The race to replace coal in Indonesia, the world’s largest coal exporter, has become a contest between the U.S. and China. At stake is not only Indonesia’s climate future, but also which superpower sets the terms for the next generation of energy in the developing world.
Chinese companies signed more than $54 billion in agreements in 2023 with state utility PLN, while President Prabowo Subianto’s 2024 Beijing visit added $10 billion.
They are embedding themselves in Indonesia’s clean-energy supply chain, from solar and critical mineral mining to electric vehicles. These investments dwarf the $20 billion Just Energy Transition Partnership (JETP) signed in 2022 with wealthy nations to help shift away from coal, which contributes 3.6 percent of GDP.
The program was faltering even before U.S. President Donald Trump’s administration withdrew in March. Only $1.2 billion, or 6 percent of JETP funds, have been disbursed, while Indonesia says it needs over $97 billion.
The U.S., the world’s top oil producer, has pushed liquefied natural gas (LNG) as part of talks to head off tariffs, touting “energy dominance” to cut reliance on China. Beijing is betting on big renewables to cement its role as the largest supplier of clean energy technology.
“The U.S. path risks deeper fossil fuel dependence, while China’s promises jobs and cleaner power with fewer safeguards,” said Putra Adhiguna of the Energy Shift Institute. Early JETP talks “set expectations unrealistically high,” he added. The U.S. pledged $2 billion, half still accessible via loan guarantees. Foreign investment is critical given Indonesia’s tiny solar and wind sector, just 0.24% of total energy.
China offers a “different version of energy security,” replacing imported fossil fuels with solar panels. Major projects include CATL’s $6 billion supply-chain venture and BYD’s $1 billion EV plant to produce 150,000 cars annually. POWERCHINA built a 100-megawatt solar park in seven months. “If a U.S. company takes four years to do a feasibility study, Chinese companies will already have invested,” Adhiguna said.
But Chinese investments often carry high environmental costs. Most nickel mines are Chinese-owned, relying on captive coal plants. Indonesia’s energy minister said in April it would boost LNG imports from the U.S. by $10 billion. Analysts warn gas deals could lock Indonesia into fossil fuels and cause it to miss clean-energy investment opportunities.
Indonesia remains deeply tied to coal, the only country to propose new plants in 2024, with the third-highest capacity globally. About 80 percent of the 1.9 gigawatts built was for captive plants powering mineral smelters. “The Indonesian government needs to realize that this is where the world is heading, like it or not,” Setyawati said.
