The Impact of New Renewable Energy Share on Indonesia’s Macroeconomic Stability

Abstract

ABSTRACT

 Indonesia faces major challenges in maintaining macroeconomic stability amidst high dependence on fuel imports and efforts to increase the share of new renewable energy (NRE). Although the share of renewable energy in the national primary energy mix has reached 13.5% in 2023, this figure is still far from the national target of 23% by 2025. Dependence on fuel imports, which reached 25 million kilolitres, puts significant pressure on the energy trade balance deficit and contributes around 2% to the national current account deficit. This study aims to analyse the effect of renewable energy share, fuel import, fuel import ratio, and mineral and coal sector investment on Indonesia's macroeconomic stability as measured by Gross Domestic Product.

Using the Robust Least Square regression approach, this study evaluates the causal relationship between these variables based on data for the period 2018-2023. The results show that the share of renewable energy has a significant positive effect on GDP with a coefficient of 4.090, confirming the importance of energy diversification in supporting economic growth. In contrast, fuel imports and fuel import ratio have a significant negative impact on GDP, with coefficients of -0.071 and -7.828, respectively, reflecting economic risks due to imported energy dependence. On the other hand, investment in the mineral and coal sector makes a significant positive contribution with a coefficient of 4.659, indicating its strategic role in supporting energy stability during the transition to renewable energy.

This study confirms the importance of an integrated energy policy to reduce dependence on fuel imports, accelerate the development of renewable energy, and optimise investment in the mineral and coal sector. The findings make a significant contribution to the literature on energy transition and economic stability, while supporting Indonesia's efforts to achieve sustainable development.