In 2025, President Prabowo Subianto announced Indonesia’s ambitious commitment for all its electricity to be generated by renewable energy within 10 years. Complicating this, however, is the country’s captive coal power plants – dedicated off-grid stations that produce energy for an industrial facility. Each new plant represents a loophole in the Indonesian energy transition agenda.
Editor’s note:
This is the first in a five-part series on Indonesia’s captive coal – private, off-grid coal plants that are being built to power industrial operations. Largely invisible in national energy transition plans, captive coal is justified by the country’s export strategy. Our series investigates the loopholes that have kept coal expanding, who is benefitting, and what it means for a country caught between climate commitments and industrial ambition.
A 2022 presidential regulation issued by the then-president, Joko Widodo, banned the construction of new coal-fired power plants connected to the national grid. The intention was to bring down national emissions. This regulation, however, came with some caveats. First, any greenlit new coal plants would still be built. Second, any new coal plants needed for strategic industrial projects (such as nickel processing) would be permitted, though these would be required to reduce emissions by at least 35% within 10 years of opening, and to close down by 2050.
Under the Prabowo administration, both caveats still hold. During a November 2025 public consultation to revise the regulation, multiple outlets reported that the government proposed additional exemptions for any new coal plants needed to maintain system reliability and energy independence.
An ‘anomalous spectre’
According to a 2025 study of the country’s industrial power landscape and green transition opportunities, undertaken by Indonesia’s Just Energy Transition Partnership (JETP), operating captive power capacity reached 25.9 GW in 2024, over 75% of which was coal-based. The figure rose to 36.7 GW when including plants under construction or being planned. Of the 4.6 GW of planned captive power, 3.1 GW was coal.
These finance agreements support developing countries in transitioning to cleaner energy sources and are primarily shaped to be as equitable as possible.
The funding is provided by a group of countries initially comprised of Canada, Denmark, France, Germany, Italy, Japan, Norway, the Netherlands, the United Kingdom and the US.
The first JETP was announced at COP26 in 2021 and was dedicated to South Africa. Since then, Indonesia, Vietnam and Senegal have also established Just Energy Transition Partnerships.
According to Elvita Trisnawati, a researcher at the Indonesian Center of Environmental Law, large scale and independent coal-fired captive power plants in the private sector operate outside official planning frameworks.
“That’s why it’s become a kind of ‘anomalous spectre’ of [the] energy transition, a loophole,” she told Dialogue Earth.
As captive coal plants are entirely off-grid and privately run, they do not feature in public power planning frameworks such as Indonesia’s Electricity Supply Business Plan (RUPTL). This national, 10-year strategy for grid power supply is co-published by PLN and the Ministry of Energy and Mineral Resources.
But captive power does appear in Indonesia’s national 2024-2060 electricity master plan (RUKN). This governmental strategy outlines policies, supply conditions, supply and demand projections through to 2060 and plans for developing the national electricity supply system. The RUKN plans for more than 16 GW of additional captive coal capacity by 2031 for mineral processing purposes, notes an October 2025 report by the non-profit energy think-tank, Ember. It adds that captive coal capacity would exceed 32 GW in Indonesia within seven years, surpassing the total coal capacity of Southeast Asia’s second-largest coal generator, Vietnam (27.2 GW in 2024).
Driven by mining and nickel
The use of captive power is heavily concentrated in the mining and nickel sectors, which are being driven by hilirisasi. This national downstreaming policy prompted the banning of nickel ore exports in 2020 and the push for domestic companies to produce higher-value, intermediate products. For example, ferronickel, a key material for steel.
The 2025 JETP study notes that mining-heavy regions were among those with the highest captive power operating capacity. Sulawesi had the highest, 10.5 GW, while Maluku came third with 4.5 GW.
Central Sulawesi hosts the PT Indonesia Morowali Industrial Park (IMIP), a joint venture between China’s Tsingshan Group, as well as the Bintang Delapan Group and Sulawesi Mining Investment, both from Indonesia. North Maluku province is home to PT Indonesia Weda Bay Industrial Park (IWIP), supported by Chinese investors Tsingshan Group, Huayou Holding Group and Zhenshi Holding Group.
Power distribution issues are among the reasons smelters and industrial estates are permitted to build captive power plants.
“In reality, across the industrial zones where these smelters operate, we face limitations with the national power supply,” Haykal Hubeis, secretary general of the Indonesian Smelter and Refining Enterprises Association (AP3I), told Dialogue Earth.
Hubeis added that a coal-based power plant is more reliable for keeping an operation running: “It’s not just because it’s cheap; it’s truly about the reliability, availability and readiness of the technology to meet 24-hour operational demands.”
The JETP study acknowledges that coal is “viewed as the most cost-effective, timely and firm source of power supply, particularly for industrial facilities that lack suitable access to the PLN grid system, have high and stable electricity demand requirements and face significant cost competition”.
However, the study also highlights how governments and industries worldwide are increasingly pushing for supply chain sustainability. It says the growth of captive coal power creates market and financial risks to the Indonesian industry, on top of causing environmental damage and climate impacts: “Such risks could jeopardise the opportunity for Indonesia to compete in the global export market and attract FDIs [foreign direct investments] which demand a cleaner supply chain.”
Dialogue Earth reached out to the JETP Delivery Unit and was referred to the 2025 report. We also contacted the Ministry of Energy and Mineral Resources for comment but did not receive a response.
Making the shift to renewable energy
Some industrial estates have begun efforts to align with the government’s 2060 net-zero greenhouse gas emissions target. The spokesperson for Central Sulawesi’s IMIP, Dedy Kurniawan, told Dialogue Earth that a solar power plant has been built alongside a coal-fired cogeneration plant at the industrial park, which generates electricity and industrial steam simultaneously.
Kurniawan said IMIP began developing renewable energy in 2022, when it conducted a feasibility study. Construction of a 1.27 MW-peak solar power plant began the following year, which was fully operational in 2024.
These solar plants “function as a complementary energy source, not a primary substitute”, Kurniawan added.
“IMIP recognises that the energy transition is not just a strategic choice but rather a necessity, both for environmental sustainability and long-term industrial competitiveness,” Kurniawan said. “Moreover, there are costs cut once renewable energy becomes operational. Among others is minimising the carbon tax currently incurred.”
Dwi Cahya Agung Saputra, electricity systems and renewable energy manager at the Institute for Essential Services Reform (IESR), a Jakarta-based energy think-tank, said there is no single solution for shifting to renewable energy.
For example, the February 2026 IESR report Beyond Industrial Coal says Indonesian companies with ageing captive fossil fuel power have begun switching to the PLN grid. This strategy reduces operational costs and can provide cleaner power sources. In Riau, the palm oil and pulp sectors have been identified by the IESR as having the potential to turn abundant organic waste into a baseload energy source, thus reducing methane emissions.
But the IESR report also notes drawbacks. An industrial operation that integrates with the grid could reinvest the savings into building its renewable power capacity. But for ground-based solar power generation, PLN’s biaya operasi paralel (parallel charge) is calculated based on a monthly flat rate that can be higher than the actual generation of a particular solar installation. As a result, says the report, renewables adoption is currently “restricted to small-scale off-grid applications for monitoring and ‘green branding’ rather than substantial power displacement”.
On using organic waste for baseload energy, the IESR notes that national investment roadmaps lack a “specific strategy”, creating “significant uncertainty” for investors: “Local governments emphasise the urgent need for regulatory revisions that align central policy with [Riau’s] unique capacity for biomass-driven decarbonisation”.
IMIP’s Kurniawan pointed out that, if it is to deliver large amounts of power on an industrial scale, 24 hours a day, the energy transition requires a huge initial investment: “In reality, implementing the energy transition requires investment in supporting infrastructure, particularly for energy storage.”
Furthermore, he said there should be a government policy that accounts for the full costs incurred by the industry, identifying gaps and mismatches in energy transition investments.
Saputra of IESR said the government should begin captive coal restrictions by 2030, or at least earlier than 2050, to achieve its net-zero emissions targets:
“If everyone continues to rely on fossil fuels, and if the use of fossil fuels is allowed to continue beyond 2030, then the transition to renewable energy will become even more difficult.”
