Downstream policy in Indonesia: Does it support energy security?
DOI:
https://doi.org/10.12928/optimum.v16i1.15575Abstract
The downstream policy in the mining sector aims to enhance the added value and competitiveness of national industries in a dynamic global market. This policy also impacts domestic energy security. This study examines whether Indonesia’s mining downstream policy supports energy security. Using panel data for 34 provinces from 2017 to 2022, we proxy downstreaming by mining sector value added. Energy security is measured by a composite index constructed with Principal Component Analysis from four dimensions: availability, accessibility, affordability, and acceptability. Fixed-effects panel estimates indicate that stronger downstream activity is associated with higher overall energy security, driven mainly by improvements in supply and access indicators such as installed generation capacity, electricity generation, and household electrification. In contrast, the estimated effect of downstreaming on the electricity price (tariff) measure is statistically insignificant, implying no robust evidence that downstreaming changes retail electricity prices over the study period. The findings suggest that downstream policy contributes to energy security primarily through capacity expansion and wider access, while affordability outcomes are likely shaped by other mechanisms, including regulated pricing and region-specific cost structures. The study provides province-level evidence to inform downstream strategies that better align industrial objectives with energy security goals.
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