These finance agreements support developing countries in transitioning to cleaner energy sources and are primarily shaped to be as equitable as possible.<\/p>\n\n\n\n
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.<\/p>\n\n\n\n
The first JETP was announced at COP26 in 2021 and was dedicated to South Africa<\/a>. Since then, Indonesia<\/a>, Vietnam<\/a> and Senegal<\/a> have also established Just Energy Transition Partnerships.<\/p>\n<\/div><\/div><\/div>\n\n\n\n The largest user of captive power is the nickel sector, with installed capacity reaching 13.9 GW in 2024, followed by the pulp and paper industry (3.2 GW) and industrial estates that supply power and other utilities to multiple factories (2.4 GW).<\/p>\n\n\n\n Editor\u2019s note:<\/strong><\/p> This is the second in a five-part series on Indonesia\u2019s expanding “captive” coal \u2013 private, off-grid coal plants that are being built to power industrial operations. <\/p> Largely invisible in national energy transition plans, captive coal is justified by the country\u2019s export strategy. <\/p> 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. The energy-intensive nature of smelting accounts for nickel\u2019s dominance of captive power use, says Haykal Hubeis, secretary general of the Indonesian Smelter and Refining Enterprises Association (AP3I). Smelting requires continuous high-temperature operations and stable baseload power.<\/p>\n\n\n\n Haykal said that transitioning away from coal remains difficult because many nickel-processing hubs are in remote areas with limited grid connectivity and insufficient renewable energy infrastructure.<\/p>\n\n\n\n \u201cUnfortunately, coal remains the only energy source currently capable of reliably powering the nickel industry from both a technical and cost perspective,\u201d he told Dialogue Earth.<\/p>\n\n\n\n Indonesia issued a presidential regulation<\/a> in 2022 to accelerate renewable energy development and ban new coal-fired power plants. However, it exempted captive coal plants linked to national strategic projects.<\/p>\n\n\n\n The downstreaming of nickel \u2013 that is, the push to process (rather than export) raw nickel into higher-value products, from stainless steel to battery materials \u2013 is among the government\u2019s flagship priorities<\/a>. Environmental experts and advocates say this has created space for continued captive coal development within a policy meant to support the energy transition.<\/p>\n\n\n\n Katherine Hasan, a researcher at the Centre for Research on Energy and Clean Air (CREA), said decarbonising the sector is crucial given how much Indonesia produces and given the metal is a key ingredient for EV batteries and other aspects of the global energy transition.<\/p>\n\n\n\n \u201cThis has become a paradox for global decarbonisation efforts because Indonesian nickel still carries a significant carbon footprint,\u201d said Katherine.<\/p>\n\n\n\n Amid these challenges, several companies have begun trying to decarbonise, including Vale Indonesia, a subsidiary of Brazilian mining giant Vale.<\/p>\n\n\n\n In a 2024 analysis<\/a> by the Institute for Energy Economics and Financial Analysis (IEEFA), Vale recorded the lowest carbon intensity among Indonesia\u2019s four major nickel producers, at 28.7 tonnes of CO2 per tonne of nickel produced.<\/p>\n\n\n\n In its 2021 sustainability report<\/a>, the company attributed its lower emissions to the use of three hydropower plants for its Sorowako operations in South Sulawesi, which it says are \u201ccapable of avoiding CO2 emissions by more than 1 million tons of CO2 equivalent per year compared to coal-fired plants.\u201d<\/p>\n\n\n\n Dwi Cahya Agung Saputra is a researcher at Jakarta-based energy think-tank the Institute for Essential Services Reform (IESR). He explained that this companies like Vale cater to markets with a growing preference for low-carbon products or \u201cgreen markets\u201d. They have access to capital, suitable technologies and geographic advantages needed to make cleaner power development more feasible, such as enough available land, he added.<\/p>\n\n\n\n Meanwhile, other producers present a more complicated picture. PT Trimegah Bangun Persada Tbk, part of the Harita Group, illustrates how emissions can vary even within the same company.<\/p>\n\n\n\n IEEFA\u2019s analysis shows that its ferronickel production remained highly emissions-intensive, while its battery-material production had a much lower carbon footprint, reflecting different energy requirements.<\/p>\n\n\n\n The contrast shows why analysts say decarbonisation pathways in Indonesia\u2019s nickel sector cannot be treated uniformly across companies, products or technologies.<\/p>\n\n\n\n \u201cThere is no one-size-fits-all solution. Indonesia is highly complex, and decarbonisation efforts must be tailored to each company,\u201d Saputra told Dialogue Earth.<\/p>\n\n\n\n In June 2025, the government launched the National Nickel Industry Decarbonization Roadmap. This targets a 81%<\/a> fall in the sector\u2019s greenhouse gas emissions by 2045. It plans to achieve that mainly by accelerating renewable power deployment, in order to move away from captive coal power. A smaller role is slated for green hydrogen and biomass, and expanded natural gas infrastructure. Regarding the nickel roadmap, Saputra said IESR has identified several gaps. The plan doesn’t recognise the need for a paradigm shift in how renewable energy is integrated into nickel production, he said. For example, choosing suitable locations for smelter development based on renewable energy potential on-site, instead of proximity to mineral deposits.<\/p>\n\n\n\n Furthermore, he said the roadmap does not provide a detailed assessment of regional renewable energy potential or how it could be utilised, making it harder to translate this shift into future smelter planning.<\/p>\n\n\n\n In February, IESR developed a framework<\/a> to help policymakers design targeted interventions for decarbonisation within the nickel sector and other energy-intensive industries, especially those that use captive power plants.<\/p>\n\n\n\n The report categorises the industries into six archetypes<\/a>, each requiring a different decarbonisation pathway.<\/p>\n\n\n\n \u201cPragmatic switchers\u201d are heavy industries with legacy captive fossil plants near the state-owned PLN grid. These can reduce emissions by connecting to grid electricity.<\/p>\n\n\n\n \u201cIndustrial estate tenants\u201d are high-energy users within private industrial parks constrained by the park\u2019s grid and rules. These would need to negotiate with estate utilities to build renewable capacity.<\/p>\n\n\n\n \u201cRemote microgrid pioneers\u201d are located in extremely isolated areas with no access to the PLN grid. They would need isolated hybrid systems combining solar and battery storage.A paradox of decarbonisation<\/h2>\n\n\n\n
Pathways to decarbonisation<\/h2>\n\n\n\n
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The government is also in the process of drafting a broader roadmap for decarbonising nine key industrial sectors<\/a> \u2013 namely cement, fertiliser, metal, paper, textiles, chemicals, automotive, food and beverage, and glass and ceramics. <\/p>\n\n\n\n
As for \u201cbio-resource integrators\u201d \u2013 which generate significant organic waste byproducts \u2013 they could convert organic waste into baseload power and thermal energy, reducing fossil-fuel consumption and waste-related emissions.<\/p>\n\n\n\n