Energy collaborations with China gain momentum in Indonesia amid dwindling support from the West
In the global push towards a cleaner future, Indonesia finds itself at the centre of a significant shift, with both Western and Eastern powers making their moves in the Southeast Asian nation.
The Just Energy Transition Partnership (JETP), launched in 2022 by an international group of Western countries, Japan, and others, pledged a total of US$20 billion. This partnership, unlike many Chinese deals done behind closed doors, includes safeguards and transparency requirements. However, as of now, only US$1.2 billion has been mobilised from the JETP.
Despite this, China remains a significant player in Indonesia's development financing. In 2022 and 2023, China was the largest single-country provider, hovering at around 10% of the total. This Chinese influence is evident in sectors like renewable energy, with the US$2 billion World Bank loan guarantee for Indonesia still in support, and the US Development Finance Corporation maintaining interest in investments.
Notably, the US quietly withdrew from the JETP in March 2025, leaving Germany and Japan to take over coordination. Meanwhile, China sees Indonesia as a strategic location for manufacturing products for further trade.
On the other hand, the group that signed a Memorandum of Understanding (MoU) with Indonesia's state-owned power company PLN in 2023 is Masdar, a global clean energy leader. The agreement covers collaboration on renewable energy projects, including the development of floating solar power plants and expanding renewable energy capacity in Indonesia.
However, concerns about environmental impacts and public health risks have arisen, particularly with the recent groundbreaking of a US$5.9 billion nickel battery plant by Chinese EV battery company CATL in West Java. A study by the Centre for Research on Energy and Clean Air and Celios identified severe public health risks linked to air pollution from nickel smelters in Indonesia. Many of these smelters are powered by captive coal-fired power plants, producing significant air pollution and carbon emissions.
Opportunities for investment in Indonesia's renewable energy sector are open to any interested party, including China. In fact, Chinese companies, including State Grid Corporation of China, Trina Solar, and several banks and energy firms, signed memoranda of understanding worth an estimated US$54 billion with Indonesia's state-owned power company PLN in 2023. During President Prabowo Subianto's 2024 visit to China, companies from the two countries signed investment agreements worth US$10 billion.
Chinese automakers including BYD and SGMW have set up EV manufacturing operations in Indonesia, supporting the government's target of producing 600,000 EVs annually by 2030. Despite these advancements, a report released last month by the Lowy Institute noted that western pledges to support Southeast Asia's clean-energy transition "have yet to translate into more projects on the ground".
As Indonesia's minister for energy and natural resources, Bahlil Lahadalia, reiterated Jakarta's commitment to Chinese engagement in September 2024, offering major "green investment opportunities" to China. Indonesia, being the world's largest producer of nickel, and with approximately 80% of nickel-processing investments in the country being totally or majority Chinese-owned, presents a significant opportunity for China to expand its involvement in Indonesia's green-energy value chain, including solar and hydropower projects, electric vehicle assembly, and more.
The future of Indonesia's energy transition seems to be a dynamic balance between Western transparency and Chinese investment, with both parties striving to make their mark in this strategic location.
