Indonesia's Clean Energy Future at the Center of U.S.–China Supply Struggle
By Aniruddha Ghosal – Edited by Andrew Zinin – September 2025
Indonesia, the world’s largest coal exporter, has become the focal point of a growing contest between the United States and China over the future of clean energy in the developing world. At stake is not only Indonesia’s climate pathway but also which superpower sets the terms of the next generation of energy systems.
Like much of the developing world, Indonesia faces a stark choice between two very different energy futures.
China Deepens Its Role in Indonesia's Energy Transition
Chinese companies signed more than $54 billion in agreements with Indonesian state utility PLN in 2023, with President Prabowo Subianto’s 2024 visit to Beijing adding another $10 billion in commitments. Chinese firms are embedding themselves across Indonesia’s clean energy supply chain, from solar manufacturing and critical mineral mining to electric vehicle (EV) production.
These investments far exceed the $20 billion Just Energy Transition Partnership (JETP) signed in 2022 between Indonesia and a group of wealthy nations to help shift away from coal, which still contributes about 3.6% of Indonesia’s GDP.
The JETP has struggled to make progress. Only $1.2 billion (6%) of its funds have been disbursed, while Indonesia estimates it needs over $97 billion for a successful transition.
China’s projects are massive and fast-moving:
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CATL launched a $6 billion battery supply-chain venture in 2022.
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BYD announced a $1 billion EV plant in 2024 capable of producing 150,000 cars annually and creating 18,000 jobs.
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BTR New Material Group opened a $478 million anode material factory in 2024, adding around 8,000 jobs.
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LONGi unveiled a solar panel factory in 2025 with annual production capacity of 1.6 GW.
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POWERCHINA built a 100 MW solar park in just seven months in 2024.
“This is a whole-systems change,” said Dinita Setyawati, an energy analyst at Ember. “A country can buy Chinese solar panels and use them to charge Chinese-built EVs, creating a vertically integrated clean energy ecosystem.”
U.S. Strategy and LNG Push
The United States has taken a different approach, emphasizing liquefied natural gas (LNG) as a cleaner alternative to coal. Indonesia’s energy minister Bahlil Lahadalia confirmed in April 2025 that the country would boost LNG imports from the U.S. by $10 billion as part of tariff negotiations.
However, analysts warn this risks locking Indonesia into decades of fossil fuel use, just as solar and wind become cheaper and quicker to deploy. “Committing to long-term gas deals risks leaving countries stuck with outdated infrastructure,” Setyawati said.
The JETP, although still active, has lost some political momentum after the U.S. formally withdrew from the deal in March 2025. U.S. climate envoy John Kerry had once touted America’s leadership, but after the Trump administration dismantled Biden-era climate policies and pushed for fossil fuel development, Indonesian officials questioned why they should move faster than the U.S. itself.
Still, the JETP created a framework for Indonesia to partner with new players such as the UAE and Saudi Arabia, and U.S. pledges of around $2 billion—half still available as loan guarantees—remain on the table.
Environmental and Social Costs
Despite its speed, China’s model has drawn criticism for environmental harm. Most of Indonesia’s nickel mines are Chinese-owned, and many rely on captive coal power plants to provide electricity for smelters.
A 2024 study by the Centre for Research on Energy and Clean Air estimated that pollution from nickel smelters and their coal plants could cost $2.6 billion in economic losses and cause 3,800 premature deaths in 2025, rising to nearly 5,000 deaths and $3.4 billion in losses by 2030.
Meanwhile, Indonesia still remains one of the most coal-dependent countries in the world. It proposed new coal plant construction in 2024 and had the third-highest coal capacity globally. About 80% of the 1.9 GW of new coal capacity built in 2024 was dedicated to supplying captive power plants for mineral processing facilities.
Indonesia at a Crossroads
Indonesia’s energy choices in the next few years could determine whether it becomes a regional clean energy leader or risks being locked into high-carbon infrastructure. “The government needs to realize this is where the world is heading, like it or not,” Setyawati warned.
