Indonesia establishes regulatory framework for energy conservation services

16 March 2026

Indonesia’s Minister of Energy and Mineral Resources Regulation No. 1 of 2026 on Energy Conservation Services Business (“Regulation”) came into effect on 8 January 2026, establishing a regulatory framework for the provision of energy conservation services (“Energy Services”) and the operation of energy service companies (“ESCOs”). Issued to implement Indonesia’s broader energy conservation policies, the Regulation provides clearer governance for the energy-efficiency services sector and sets out the legal basis for the business activities of entities providing energy conservation services. The term “energy conservation” involves a systematic, planned, and integrated approach to conserving and making more efficient use of domestic energy resources.

This article provides an overview of the Regulation.

Scope

The Regulation requires an ESCO to be a licensed legal entity that conducts a permanent and continuous business established under Indonesian law, domiciled and operated within the territory of Indonesia.

The following activities constitute Energy Services:

• Conducting investment-grade energy audits to identify technically and cost-effective energy efficiency opportunities. Energy efficiency involves using energy efficiently and effectively while prioritising safety, security, comfort, and productivity;
• Financing energy efficiency projects (“EE Project”) in the form of an energy performance contract requires the measurement and verification of relevant energy performance. An EE Project involves the implementation of one or more energy efficiency activity on systems, facilities, and processes at the Energy Service users’ (“Users”) premises, by which energy savings are achieved and measured. Such a contract is an agreement for energy efficiency activities under which the return on investment is calculated from the energy savings obtained;
• Implementing installation and/or construction work, as well as monitoring and supervising EE Projects, in accordance with engineering standards under laws and regulations, Indonesian national standards, and/or international standards;
• Operating, maintaining, and repairing energy installations in accordance with engineering standards under laws and regulations, Indonesian national standards, and/or international standards; and/or
• Measuring and verifying energy performance, as carried out by certified providers.

The Regulation defines Users broadly to include governments, communities, and various categories of business involved in the provision or use of energy. These include:

• energy providers, including entities, permanent establishments, and non-legal entities that supply energy;
• energy source users, including the central and regional governments, entities, permanent establishments, non-legal entities, and communities that utilise energy sources; and/or
• energy users, including the central and regional governments, entities, permanent establishments, non-legal entities, and communities that utilise energy.

The terms “entities”, “permanent establishments”, and “non-legal entities” are commonly used together in Indonesian regulations to capture the full spectrum of business actors. Broadly, “entities” refer to incorporated legal entities such as companies or state-owned enterprises, “permanent establishments” refer to the Indonesian business presence of foreign companies, while “non-legal entities” refer to unincorporated business forms such as partnerships or other business arrangements without separate legal personality.

Business models

Energy Services must be implemented through an agreement concluded between an ESCO and a User. The agreement must at a minimum stipulate the business model to be utilised for the EE Project. The Regulation stipulates the possible business models as set out in the table below. However, other business models based on the needs of the parties may also be utilised.

The implementation of business models may be supported by third parties and/or the financial services industry in accordance with laws and regulations.

Reporting requirements

Initial reports

An ESCO that has obtained its Energy Services license must submit a report to the Minister of Energy and Mineral Resources (“Minister”) no later than 14 working days after the issuance of the license. The report must include a copy of the license and set out the categories and parameters for each Energy Service.

Expansion reports

If an ESCO expands its business, it must submit an Energy Service expansion report to the Minister no later than 14 working days after the approval of the expansion. The report must include a basic document consisting of a copy of the license and technical documents detailing the categories and parameters for the expansion.

Implementation reports

An ESCO must submit an annual report on the implementation of its Energy Services no later than 31 December and at any other time as required. The report must contain a summary of the EE Project, calculations of energy savings from the energy source replacement, and documentation of the EE Project.

The Minister will issue written warnings to ESCOs that fail to submit reports.