Based on Original Work By : Hans Nicholas Jong, Jeff Hutton Publisher: Mongabay Date of Publication: February 20, 2025
Indonesia’s ambitious plans to transition away from coal face significant obstacles, raising doubts about the country’s commitment to climate goals. Despite pledging to retire coal-fired power plants, economic concerns, legal risks, and political interests have hindered progress. The $20 billion Just Energy Transition Partnership (JETP), an international initiative to accelerate Indonesia’s shift to renewable energy, now faces an uncertain future as officials question its viability. Climate envoy Hashim Djojohadikusumo recently called early coal plant closures “economic suicide,” signaling a potential retreat from the country’s Paris Agreement commitments. This stance aligns with the U.S.’s wavering commitment to global climate action, which has further weakened international climate financing efforts.
In 2023, Indonesia’s state-owned electricity provider PLN attempted to curb Jakarta’s severe air pollution by partially shutting down the Suralaya-Banten coal power complex. However, the move was largely symbolic, as many other coal plants surrounding the capital continued to operate. This instance may mark the last time any of Indonesia’s 135 coal-fired power plants close ahead of schedule. Although Indonesia has committed to generating two-thirds of its electricity from renewable sources by 2040, major financial and legal barriers threaten to derail this goal.
A key issue is Indonesia’s overcapacity in coal power generation, a result of extensive plant construction under the presidencies of Joko Widodo and Susilo Bambang Yudhoyono. PLN is contractually obligated to pay for power generation even if the electricity isn’t needed, costing the company over 21 trillion rupiah ($1.3 billion) annually. Government officials fear legal repercussions if coal plants are shut down, as they could be accused of mismanaging state resources. The conviction of former Pertamina CEO Karen Agustiawan in 2023 for financial losses linked to long-term energy contracts has made state-owned enterprise directors hesitant to take similar risks.
The coal industry’s deep ties to political and business elites further complicate the transition. Key government figures, including President Prabowo Subianto, have personal stakes in coal assets. The Minister of State-Owned Enterprises’ brother controls Adaro, one of the world’s largest coal mining companies, which is expanding operations despite global climate commitments. International investors, including Japanese companies, have introduced controversial technologies such as ammonia-coal blending, claiming it reduces emissions. However, environmentalists argue that burning ammonia increases toxic air pollution, causing severe health impacts.
Despite these challenges, there are glimmers of hope for renewable energy expansion. A 120-MW solar project on Batam Island is set to begin construction, adding to existing clean energy projects such as the 145-MW Cirata solar plant developed by the UAE’s Masdar. However, Indonesia has capped solar capacity at 1.5 GW by 2028, limiting potential growth. Financial solutions such as debt-for-climate swaps offer an alternative pathway. By converting coal power debt into funds for renewable energy and infrastructure development, Indonesia could reduce PLN’s $24.5 billion debt burden while securing investment for clean energy projects. Some $5.8 billion in PLN’s debt maturing in 2025 may be eligible for such swaps, providing a potential boost to the country’s renewable energy transition.
e fate of Indonesia’s coal phase-out remains uncertain, but the financial and environmental stakes are higher than ever. Without stronger policy commitments and international support, Indonesia risks missing its climate targets and locking in decades of continued reliance on coal.
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