Indonesia faces a massive financial challenge in its shift to greener energy for captive power, requiring an estimated $31 billion in investment by 2030 and a total of $92 billion by 2050, according to a new report from the Just Energy Transition Partnership (JETP).
The captive power sector, defined as electricity generation developed and utilised by industrial consumers primarily for their own operational needs, has experienced substantial and rapid growth in recent years within the dynamic economic landscape of the Southeast Asian country, Reuters said in a report.
This expansion is particularly pronounced within industrial estates dedicated to nickel processing and related activities.
Challenge of coal-dependent captive power
The captive power facilities in these nickel hubs, frequently utilising coal-fired technology due to perceived cost-effectiveness and ready availability, represent a significant energy trend that is deeply interconnected with the nation’s broader industrial policy and its critical role in the global nickel supply chain.
According to the Indonesian JETP Secretariat’s report, captive power capacity in Indonesia was estimated at 25.9 GW in 2024, with coal powering more than 75% of this total.
Furthermore, the report indicated that almost 11 GW of additional capacity is currently under development, with the majority of these new projects also planning to utilise coal.
The report stated that planned investments until 2030 are primarily directed toward deploying renewable energy, particularly solar PV and hydropower, along with battery storage.
Additionally, the report suggested other measures, including greater integration of renewables, system efficiency improvements, and a partial transition to gas as a fuel source.
Decarbonization roadmap and funding hurdles
As a result, by 2030, renewable power is projected to comprise 34% of captive generation, from 9% in 2024, with this share rising to 55% by 2040 and over 80% by 2050.
Such adoption, the report stated, would lead to 75% lower carbon emissions in 2030 than under a baseline scenario.
Indonesia’s 2023 decarbonisation policy, part of the JETP, initially excluded the captive power sector.
The JETP is a major G7-backed funding mechanism designed to assist developing countries in reducing their carbon emissions and transitioning to cleaner energy.
However, the plan’s scope was limited by this exclusion.
Furthermore, the initiative faced a significant setback when the US government announced its withdrawal from JETP agreements with several key partner nations, including Indonesia, South Africa, and Vietnam, earlier in the year.
This withdrawal cast doubt on the future funding and effectiveness of Indonesia’s energy transition efforts under the JETP framework.
The JETP Captive Scenario report, while not a legally binding document, is generally developed in cooperation with government officials.
Despite Indonesia, a leading global coal producer, securing over $20 billion in financing commitments through the JETP scheme, the actual allocation of these funds has been sluggish.
“As the JETP funds represent only a fraction of the total investment needs, realising the outlook depends on mobilizing much greater funding from diverse sources of capital,” the report said.
The JETP Secretariat estimated that $97 billion in investment is required by 2030 to decarbonize Indonesia’s primary, on-grid electricity sector.
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