Energy Crisis Fails to Disrupt People's Electricity, Is Coal DMO Right?
JP Morgan has just released Pandora’s Box: The Global Energy Shock of 2026, placing Indonesia second in the world as the most resilient country against global energy uncertainties amid the ongoing crisis. This recognition is proud, yet it demands reflection on what truly gives Indonesia such resilience. One fundamental answer lies in a policy instrument: the Coal DMO.
What is DMO?
Domestic Market Obligation (DMO) for Coal is an obligation requiring every national mining company to allocate at least 25% of its total production to meet domestic needs before the remainder can be exported. Its basic principle is simple yet strategic: before Indonesian coal is sold to the world market, the needs of domestic industry and people must first be ensured at affordable and stable prices.
In practice, DMO operates through two pricing schemes. For general industrial sectors such as cement, fertiliser, textiles, and smelters, the price is capped at a maximum of US$90 per tonne – safeguarding the competitiveness of national products and millions of workers dependent on them.
For the PLN electricity sector, the price is set even lower at US$70 per tonne, consistent since 2018 despite the Reference Coal Price once reaching US$330 per tonne in 2022. This regulation is formalised through Ministry of Energy and Mineral Resources Decree No. 267 of 2022, as amended by Decree No. 399 of 2023.
Energy policy cannot be evaluated solely through the lens of market efficiency. It must be assessed with a focus on social justice and national resilience. When global prices surge amid crises or uncertainties and DMO does not exist, the hardest hit are not mining corporations, but ordinary people paying electricity tariffs, small traders running businesses, and labour-intensive industries employing millions of workers.
Here, the government’s bias is evident: DMO prioritises public interests over corporate export gains, in line with Article 33 of the 1945 Constitution, which states that natural resources are “utilised for the greatest prosperity of the people.”
Why is DMO the Right Cushion?
To explain why DMO is not a populist policy but a smart resilience instrument, we can refer to the framework of Daniel Yergin, the Pulitzer Prize-winning energy historian.
In his work The Prize (1991), Yergin formulated four pillars of energy resilience: supply diversification, resilience to shocks, market integration, and flexible response capability. Yergin emphasises that true resilience is not just about having reserves, but about the ability to mobilise those reserves when needed.
Through this framework, DMO functions as an economic buffer that absorbs global shocks before they damage domestic structures. Its mechanism can be explained as follows: when global coal prices surge, without DMO, that spike would directly pass to PLN’s electricity production costs, then drive up electricity tariffs, and ultimately trigger inflation across the economy.
Through DMO, the transmission chain of shocks is broken at the source. This is a concrete application of Yergin’s resilience pillar – the system’s ability to absorb surprises without significant disruption.
The context is significant because around 66% of Indonesia’s electricity generation mix in 2025 still comes from coal. This means coal prices are not merely an export commodity price, but the base price for national electricity. Securing domestic coal prices means securing electricity prices for 280 million Indonesians. Here, DMO acts as a shock absorber in the national energy architecture.
DMO Policy Application
This buffering mechanism was truly tested in early 2026. When Middle East geopolitical conflicts pushed global crude oil prices above US$120 per barrel and global energy prices fluctuated, domestic electricity prices in Indonesia remained stable. This outcome was not achieved by itself – it is the fruit of a policy architecture designed over years, now strengthened under President Prabowo Subianto’s leadership.
Minister of Energy and Mineral Resources Bahlil Lahadalia translates the President’s directives into a series of synergistic policies. DMO is retained as a buffer, while the inauguration of the Balikpapan Refinery Development and Management Project (RDMP) in January 2026 increases oil processing capacity from 260,000 barrels per day to 360,000 barrels per day, the dedieselisation programme replaces thousands of diesel power plants with solar and geothermal energy, and the B50 biodiesel mandate is prepared to take effect from July 2026. Viewed through Yergin’s framework, this series builds all four pillars of energy resilience simultaneously.
From Resilience to Sovereignty
Resilience is essentially a defensive condition – the ability to endure. A higher aspiration is energy sovereignty, namely full control over the nation’s own energy fate. The government’s commitment to this is clearly evident in the 2025-2034 Electricity Supply Business Plan (RUPTL), dubbed the “greenest RUPTL in history.”
From the planned addition of 69.5 GW of power plants over the next ten years, 76% will come from new renewable energy and storage systems – from solar, hydro, geothermal, bioenergy, to nuclear. The share of clean energy in the national electricity mix is targeted to increase 2.5 times to 34.3% by 2034.
Meanwhile, additional coal power plants are only 6.3 GW to support the transition. This transition demands further steps, accelerating renewable energy development whose primary mix target is still being optimised, strengthening downstream mineral processing, and developing carbon capture technology to leverage coal’s advantages.