Indonesia's Energy Transition Does Not Necessarily Mean Deindustrialization
The debate over captive coal in Indonesia needs to be situated within a broader context. Criticism of the use of coal to support the nickel industry is relevant, particularly as global markets increasingly take carbon footprints into account across supply chains. However, treating the expansion of captive coal as evidence that Indonesia has failed to pursue an energy transition is an overly simplistic conclusion.
Indonesia currently faces two agendas simultaneously: pursuing an energy transition and transforming its economy through downstream industrialization. Nickel, steel, aluminum, and battery processing industries require electricity supplies that are large, stable, and cost-competitive. Given that the national electricity grid is not yet fully capable of meeting the needs of industrial zones, captive power has become an economically viable and readily available solution. Dialogue Earth itself acknowledges that captive coal has expanded primarily because of industry's demand for reliable electricity and limited access to the national grid.
The issue, therefore, is not whether Indonesia still uses coal, but how this dependence can be reduced as clean-energy capacity expands.
At this point, the government's policy direction needs to be assessed more comprehensively. The 2025--2034 Electricity Supply Business Plan (RUPTL) targets approximately 76% of additional power-generation capacity to come from renewable energy and storage. The government also plans to develop approximately 47,758 kilometers of transmission circuits to connect renewable energy sources with industrial and consumption centers. This means that the state is not merely adding generating capacity. It is also building the infrastructure required to transform the structure of the national energy system.
Captive coal should therefore be understood more appropriately as one of the challenges of the transition period, rather than as a representation of Indonesia's overall energy-policy direction.
Indeed, the issue also presents a strategic opportunity. Indonesia is one of the largest players in the global nickel supply chain. This position provides leverage to promote new standards for green industry. Dialogue Earth itself identifies opportunities to use monitoring, reporting and verification (MRV), green premiums, and transition credits to accelerate the shift from captive power toward cleaner energy sources.
Accordingly, downstream industrialization and the energy transition do not necessarily have to be treated as two conflicting policy agendas. The challenge is to make downstream industrialization part of the broader transformation toward low-carbon industry.
This is where the development of transmission infrastructure, energy storage, renewable energy, and transition financing becomes critical. Indonesia cannot simply replace coal without first developing an energy system capable of providing reliability and competitive prices for industry. Ultimately, the energy transition is not merely about replacing one energy source with another. It is about rebuilding the infrastructure underpinning the national economy.
Criticism of captive coal remains necessary. The government needs to strengthen emissions standards, increase supply-chain transparency, promote renewable captive power, and ensure that industrial expansion follows a credible decarbonization pathway. However, such criticism should focus on the speed and quality of the transition rather than assuming that industrialization and energy transition are mutually exclusive choices.
Indonesia's success should not be measured solely by how much coal it continues to use today. A more relevant measure is how quickly Indonesia can build a new energy system while maintaining the momentum of industrialization. If this process succeeds, Indonesia will not merely become a country that follows the global energy-transition agenda. It could develop its own model: an industrialization pathway that progressively moves from captive coal toward a captive green industry.
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