percent for ammonia production, and 2 percent for oil refining. However, the current hydrogen supply is still dominated by gray hydrogen, which has a high carbon intensity. Fabby suggested that stimulating demand for green hydrogen should begin by meeting the needs of hard-to-decarbonize sectors such as the fertilizer and cement industries.
“To make green hydrogen more competitive, the cost of electricity from renewable sources must be reduced to below USD 0.05/kWh, as this significantly impacts production costs. Additionally, hydrogen infrastructure should be developed close to demand centers to minimize transportation costs. The government can also introduce incentives and subsidies to lower production costs, enabling green hydrogen to compete with gray and blue hydrogen,” Fabby explained.
IESR also encourages Indonesia to learn from developed countries in designing a sustainable hydrogen market strategy. Through its collaboration with the UK Government under the GETI project, IESR is working to establish the Indonesia Green Hydrogen Accelerator, an initiative aimed at accelerating green hydrogen development in line with Indonesia’s National Hydrogen Strategy 2023.
Erina Mursanti, GETI Project Manager at IESR, noted that the UK has successfully developed its hydrogen market through policies such as the Low Carbon Hydrogen Standard. The UK Government is targeting 10 GW of low-carbon hydrogen production by 2030 and has provided £240m of funding to the Net Zero Hydrogen Fund (NZHF). It also promotes green hydrogen development through government incentives, industry partnerships, research and development, and enabling infrastructure. She suggests that Indonesia can adopt a similar strategy to build a competitive green hydrogen ecosystem, attract international investment, and accelerate the energy transition.
Indonesia has identified 17 potential sites for green hydrogen production, with estimated production costs ranging from USD 1.9 to 3.9 per kg (or USD 14 to 28.9 per million British thermal units (MMBTU)) by 2040. According to IESR’s Indonesia Energy Transition Outlook (IETO) 2025, these costs are relatively low compared to current global green hydrogen production costs, which range between USD 2.7 to 12.8 per kg. However, the subsidized gas price of USD 6 per MMBTU for seven industrial sectors poses a challenge to the competitiveness of green hydrogen. To address this, reducing gas subsidies and implementing carbon pricing mechanisms could enhance the viability of green hydrogen for domestic industries.
“The government needs to demonstrate a strong commitment to developing a green hydrogen ecosystem through policies, regulations, incentives, and strengthened production targets while improving the investment climate. Continued reliance on fossil fuels for hydrogen production risks increasing carbon emissions and contradicts Indonesia’s net-zero target. Moreover, dependence on natural gas could threaten energy security due to declining domestic gas reserves,” Erina concluded.
