Indonesia's clean-energy future collides with US-China energy race

Indonesia's clean-energy future has become the focal point of a broader supply struggle between the United States and China, a competition with implications for climate policy and the next generation of development finance. The outcome could determine how rapidly the developing world pivots away from coal and toward renewables, and which power pacesetters set the terms for energy infrastructure and manufacturing.

China signed more than $54 billion in agreements in 2023 with PLN, the state utility, and a 2024 Beijing visit by President Prabowo Subianto added about $10 billion in commitments. Chinese firms are embedding themselves in Indonesia's clean-energy supply chain—from solar and critical mineral mining to electric vehicles, or EVs—and these investments dwarf the $20 billion Just Energy Transition Partnership, or JETP, signed in 2022 to help shift away from coal, which still contributes to about 3.6% of Indonesia's GDP. The program was faltering even before the United States administration formally withdrew in March. Only $1.2 billion, or about 6%, of JETP financing has been disbursed while Indonesia says it needs more than $97 billion for the transition.

The U.S. path emphasizes energy dominance and has pushed liquefied natural gas, or LNG, as a tool to head off tariffs and reduce dependence on rivals while Beijing bets on a big renewables push to cement its role as the largest supplier of clean energy technology. Analysts note that the two countries are shaping two different visions of the future. Putra Adhiguna of the Energy Shift Institute said that the United States withdrawal in March did not derail JETP but did shift political leadership and expectations. Early JETP conversations set expectations unrealistically high, raising goals that would be hard to achieve regardless of policy changes. The United States pledged $2 billion for JETP, with roughly half still accessible via loan guarantees, though the total JETP financing has been about $20 billion. Indonesia says it needs more than $97 billion for the transition. The JETP was meant to be a foundation, not a complete solution, and its disbursement pace has frustrated officials who say time is a factor in fast-moving markets.

China offers a different version of energy security, replacing imported fossil fuels with solar panels that generate electricity for decades. Major Chinese projects in Indonesia include a $6 billion supply-chain venture by battery maker CATL with local partners in 2022 and BYD’s $1 billion EV plant announced in 2024 that will produce 150,000 cars annually and employ 18,000 workers. Other projects cited by observers include a $478 million factory by BTR New Material Group to make EV battery anode materials and a LONGi solar panel factory unveiled for 2025 with an annual capacity of 1.6 gigawatts. It is a whole-systems change, said Dinita Setyawati, an energy analyst focused on Southeast Asia at the think tank Ember, noting that a country could buy solar panels from China and charge Chinese-built EVs with clean electricity. These deployments are often rapid—PowerChina built a 100-megawatt solar park in seven months in 2024—creating a sense of urgency that some Western investors cannot match. If a U.S. company takes four years to complete a feasibility study, Chinese companies may already be investing by the time the study finishes, Adhiguna said. Yet Chinese investments often come with higher environmental costs. Most of Indonesia’s nickel mines are Chinese-owned, and the mines rely on captive coal-fired power plants to operate. A 2024 study by the Centre for Research on Energy and Clean Air on the environmental and health costs of nickel mining in three Indonesian provinces found pollution from smelters and coal-fired power plants would cost the economy $2.6 billion in 2025, rising to $3.4 billion by 2030, while resulting in more than 3,800 deaths in 2025 and nearly 5,000 by 2030. Indonesia’s energy minister, Bahlil Lahadalia, said in April it would boost LNG imports from the United States by around $10 billion as part of tariff negotiations. LNG burns cleaner than coal but remains a fossil fuel, and long-term deals could entrench Indonesia in gas despite the race toward cheaper, faster-to-deploy solar and wind power.

Indonesia remains deeply tied to coal. It was the only country to propose building new coal plants and had the third-highest amount of coal capacity globally in 2024. About 80% of the 1.9 gigawatts of coal capacity Indonesia built was for the captive coal plants for smelters processing minerals like nickel and cobalt for EVs, according to a report by the U.S.-based nonprofit Global Energy Monitor. The government says the world is moving toward cleaner power, but critics warn that Western investors may offer stronger safeguards even as faster Chinese deployment outpaces them. Setyawati notes that Indonesia risks falling behind in the clean-energy transition and missing out on opportunities such as data centers seeking renewable energy in Southeast Asia. The two big powers are reshaping the region’s energy future in ways that will influence climate, jobs, and sovereignty for years to come.