Jakarta, Sep 23 (AP) - The race to replace coal as the dominant energy source in Indonesia, the world's top coal exporter, has turned into a strategic contest between the US and China. The outcome will not only shape Indonesia's climate future but also determine which global superpower will have the upper hand in setting energy standards for the developing world.
Like many other developing nations, Indonesia finds itself at a crossroads, facing two distinctly different energy paths.
In 2023, Chinese firms have signed agreements worth over $54 billion with Indonesian state utility PLN. In addition, a visit by Indonesian President Prabowo Subianto to Beijing resulted in another $10 billion in commitments. This positions Chinese companies strongly in Indonesia's emerging clean-energy supply chain, encompassing solar energy, critical mineral mining, and electric vehicles (EVs).
These substantial Chinese investments overshadow the $20 billion offered by the Just Energy Transition Partnership (JETP) signed in 2022 between Indonesia and several wealthy nations aimed at transitioning away from coal, which accounts for 3.6% of Indonesia's GDP.
The JETP initiative had been stumbling even before the US President Donald Trump administration’s formal withdrawal in March. To date, only $1.2 billion, just 6% of the promised JETP funding, has been disbursed, while Indonesia estimates it requires over $97 billion for a successful energy transition.
The US, a leading oil producer globally, has advocated for liquefied natural gas (LNG) as part of talks to avoid tariffs for Indonesia. The US strategy emphasizes achieving "energy dominance" to lessen dependency on strategic rivals like China. Meanwhile, China is focusing on extensive renewables projects to ensure its dominance in the supply of clean energy technology.
The US approach risks reinforcing a reliance on fossil fuels, whereas China's proposal aims to deliver jobs and cleaner energy with potentially fewer safeguards.
"These two countries... they're shaping two different visions of the future," stated Putra Adhiguna of the Energy Shift Institute.
US Exit Influences Politics, But Not Investments
While the US departure in March affected the political landscape, it did not derail investments in the JETP. Analysts suggest that when the JETP was signed, US climate envoy John Kerry claimed the US had laid essential groundwork. However, after Trump dismantled Biden-era climate policies and emphasized fossil fuel development, Indonesian officials questioned the rationale for them to transition if America wasn't doing the same, says Adhiguna.
Early discussions around the JETP had set overly optimistic goals that became difficult to realize, irrespective of US policy shifts, he added.
The US had pledged $2 billion, with about half still available through loan guarantees, according to Jordan Lee from the Tony Blair Institute for Global Change in Jakarta. The JETP was always meant to cover only a portion of the estimated $97 billion required. Foreign investment was deemed crucial given Indonesia's nascent solar and wind energy sectors, which accounted for just 0.24% of total energy production compared to 3.8% in the Philippines and 13% in Vietnam.
Lee noted that the JETP initiative also acted as a unifying framework for stakeholders and facilitated Indonesia's partnerships with new countries like the UAE and Saudi Arabia.
Indonesia's JETP secretariat did not respond to a request for comment from The Associated Press.
China Provides an Alternative Framework
Significant Chinese ventures in Indonesia include a $6 billion supply-chain initiative by battery giant CATL with local partners in 2022 and an EV manufacturing plant announced by BYD in 2024 that will produce 150,000 cars per year and create 18,000 jobs.
Additionally, China's BTR New Material Group launched a $478 million factory in 2024 for producing anode materials for EV batteries, adding approximately 8,000 jobs. Meanwhile, a solar panel factory set to be unveiled by LONGi in 2025 will have an annual capacity of 1.6 gigawatts.
"It's a whole-systems change," said Dinita Setyawati, an energy analyst with Southeast Asia's think tank Ember. She pointed out that countries could acquire solar panels from China and charge their Chinese-manufactured electric cars with clean electricity.
These projects are deployed swiftly, essential for Indonesia's five-year political cycles, although Western investors may offer greater safeguards. For example, POWERCHINA completed a 100-megawatt solar park in just seven months in 2024.
"If a US company takes four years to do a feasibility study, Chinese companies will already have invested by then," remarked Adhiguna, although he added that Chinese investments often carry significant environmental costs.
Much of Indonesia's nickel mining is under Chinese ownership, tapping into the country’s vast reserves needed for building EV batteries. However, these mines depend on captive coal-fired power plants built on-site, supplying necessary electricity.
A 2024 study by the Centre for Research on Energy and Clean Air revealed that pollution from nickel mining operations in three Indonesian provinces, primarily from smelters and coal-fired power plants, would result in economic costs amounting to $2.6 billion by 2025, rising to $3.4 billion by 2030, while causing over 3,800 deaths in 2025 and nearly 5,000 by 2030.
US Gas Deals May Lock Indonesia Into Fossil Fuels
In April, Indonesia’s energy minister, Bahlil Lahadalia, announced plans to increase LNG imports from the US by approximately $10 billion as part of tariff negotiations. Despite burning cleaner than coal, LNG, as a form of natural gas cooled for transport, still emits greenhouse gases.
The concern is that such deals could further solidify Indonesia's dependence on fossil fuels. Entering into long-term agreements might commit the country to potentially outdated infrastructure as the world swiftly gravitates toward more cost-effective and rapidly deployable solar and wind energy options, analysts warned.
Indonesia could risk lagging in the clean energy transition phase and miss investment possibilities like data center growth seeking renewable sources in Southeast Asia, expressed Setyawati.
"And once they realize it, it might be too late," she cautioned.
Meanwhile, Indonesia remains heavily entwined with coal. It was the sole country proposing to build new coal plants and ranked third globally for coal capacity by 2024.
Approximately 80% of Indonesia's 1.9 gigawatts of newly built coal capacity was meant for captive plants that support smelters processing minerals like nickel and cobalt for electric vehicles, according to a report by the US-based nonprofit Global Energy Monitor.
"The Indonesian government needs to realize that this is where the world is heading, like it or not," reiterated Setyawati. (AP) SCY SCY
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