National Energy Security: An Analysis of Economic Growth and Energy Consumption at the Regional Level in Indonesia

Anna Yulianita, Siti Rohima, Mardalena and Lisa Hermawati

Journal of Applied Economic Research, 2025, vol. 24, issue 2, 415-437

Abstract: Regional energy security is a critical component in ensuring sustainable development in Indonesia, a country with diverse geographical and economic characteristics. In 2022, more than half of Indonesia’s final energy consumption was concentrated in the Java-Bali region, highlighting regional disparities in energy use. This study aims to analyze the relationship between regional energy consumption and economic growth across Indonesia’s major islands—Sumatra, Java, Bali & Nusa Tenggara, Sulawesi, and Maluku & Papua. Specifically, the study tests three main hypotheses: the growth hypothesis (energy consumption drives economic growth), the conservation hypothesis (economic growth leads to increased energy consumption), and the neutrality hypothesis (no significant causality between the two). Using panel data and the Granger Causality test technique, the study categorizes regional behavior to identify specific patterns of causality. The results support the growth hypothesis in most regions, where increased energy consumption, particularly electricity usage, significantly contributes to regional economic growth. In Bali & Nusa Tenggara, where the economy relies heavily on tourism and services, the conservation hypothesis is more applicable, suggesting that economic activity drives energy demand. In contrast, the Maluku & Papua region exhibits the neutrality hypothesis, with weak or no causal relationship between energy consumption and economic growth. These findings offer both theoretical and practical implications: they reinforce the importance of regional energy planning in economic policy and highlight the need for tailored energy strategies to suit the specific dynamics of each region. Understanding these regional patterns provides essential input for policymakers to design equitable and efficient energy distribution frameworks.

Keywords: energy security; economic growth; energy consumption; Granger causality; neutrality hypothesis (search for similar items in EconPapers)
JEL-codes: O14 P28 Q43 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnjaer:v:24:y:2025:i:2:p:415-437

DOI: 10.15826/vestnik.2025.24.2.014

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