Designing the Energy and Electricity Laws for the Next 50 Years

Note: This article reflects the personal opinion of the author and does not represent the views of the CNBC Indonesia editorial team.

No country can build the energy system of the future using the mindset of the past. The history of energy has always moved faster than regulation. The oil crisis of the 1970s gave birth to a new paradigm of energy security.

The 1990s brought market liberalisation and efficiency in the electricity system. The last two decades have been marked by the acceleration of renewable energy, the digitalisation of power grids, and decarbonisation commitments. The world has now entered a new chapter in which artificial intelligence, energy storage systems, electric vehicles, hydrogen and modular nuclear reactors are beginning to shape the face of the global energy system.

Recent developments in the energy and minerals industry convey one very clear message: energy regulation can no longer be drafted merely to answer today’s challenges. Regulation must be able to anticipate challenges that have not yet fully emerged. For this reason, deliberations on the Energy Law and the Electricity Law represent an important moment to ensure that Indonesia’s legal foundation remains relevant for the next fifty years.

Thus far, the regulatory approach has often been reactive. When a technology develops rapidly, new rules are gradually adjusted. When a new business model emerges, the government revises the rules again. As a result, the law always lags one step behind innovation. In a world of energy that is changing very quickly, this pattern is becoming increasingly untenable.

Energy is undergoing an unprecedented transformation. Households are no longer merely electricity consumers; they are beginning to act as producers through rooftop solar. Electric vehicles are slowly evolving from mere transport tools into part of the energy storage system through the vehicle-to-grid concept.

Battery systems are no longer just a supplement but are becoming a primary buffer for grid stability. Artificial intelligence is even being used to optimise plant operations, forecast electricity load and detect system disturbances in real time.

This transformation is still at an early stage. Over the coming decade, energy storage technology is expected to develop far more rapidly. Smart grids will allow millions of devices to communicate automatically to maintain system balance. Hydrogen is beginning to play a role in heavy industry and transport. Digitalisation will change how electricity is produced, traded, stored and consumed by the public.

Over the next two to three decades, these changes are expected to grow more complex. Long Duration Energy Storage will enable energy to be stored for days or even weeks. Virtual Power Plants will link millions of small generators into one virtual plant capable of operating like a utility-scale facility.

Offshore Energy Hubs will integrate offshore wind, hydrogen, ammonia, oil and gas, and Carbon Capture, Utilisation and Storage (CCUS) technology within one interconnected industrial ecosystem.

Even before Indonesia reaches its centenary in 2045 and enters the middle of this century, the world may already know more economical modular nuclear reactors, high-capacity solid-state batteries, low-carbon synthetic fuels, and even nuclear fusion technology, which today remains in development. No one can be certain which technology will emerge as the winner. Precisely because of that uncertainty, regulation must be designed to adapt to a range of possibilities.

This is where the concept of future-proof regulation becomes highly relevant. Its essence is not to create laws that regulate every technology in detail, but to build a legal framework flexible enough to accommodate innovation without sacrificing legal certainty. Good regulation is not regulation that picks a particular technology as the winner, but regulation that gives room for the best technologies to develop according to national needs.

Many countries have begun adopting this approach. Singapore has developed a regulatory sandbox so that energy innovations can be tested before being permanently regulated. The United Kingdom has updated the governance of its electricity system to better prepare for digitalisation and rising renewable energy penetration.

The European Union is accelerating regulatory harmonisation to support green industry, whilst the United States increasingly promotes technology-neutral policies, granting incentives based on performance and emissions reductions rather than on the choice of a specific technology.

The lesson from these countries is actually simple. Modern regulation no longer determines which technology will win. Regulation’s task is to create certainty, encourage innovation and protect the national interest in the face of ceaseless change.

Indonesia has an opportune moment to adopt this way of thinking. The agendas of energy self-sufficiency, industrial downstreaming, strengthening energy resilience, and accelerating new and renewable energy development all require a legal foundation capable of withstanding technological dynamics over the coming decades. Regulation must provide certainty for investors, yet at the same time be adaptive enough not to obstruct the emergence of new innovations.

The drafting of the Energy Law and the Electricity Law therefore needs to be built upon five main principles that can keep regulation relevant over the long term.

First, regulation must be technology neutral. Legislation should not lock the direction of development onto one particular technology.

Global experience shows that innovation often develops faster than policymakers predict. Overly specific regulation risks becoming obsolete before its benefits are truly felt. Conversely, a technology-neutral approach gives room for various solutions to compete on efficiency, safety, sustainability and economic benefit.

Second, regulation must anticipate the digitalisation of the energy system. The future of the energy sector will be determined not only by new power plants, but also by data, artificial intelligence, the Internet of Things, cybersecurity, and the capacity to manage millions of interconnected devices.

Smart meters, smart grids, predictive maintenance and digital electricity trading will become part of the daily life of the power system. Therefore, data governance, system interoperability, digital security and the protection of critical infrastructure must be given adequate space within the national legal framework.

Third, regulation needs to encourage integration between energy sub-sectors. To date, electricity, oil and gas, new and renewable energy, bioenergy, hydrogen, energy storage and carbon management have often been viewed as standalone sectors. Yet the future of energy is moving towards a single interconnected ecosystem.

Power generation will be integrated with energy storage. Hydrogen will serve both as a storage medium and as an industrial fuel. Carbon will become part of industrial decarbonisation strategy. Regulation that remains siloed will find it increasingly difficult to keep up with these developments.

Fourth, regulation must open the door to new business models. In future, consumers will no longer merely buy electricity. They may also sell electricity from rooftop solar panels, provide electric vehicle battery capacity to support the grid, or become part of a virtual power plant.

Energy aggregators, grid flexibility services, digital electricity trading and various platform-based business models will grow ever faster. The legal framework needs to provide certainty for these new business models without stifling innovation.

Fifth, the entire design of regulation must remain oriented towards national energy resilience. However impressive technological innovation may be, the ultimate goal remains the same: ensuring energy is available, affordable, reliable and sustainable, and capable of supporting Indonesia’s economic growth.

Regulation must not merely pursue rapid technology adoption, but must also maintain a balance between investment, national interests, industrial competitiveness, consumer protection and the security of the energy system.

These five principles will become ever more important as Indonesia enters a more advanced phase of industrialisation. Mineral downstreaming, the development of green industrial estates, data centres, electric vehicles, artificial intelligence and high-technology manufacturing will require an energy system far more complex than today’s. Regulation must be able to anticipate these changes long before the challenges actually arise.

Moreover, the revision of the Energy Law and the Electricity Law must be viewed as an institutional investment, not merely a regulatory update. Countries that have succeeded in leading the energy transition have done so not only because they possess abundant resources or the best technology, but because they have institutions and regulation capable of providing certainty amid a changing world. Legal certainty will determine investor confidence. Regulatory flexibility will determine the speed of innovation. Both are the foundation for the birth of the future energy industry.

Indonesia has enormous opportunities. We have diverse energy resources, a vast domestic market, a strategic geographic position, and a development agenda that increasingly places energy resilience as a national priority. This momentum should be used to build regulation that not only solves today’s problems but can also anticipate the challenges of one to two generations ahead.

Fifty years from now, Indonesia’s energy system will almost certainly be fundamentally different. Households may become power generators. Vehicles may become energy storage. Hydrogen may become an industrial fuel.

Artificial intelligence may manage the electricity system automatically. Even technologies still confined to laboratories today may have become part of everyday life. What must not change is the ability of Indonesia’s regulation to remain relevant in the face of each wave of innovation.

Ultimately, the Energy Law and the Electricity Law are not merely a collection of articles governing generation, transmission, distribution or electricity trading. They are a strategic foundation that will determine how Indonesia seizes every technological opportunity, attracts quality investment, strengthens industrial competitiveness, and safeguards national energy resilience through the middle of this century and beyond.

Regulation that only answers today’s needs will soon be overtaken by change. Conversely, regulation designed with a fifty-year vision will give room for innovation, provide certainty for businesses, strengthen energy sovereignty, and ensure that every technological leap truly serves the welfare of the people.

Now is the time for Indonesia to seize the momentum of revising the Energy Law and the Electricity Law to build a legal framework that is adaptive, far-sighted and oriented towards the national interest. Visionary regulation will not only safeguard energy resilience, but also pave the way for Indonesia to become one of Asia’s centres of energy innovation, investment and industry. If the legal foundation is laid correctly today, then fifty years from now Indonesia will not merely follow global change, but help determine its direction.