Despite being one of the world's largest coal producers, Indonesia is experiencing rolling blackouts, primarily affecting the Java-Bali grid. This paradoxical situation is attributed to several factors, including delays in the Ministry of Energy and Mineral Resources' approval of companies' Work Plan and Budget (RKAB), which disrupts coal supply, and a significant price gap between domestic and international coal prices. Under the Domestic Market Obligation (DMO) scheme, coal supplied to Indonesian power plants is capped at $70 per ton for high-calorific coal, while the country's benchmark export price stood at $121.83 per ton in June 2026, creating a financial incentive for producers to prioritize more lucrative export markets.
The state-owned electricity firm PLN projects a need for 154 million tons of coal in 2026 but has only secured about 134 million tons through legally binding contracts, leaving an 18 million to 20 million ton gap. This shortfall has been exacerbated by the government's use of the RKAB process to cap national coal production at 600 million tons, aiming to support export prices but inadvertently reducing domestic supply flexibility. The government has taken short-term measures, including emergency shipments of 1.8 million tons in July 2026 and a special allocation of 3 million tons per month from August to December, which helped restore about 5 gigawatts of reserve capacity to the Java-Bali grid, ending the immediate blackouts.
However, long-term energy security remains uncertain as global forecasts suggest Newcastle coal prices will remain firm, between $149 and $155 per metric ton through mid-2027, ensuring the substantial gap between international prices and Indonesia's $70 DMO ceiling persists. In an attempt to address issues like under-invoicing and export leakage, Indonesia has implemented a centralized coal export gateway, PT Danantara Sumberdaya Indonesia (PT DSI), which began operations on June 1, 2026, with full implementation set for January 1, 2027. This move has created uncertainty among overseas strategic partners, potentially affecting $1.8 billion in coal export contracts in 2026 alone and causing them to postpone investment decisions.
