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🌱 Can China Power Indonesia’s Clean Energy Future? ⚡🔋

Can China power Indonesia’s clean energy transition? Explore how Chinese investments, technology, and policy shape Indonesia’s renewable energy goals, and what challenges stand in the way.

Author

Green Glow
August 12, 2025

Indonesia, Southeast Asia’s largest economy, stands at a pivotal moment in its energy transition. With ambitious plans to derive 35% of its energy from renewable sources by 2034, the country faces a financing gap estimated at over USD 110 billion for generation, transmission, and supporting infrastructure. Following the withdrawal of the United States from the Just Energy Transition Partnership (JETP) in early 2024, eyes have turned toward China—already a dominant player in global clean energy investment—as a potential key enabler of Indonesia’s low-carbon future.

But can China truly power Indonesia’s clean energy transition? The answer is complex, touching on geopolitics, finance, infrastructure, and the delicate balance between industrial dependency and sovereign development.

Table of Contents

China’s Clean Energy Footprint in Indonesia: A Growing Financial Role

Over the past decade, China has become the most significant public clean energy financier in Southeast Asia, providing more than USD 2.7 billion between 2013 and 2023, with Indonesia receiving the largest share. In 2023 and 2024 alone, bilateral deals between Indonesia and China totaled USD 22.6 billion, covering electric vehicles (EVs), battery manufacturing, solar technologies, and industrial infrastructure.

These investments represent a strategic alignment. China possesses the technology and manufacturing capacity, while Indonesia offers critical minerals (e.g., nickel) and a large, emerging market. With domestic overcapacity in solar and battery production, Chinese firms see Southeast Asia as a key growth region.

Yet, most of this financing is commercial and private sector–led, not concessional public funding. Unlike JETP partners, China has not committed to grant-based or low-interest climate finance in Indonesia. Its contributions remain primarily investment-driven—more about mutual business interests than climate justice or global burden-sharing.

Indonesia’s Clean Energy Goals: Ambition Meets Reality

Indonesia’s Electricity Supply Business Plan (RUPTL) for 2025–2034 outlines ambitious goals, including the addition of 71 gigawatts of solar, hydro, and geothermal capacity. However, systemic challenges continue to stall momentum:

  • Regulatory uncertainty, especially in power procurement, licensing, and tariff structures.

  • The dominance of PLN, the state-owned utility, whose opaque tender processes deter foreign investors.

  • Underdeveloped transmission and distribution networks, particularly in remote islands.

  • Slow uptake of private capital, due to project risks and unclear incentives.

These hurdles mean that even when financing is available, deployment remains slow. According to Tiza Mafira of the Climate Policy Initiative, “We can’t rely on private funding because the regulations aren’t supportive.” The country needs public funds to de-risk investment, possibly through blended finance, concessional loans, and guarantees.

Can China Step Up as a Strategic Partner—Beyond Capital?

While financial flows are crucial, many analysts argue that China’s real value lies in its technology and industrial capabilities. Chinese companies are world leaders in:

  • Solar PV modules (over 70% of global supply)

  • Battery manufacturing (including LFP and NMC chemistries)

  • Electric vehicles (through brands like BYD and Wuling)

  • Hydropower engineering and construction

Indonesia’s recent shift toward green industrialization, especially in EV and battery value chains, aligns with China’s interest. Projects like the GEM–PT Vale nickel processing plant and PowerChina’s hydropower projects illustrate the depth of this collaboration.

However, there's a cautionary note. As Mafira points out, Indonesia must not become merely an importer of Chinese technologies. The goal is industrial partnership, not dependency. For China to be a true strategic partner, it must help Indonesia build domestic capabilities, share know-how, and support local supply chains.

The Geopolitical Dimension: Belt and Road or Clean and Green?

China’s engagement in Indonesia operates largely under the Belt and Road Initiative (BRI). Traditionally associated with fossil fuel and infrastructure projects, BRI is now undergoing a "greening" shift, with newer projects focusing on renewables, energy efficiency, and environmental mitigation.

Nevertheless, concerns remain:

  • Many of China’s investments in Indonesia are still linked to fossil fuel infrastructure, particularly coal plants supporting industrial zones.

  • The Kayan hydropower mega-project, once backed by PowerChina, has stalled, and Japan has recently signaled interest in stepping in.

  • The lack of transparency in Chinese development finance complicates impact assessments and public accountability.

In this light, China’s role in Indonesia is more opportunistic than systemic—seizing commercial openings rather than leading a coordinated climate financing strategy akin to JETP.

Conclusion

China has the potential to play a transformative role in Indonesia’s clean energy future. It brings capital, technology, and a willingness to invest where others hesitate. But the form of that engagement matters greatly. Commercial finance alone will not fill Indonesia’s climate finance gap. Nor will technology transfers without local industrial development lead to long-term resilience.

For Indonesia, the challenge is twofold:

  • Leverage Chinese investment while diversifying sources of finance and expertise.

  • Reform domestic institutions, especially PLN, to create a conducive environment for clean energy scale-up.

Ultimately, China can help power parts of Indonesia’s clean energy transition, but it cannot do it alone. A successful pathway requires a broader coalition of public and private actors, regulatory reforms, and a shift from transactional deals to long-term, transparent, and equitable partnerships.

FAQs

Why is Indonesia focusing on clean energy?

Indonesia has committed to reducing its greenhouse gas emissions under the Paris Agreement. Its goal is to have 35% of its energy mix come from renewables by 2034, while also attracting green investments and reducing reliance on fossil fuels.

What role does China currently play in Indonesia’s clean energy development?

China is Indonesia’s largest public financier of clean energy in Southeast Asia and a key investor in sectors like solar, EVs, and battery production. However, most of its contributions are commercial investments, not concessional financing.

Is China replacing the United States in financing Indonesia’s energy transition?

Partially. After the U.S. exited the Just Energy Transition Partnership (JETP), China became a more prominent player. However, it hasn't formally committed to grant-based or public concessional financing like traditional JETP donors.

What challenges does Indonesia face in attracting clean energy investment?

Key challenges include:

  • Regulatory uncertainty

  • Opaque procurement by PLN (state utility)

  • Weak transmission infrastructure

  • Limited bankable projects for private investors

Is Chinese clean energy investment helping Indonesia reduce coal dependency?

Not entirely. While new green projects are underway, many Chinese-backed investments still support coal infrastructure, particularly in industrial zones. A full transition depends on clear policy signals and structural reforms in Indonesia.

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