What's the cheapest cost of electricity from diesel?

Diesel vs solar — the weight of fuel versus the lift of renewables Generated by Sam (SIMMA)

On the island of Sumba, east of Bali, the Sumba Iconic Island study documented a diesel generator commissioned in 1976 — a SWD unit already pushing 35 years of service at the time of the report's publication (Bibalex, 2011). There were also several units from the 80s.

This generator — and thousands like it across the archipelago — are being replaced with solar and batteries. In April 2026, PLN announced it would swap 2,396 diesel power plants with 3.21 GWp of solar and 9.03 GWh of battery storage across 741 locations, mostly in eastern Indonesia (Bloomberg Technoz).

But what if the transition stalls? What if the next administration looks at the price tag of all that new technology and decides to do the simpler thing: swap old diesel generators for new diesel generators and keep the islands running on diesel forever?

So here is the question: What is the cheapest price diesel electricity can achieve, if you give diesel every possible advantage?

We'd use the best generators, the cheapest fuel, and the shortest supply chain. Then we compare that price to reality and ask ourselves whether it's good enough to justify keeping the diesel fleet running indefinitely.

The economics of diesel power

Diesel electricity has several cost drivers, but we'll focus on two of the most important ones:

Cost (Rp/kWh) = Cost of diesel (Rp/Liter) × Generator efficiency (Liters/kWh)

The real system is not this simple. There are supply chains, storage depots, maintenance schedules, operating crews, spare parts inventories, financing costs, and a dozen other variables that shape the final price of a kilowatt-hour.

But all of that complexity exists to serve two numbers. The cost of the fuel and how much of it the generator burns to make a kilowatt-hour. Everything else — policy, logistics, maintenance, depreciation — is detail that flows through one of these two knobs.

The first number: cost per liter. What Indonesia pays for a liter of mineral diesel at the refinery gate varies by supply channel. The cheapest channel produces diesel at around Rp 8,314 per liter. The most expensive — direct imports from Singapore — costs around Rp 9,150. The spread is about Rp 840, or 10%. Not small, but not the main story. (Derived in the next section.)

The second number: liters per kilowatt-hour. This is the inverse of efficiency. A brand new, properly loaded generator produces about 4.0 kilowatt-hours from every liter — it needs 0.25 liters to make one kWh. An old, oversized generator running at low load might produce only 1.27 kWh per liter — needing 0.79 liters for the same kWh. The spread is 3×. This is where the numbers diverge. (Derived in the section after that.)

Let's walk through each number first — where they come from, how they're calculated, and why the spread between them is the entire argument for de-dieselization.

The cheapest possible price for diesel

There is no single published figure for what diesel costs Indonesia. But the Handbook of Energy & Economic Statistics of Indonesia (HEESI), published annually by the Ministry of Energy, provides the data we need.

We'll start with the national system. In 2024, Indonesia's refineries processed 311,546 thousand barrels of crude oil (Table 6.2.3). Out of that, they produced 116,758 thousand barrels of diesel (Table 6.2.5). That's the total domestic diesel output. Anything beyond that must have come from direct imports.

Where did the crude come from? Two sources.

Channel 1 — domestic crude

Indonesia produced 212,332 thousand barrels of crude in 2024. It exported 27,199 thousand barrels. The remaining 185,133 thousand barrels went to domestic refineries. That's 59% of the total refinery input (185,133 ÷ 311,546).

59% of the 116,758 thousand barrels of diesel output belongs to domestic crude:

59% × 116,758 = 68,887 thousand barrels from domestic crude

Convert to kiloliters (1 barrel = 159 liters):

68,887,000 × 159 ÷ 1,000,000 = 10.95 million kiloliters

Domestic crude is priced at the Indonesia Crude Price (ICP). In 2024, ICP averaged $78.12 per barrel (Table 4.1). Add Pertamina's refinery operating cost of $3.67 per barrel (Tempo), and the total cost is $81.79 per barrel.

A barrel has 159 liters. At an exchange rate of Rp 16,162/USD (HEESI 2024 executive summary):

$81.79 ÷ 159 × 16,162 = Rp 8,314 per liter

This is the cheapest diesel Indonesia can produce.

Channel 2 — imported crude

The remaining 41% of refinery input came from imported crude — about 128 million barrels. Its share of diesel output:

41% × 116,758 = 47,871 thousand barrels from imported crude

47,871,000 × 159 ÷ 1,000,000 = 7.61 million kiloliters

Imported crude is priced at global benchmarks. Brent averaged $81 per barrel in 2024 (EIA). Add the same $3.67/bbl refining cost, and the total is $84.67 per barrel:

$84.67 ÷ 159 × 16,162 = ~Rp 8,606 per liter

Channel 3 — direct diesel imports

Indonesia also imports finished diesel directly. In 2024, that was 4.25 million kiloliters (Table 6.2.6). This is refined fuel from Singapore, priced at MOPS Gasoil — the Mean of Platts Singapore benchmark. MOPS 10ppm averaged roughly $90 per barrel in 2024, tracked via the Platts Singapore Gasoil benchmark (SGX). Indonesia imports a grade that trades at a small discount to the 10ppm benchmark, roughly $90/barrel:

$90 ÷ 159 × 16,162 = ~Rp 9,150 per liter

The blended average

For our best-case scenario, we'll assume the generator gets the cheapest fuel — Channel 1, at Rp 8,314 per liter. This is the lowest possible material cost for diesel in Indonesia.

(Rp 8,314 is the price at the refinery gate. The diesel still has to travel.)

The best cost of getting it there

A liter of diesel must travel from the refinery to a storage depot, onto a barge or tanker, to a smaller depot, onto a truck, and into the generator's fuel tank. Indonesia doesn't publish a single figure for distribution costs — but there is one public data point.

In 2015, the General Manager of PLN Maluku-Maluku Utara told the press that his region paid Rp 2,000 per liter just for distribution — the cost of moving diesel within a remote archipelago of islands (Environment Indonesia). Adjusted to 2024 rupiah at roughly 3.5% annual inflation, that is ~Rp 2,700 per liter for a remote island chain.

A plant in Java near a port sits at the opposite end of the logistics spectrum — pipeline or short truck from the refinery to a regional depot, then a short hop to the plant. A reasonable estimate for this best-case scenario is roughly half the Maluku figure, around Rp 1,000 to 1,500 per liter. This is a floor — the real number for any specific plant depends on its distance from the nearest depot.

Delivered cost at plant gate: ~Rp 9,300 to 9,800 per liter (cheapest fuel + best-case distribution)

What a liter of diesel can give you

Every liter of diesel contains about 10 kilowatt-hours of energy (US DOE AFDC). Most of that energy is lost as heat. How much is lost depends on the generator.

A brand new, properly loaded, well-maintained diesel generator can achieve 40–45% thermal efficiency — extracting 4.0 to 4.5 kWh from every liter. This is what a policymaker would buy if they decided to replace the old fleet with new diesel generators.

For comparison, the current PLN fleet average is 26.2% (2.62 kWh/L), derived from actual 2024 generation data: 2.68 billion liters of HSD produced 7,037 GWh (Tables 6.4.5 and 6.4.2). And the Legundi PLTD in Lampung, running a 250 kW generator at an average load of just 62 kW, achieved only 12.7% efficiency — 1.27 kWh per liter (Allo & Adi, 2026).

But in our best-case scenario, we assume 40%.

The answer: cheapest diesel electricity

The absolute best case for diesel electricity — a brand new, 40% efficient generator, running on the cheapest possible Indonesian crude, at a plant within easy reach of the logistics network — produces power at about Rp 2,390 per kilowatt-hour.

Is that good?

For context, Eniya Listiani Dewi, the Director of Renewable Energy at Indonesia's energy ministry, has stated that remote diesel generation costs between $0.25 and $1.19 per kWh (Katadata, Feb 2026). That's Rp 4,500 to Rp 19,600 per kWh. Our best case of ~Rp 2,390/kWh sits well below even her published floor — but only because we assumed the most favorable possible conditions.

The fleet average of ~Rp 3,650/kWh sits just below her published floor — the national fleet already beats the ministry's own lower estimate. The Legundi case of ~Rp 7,520/kWh sits comfortably within her range.

Why the best case isn't the real case

Even a policymaker committed to buying new generators can't escape two structural problems.

The age of the existing fleet. The Sumba Iconic Island renewable energy study documented PLTD units from the 1970s and 1980s still running — a 1976 SWD unit pushing 50 years of continuous service (Bibalex). These units burn more fuel per kWh than a modern generator. Replacing them would require a multi-year, multi-trillion-rupiah procurement program. It hasn't happened yet.

The oversizing problem. This is more fundamental, and new generators won't fix it.

Diesel generators are most efficient when running close to their rated capacity. But remote PLTDs are sized for peak evening demand, e.g. a few hours of 1,000 kW, while running at 250 kW for the rest of the day. If the generator is rated at 1,500 kW to anticipate future growth, it operates at 16% capacity factor most of the time.

At 16% load, the engine isn't really generating power — it's warming up. A disproportionate amount of fuel goes into keeping the engine hot and overcoming internal friction. It's like driving a car in crawling traffic: all noise, all heat, but very few kilometers actually traveled.

The Legundi plant is the perfect example. It's a 250 kW generator running at 62 kW, which is less than a third of its rating. The result is 12.7% efficiency, and more than half the fuel is wasted. Buying a brand new 250 kW generator for the same location would still leave it running at 62 kW, and the efficiency would still be terrible.

The distribution uncertainty. The Rp 1,000-1,500/L distribution cost used in this calculation is a derived estimate based on one public data point from Maluku in 2015. The government does not publish a single figure for diesel distribution costs to remote PLTDs. That uncertainty runs one way: diesel's true cost is almost certainly higher than the paper calculation.

Can Indonesia keep islands running on diesel forever?

Assume the best possible scenario. New generators across the fleet. Cheapest fuel. Efficient logistics. Assume the government spends whatever it takes to get there.

The delivered cost of power: ~Rp 2,390/kWh.

PLN's uniform residential tariff for a non-subsidized household is Rp 1,444/kWh. Industrial customers pay as low as Rp 997/kWh.

Even in the best case, diesel electricity costs about 65% more than what a household pays — and more than double what the largest industrial customers pay (Rp 2,390 vs Rp 997). There is no scenario where keeping islands on diesel makes economic sense. The transition isn't optional.