This month marks two years into the signing of the Indonesia Just Energy Transition Partnership (JETP), and captive coal power in the country is showing no signs of slowing down. According to a new analysis by the Centre for Research on Energy and Clean Air (CREA) and Global Energy Monitor (GEM), between July 2023 and July 2024, Indonesiaʼs coal power capacity saw a 15% increase, totalling 7.2 GW. Of that, 2.6 GW comes from independent power producers (IPPs) and 4.5 GW from captive use, meaning new coal capacity for industry wasn early double that of coal for the national grid.
The analysis– an update to CREA and GEMʼs 2023 report–finds that sizable growth in captive coal is expected to continue, with an estimated total of 11.04 GW up to 2026, including all units in the construction, pre-permitted, and announced phases. Combined with the 132 units of operational captive coal-fired power plants (CFPPs) totaling 15.2 GW, proposals would put total captive coal capacity at 26.24 GW, which is greater than the total coal plant capacity of all of Australia in 2023and would put captive in the largest share of Indonesiaʼs coal generation outside of PLN and IPPs, at nearly 40%.
Captive coal power in Indonesia is mainly dedicated to powering a select range of energy-intensive industries, with metals such as nickel and aluminium holding major shares, followed by pulp and paper, chemicals, cement, and textiles. Major additions of CFPPs in the pipeline are attributed to Indonesiaʼs metals processing industry, such as nickel. While nickel is a critical metal for EVs and batteries, captive coal plants are among the most carbon-intensive routes to meet this demand.
The health and economic impacts of unchecked CFPP development in Indonesia would be catastrophic. Analysis on nickel industrial complexes located in Central and Southeast Sulawesi and North Maluku reveals that under the current growth pathway and without strengthened emission and environmental standards, exposure to air pollution emitted from coal-based smelting processes and associated captive coal power plants would lead to nearly 5,000 deaths in 2030 and cause IDR 56 trillion (USD 3.42 billion) in economic burden. Meanwhile, exclusion of captive CFPP retirement from a 2040 coal phase-out target would cause an additional 27,000 deaths and IDR 330 trillion (USD 20 billion) of economic burden from cumulative health impacts nationwide.
However, showing a proactive stance on global climate partnerships like JETP and blessed with abundant renewables potential, Indonesia holds the capability to pivot from captive coal and become a leader in industrial decarbonisation. Whatʼs more, the financial benefits of renewables clearly outweigh those of remaining reliant on coal– by 2025, solar-storage levelized cost of electricity (LCOE) in Indonesia with preferential financing is projected to be USD 0.01 cents per kWh cheaper than coal. In the next decade, pricing will be even better, with the cost difference anticipated to be over USD0.03 cents perk Wh.
In anticipation of the JETP Secretariatʼs release of Indonesiaʼs captive power landscape mapping, national and global stakeholders will be presented with a collective opportunity to catalyse decarbonisation efforts. Inclusion of captive CFPP retirement in Indonesiaʼs national plan would not only support the governmentʼs energy transition and climate targets, but would also garner interest for clean energy investments.
Katherine Hasan, Analyst at CREA: “Indonesiaʼs willingness and ability to meet global climate commitments is manifest in the JETP as well as the recent release of the Second Nationally Determined Contribution (SNDC) draft. However, the efficacy of these actions is being threatened by an ever-expanding coal capacity within our nationʼs core industries. Setting a clear and ambitious schedule for early CFPP retirement and renewables integration would not only support the governmentʼs climate targets, but also help to attract the clean energy investments Indonesia needs to secure a strategic position in the global RE supply chain."
Lucy Hummer, Senior Researcher at Global Energy Monitor: “Addressing the role of coal in Indonesiaʼs energy transition cannot be limited to the power sector. It is critical to set out a clear pathway for all captive power facilities. As a leading supplier of critical minerals for the global clean energy supply chain, Indonesia must leverage its national plan and retire captive coal-fired power plants to decarbonise energy intensive industries like nickel, a process that requires both investment and strong governance."
