Changing the DMO price alone will not resolve the crisis if upstream governance remains opaque. What Indonesia needs is a Just Economic Circuit to make the energy transition real.
The rolling blackouts that struck the Java-Bali power system in mid-2026 have once again exposed the deep-rooted dysfunction of Indonesia’s energy governance. Amid the scramble to respond to supply shortages, public and political debate quickly narrowed to a single figure: the US$ 70-per-tonne Domestic Market Obligation (DMO) coal price, which many now argue no longer reflects international market conditions.
As I recently noted in an interview with Tempo (“Far from Solving the Root Causes of PLN’s Coal Crisis”, June 24, 2026), treating the US$70 DMO price as the sole culprit behind the supply crisis is an oversimplification that ultimately benefits rent-seekers. It creates the illusion that raising—or even abolishing—the DMO price would somehow make the coal shortage disappear and automatically solve Indonesia’s electricity crisis.
Instead of remaining trapped in a superficial debate over a single pricing mechanism, it is time to confront the real issue: the systemic failure of upstream coal governance and the illusion of energy security that is deliberately maintained. At least three structural problems upstream demand immediate attention.
Three Layers of the Problem
First, administrative distortions in DMO allocation.
What is often overlooked is that the US$70 benchmark applies to high-calorific coal (6,322 GAR), whereas most of PLN’s coal-fired power plants require medium-calorific coal (4,200–5,000 GAR) because their boiler specifications are fixed. Consequently, imposing a blanket 25 percent DMO obligation across all Coal Mining Business License (IUP) holders creates a fundamental administrative distortion.
This is where government transparency should come into play. Yet authorities have never publicly disclosed which mining concessions produce coal matching PLN’s specifications, where these mines are located, or what the associated logistics costs are. As a result, many companies prefer to pay penalties rather than fulfill their DMO obligations—not simply because the regulated price is too low, but because their coal cannot technically be used by PLN’s power plants. Raising the DMO price to US$90, or even US$120, per tonne will not magically create additional medium-calorific coal near PLN’s generating units.
Second, distorted production control and chaotic RKAB governance.
PWYP Indonesia has consistently advocated for the control and gradual reduction of coal production as part of a just energy transition and environmental protection. Unfortunately, the government’s decision to reduce the 2026 production quota to 600 million tonnes appears to be driven by a very different objective: sustaining high international coal prices to protect exporters’ profit margins.
Because this production cap is designed around export rents, the approval process for the Annual Work Plan and Budget (RKAB) has become increasingly political, opaque, and protracted. Rather than ensuring adequate domestic supply, policymakers have been preoccupied with allocating production quotas to safeguard export markets. The consequences were predictable: delayed RKAB approvals, coal inventories at PLN power plants falling to only 11–12 days of operation—far below the minimum safe threshold of 26 days—and ultimately, widespread blackouts. This crisis emerged because production controls were, we believe, effectively captured by export-oriented oligarchic interests.
Third, an endless parade of artificial institutional fixes.
Much like the electric cooking stove program, which was once promoted as an energy transition initiative despite being little more than an import substitution policy, official responses to the DMO crisis have repeatedly revolved around creating new bureaucratic institutions rather than addressing structural problems. These have included proposals for transferable DMO quotas, the now-abandoned Managing Institution Partner (MIP), PLN’s coal subsidiary, a dedicated coal procurement task force within the Ministry of Energy and Mineral Resources, and, most recently, placing coal exports under a single export channel managed by PT Danantara Sumberdaya Indonesia (DSI).
As long as supply chains and RKAB governance remain opaque, any new institutional arrangement merely relocates old problems into new bureaucratic structures.
Strengthening the Energy Transition Agenda
Calls to reform Indonesia’s DMO pricing policy are becoming increasingly difficult to ignore.
On one side, mining associations argue that regulated prices should be brought closer to market levels. But the public should remain cautious. Unless accompanied by strict safeguards, higher DMO prices would primarily boost mining companies’ profit margins rather than accelerate investment in renewable energy. It would amount to little more than a transfer of wealth from PLN—and ultimately taxpayers and electricity consumers—to coal producers.
On the other hand, many civil society organizations have advanced a more progressive proposal: eliminating the implicit subsidy embedded in the DMO pricing system, as artificially cheap coal undermines the competitiveness of renewable energy. As part of Indonesia’s civil society movement, PWYP Indonesia stands firmly behind this diagnosis. Artificially suppressed coal prices distort energy markets and slow the transition to cleaner alternatives.
However, to ensure this broader reform agenda is not hijacked, the removal of price distortions must be accompanied by an effective windfall-capture mechanism.
Why? Because the energy transition requires structural readiness. Indonesia’s renewable energy bottlenecks are not limited to coal prices. They also include delays in electricity planning under the RUPTL, fragile transmission infrastructure, a shortage of green skills among young workers, and the continued expansion of captive coal-fired power plants that support the nickel industry.
If coal prices are fully liberalized without adequate state safeguards, Indonesia risks ending up with more expensive fossil-generated electricity while renewable energy remains unprepared to fill the gap.
Building a Just Economic Circuit
To bridge this gap, PWYP Indonesia proposes a Just Economic Circuit.
The principle is straightforward: separate the policy instruments.
The DMO price should remain an instrument for safeguarding the domestic energy supply. If the government ultimately decides that adjusting DMO prices is necessary to secure coal availability, this must be accompanied immediately by a mandatory balancing mechanism: a Windfall Profit Tax or a progressive export levy.
With Indonesia’s Coal Benchmark Price (HBA) now exceeding US$124 per tonne and export volumes reaching hundreds of millions of tonnes annually, extraordinary profits worth tens of trillions of rupiah should be captured by the state rather than flowing into the hands of a small group of economic elites.
These revenues should be strictly earmarked into a Just Transition Fund, dedicated to three priorities:
- Protecting vulnerable households by maintaining affordable electricity tariffs for low-income consumers (450 VA and 900 VA), ensuring ordinary citizens do not bear the costs of governance failures.
- Accelerating large-scale investment in renewable energy infrastructure.
- Supporting green skills development and economic diversification for workers and communities in coal-producing regions.
Indonesia must also learn from the governance failures of the Oil Palm Plantation Fund (BPDPKS). Any Just Transition Fund must be protected through robust public oversight, independent auditing, and a phase-down funding mechanism to ensure that the energy transition does not become permanently dependent on continued coal extraction.
This discussion has become even more urgent following the establishment of PT Danantara Sumberdaya Indonesia (DSI) as Indonesia’s single coal export gateway in June 2026. The DMO mechanism under the new DSI framework remains “to be regulated.” This presents a critical policy window. Transparency, clearly separated institutional roles, and ring-fencing excess profits for a just energy transition must be embedded now—before these regulations become entrenched.
Changing the DMO benchmark price requires little more than a ministerial signature. The far greater challenge is ensuring that such changes do not simply repackage old injustices in new institutional forms. The Indonesian public has every right to demand assurances that the country’s energy transition will not be derailed—or captured—along the way.
Read the full article on Indonesiana.id