Indonesia’s rapid growth in industrial coal plants, particularly to power its nickel industry, is raising serious concerns about climate targets, public health, and long-term economic competitiveness.

According to research by the Centre for Research on Energy and Clean Air (CREA) and Global Energy Monitor (GEM), the country’s operational and planned captive coal capacity has surged to 31 gigawatts (GW), triple its 2023 level.

Captive coal plants operate exclusively to power industrial facilities and are not connected to the national grid, creating a largely hidden but rapidly expanding energy footprint.

Captive Coal Capacity Surpasses Global Benchmarks

Of the 31GW of captive coal capacity, 19.3GW is operational, 3.6GW is under construction, and 8.16GW is in the planning pipeline, according to CREA and GEM.

This expansion now exceeds Australia’s entire coal fleet and is approaching the total coal capacity of Germany.

Between July 2024 and July 2025, captive coal accounted for roughly 80% of all new coal capacity added in Indonesia.

Most of this growth is concentrated in nickel processing hubs such as Central Sulawesi and North Maluku, where capacity has increased 2.25 times since 2023, driven by the booming nickel smelting industry.

Gaps in Official Energy Transition Assessments

The rapid surge of captive coal is not reflected in official energy transition plans. A November 2025 report by the Just Energy Transition Partnership (JETP) cited only 3.1GW of planned captive coal capacity, tabulated 4.45GW elsewhere, and omitted all announced projects.

CREA researchers highlight this discrepancy as evidence of a broader lack of transparency and oversight in Indonesia’s coal transition planning.

Katherine Hasan, analyst at CREA, stated, “Indonesia’s energy landscape is undergoing a radical split, where a stagnant national grid is being eclipsed by an explosive, nickel-driven captive coal surge.”

She emphasized the need to integrate captive coal units into national 2040 phase-out targets and to establish a public monitoring framework to enforce the government’s 35% emissions reduction mandate.

Regulatory Loopholes and Emissions Oversight

Captive coal projects benefit from Presidential Regulation No. 112/2022, which grants exemptions for national strategic projects.

While the regulation requires these units to reduce emissions intensity by 35%, there is no public monitoring framework or evidence that compliance is being verified.

CREA and GEM warned that, “the omission of large volumes of captive coal capacity from official assessments, combined with weak regulatory oversight, risks locking Indonesia into a high-emissions pathway and creating stranded assets that could undermine national competitiveness for decades.”

Public Health and Economic Consequences

CREA’s modelling shows that failing to include captive coal in retirement targets could have severe human and economic consequences.

Excluding these plants could result in 27,000 additional air pollution-related deaths and a cumulative economic burden of US$20 billion before the coal fleet is fully decommissioned.

By 2030, air pollution in nickel processing hubs alone is projected to cause 5,000 deaths annually and cost the economy US$3.42 billion each year.

Environmental degradation is also expected to result in US$235 million in losses for local farmers and fishers over the next 15 years.

CREA studies show that while industrial output peaks around the fifth year of development, environmental damage begins to sharply erode economic gains by the eighth year.

Implications for Global Market Access

Indonesia’s nickel is a critical component for electric vehicle batteries and the global transition to cleaner energy.

However, reliance on coal-powered smelters risks undermining Indonesia’s access to international markets.

Analysts warn that failure to decarbonize the industrial base could expose the country to carbon-based trade measures, including the European Union’s carbon border tax, introduced in early 2026.

Lucy Hummer, senior researcher at GEM, stated, “Data transparency is a fundamental first step towards a just and accountable energy transition. It is impossible to plan the replacement of coal plants with renewable alternatives without understanding the full landscape of existing and planned coal capacity, especially for captive coal, which has grown rapidly and largely unchecked in recent years.”

PHOTO: UNSPLASH

This article is a summary of two original articles. The full versions can be read at the following links:

https://www.eco-business.com/news/indonesias-massive-captive-coal-plans-are-putting-climate-targets-and-economy-at-risk-study/

https://www.worldcoal.com/coal/18122024/sustainable-coal-mining-practices-innovations-for-a-cleaner-future/

This article was created with AI assistance.

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