Energy ventures by China gain momentum in Indonesia amid dwindling western financial support
The US and China are both showing interest in Indonesia's green energy sector, with the US continuing to support a USD 2 billion World Bank loan guarantee and its Development Finance Corporation remaining open to investments if viable projects are presented. On the other hand, China sees Indonesia as a strategic location for manufacturing products for further trade.
Chinese companies have been expanding their involvement across Indonesia's green-energy value chain, including solar and hydropower projects, electric vehicle (EV) assembly, and smart grid development. In fact, BYD is currently building a USD 1 billion factory in West Java with a capacity of 150,000 EVs per year, and production is expected to begin in January 2026. Another Chinese automaker, SGMW, opened its Cikarang factory in 2017, initially producing conventional vehicles before adding EVs to its lineup in 2022.
However, the Just Energy Transition Partnership (JETP) initiated by a group of western countries, Japan, and initially comprising of Canada, Denmark, France, Germany, Italy, Japan, Norway, the Netherlands, the United Kingdom, and the US, has faced challenges. The government has expressed less ownership and declining enthusiasm towards the JETP due to bureaucratic fragmentation and internal hesitations. The complex structure involving multiple layers of working groups, secretariats, and donor-country parliamentary approvals has become a source of frustration for the government.
The main challenge for the JETP is the limited number of projects ready for financing. Of the USD 20 billion pledged for the JETP, only USD 1.2 billion has been mobilized as of 2025. Nevertheless, the JETP has mobilized nearly USD 1.25 billion in grants and concessional financing for solar and geothermal plants and new transmission lines.
Despite the hurdles, opportunities for investments in renewable energy are open to any interested party, including China. However, there is tension over donor funds potentially being used to buy Chinese technology, which may not sit well with donor countries.
China was the largest single-country provider of development financing to Indonesia in 2022 and 2023, hovering at around 10% of the total. In 2023, Chinese companies signed memoranda of understanding worth an estimated USD 54 billion with Indonesia's state-owned power company PLN.
The first JETP was dedicated to South Africa, and since then, Indonesia, Vietnam, and Senegal have also established Just Energy Transition Partnerships. The US quietly withdrew from the JETP in March 2025, leaving Germany and Japan to take over coordination.
As Indonesia moves towards its goal of producing 600,000 EVs annually by 2030, the country presents an attractive market for both US and Chinese investments in the green energy sector. The challenge lies in finding viable projects and navigating potential tensions between donor countries and China.
