Southeast Asia experiences a singular stance by Indonesia with proposed coal projects set for 2024, according to a recent report.

Indonesia's Coal Export Boom and Energy Transition Challenges

Indonesia, a Southeast Asian nation known for its rich natural resources, saw a significant development in its coal industry in 2024. Over half of the coal produced was exported, with major destinations being China, India, South Korea, and the Philippines. However, the country's energy sector is also facing challenges as it navigates the transition towards a cleaner and more sustainable future.

One of the key challenges is the delay in reaching a financial close on the pilot Cirebon-1 project, which was initially aimed to be accomplished by December 2024. The national plan, however, prefers retrofitting coal plants to run on ammonia, biomass, and possibly nuclear, rather than decommissioning them.

The effectiveness of ammonia co-firing technologies has yet to be proven on a commercial scale, and concerns about their viability persist. Meanwhile, the expansion of biomass could potentially contribute to further deforestation in Indonesia, a troubling prospect for the country's already fragile ecosystems.

The industrial sector in Indonesia accounts for nearly half of the total energy consumption, and the country proposed new coal plants amounting to 160 MW in 2024, all for captive use. This move could further increase the country's captive coal capacity, which tripled since 2019, primarily for nickel processing.

Indonesia's latest coal production reached 831 million tonnes in 2024, 17% above the government's target. This high production rate has been estimated to cost an additional 27,000 deaths and US$20 billion in public health burden.

The national electricity master plan for 2024 to 2060 includes plans to increase coal capacity by 26.7 GW over the next seven years, 75% of which would be captive plants. This expansion could be problematic as Southeast Asia, excluding Indonesia, maintains over 60 GW of operating coal plant capacity, but alternative power capacity has not caught up with the fuel's deprioritization in countries like Vietnam.

Vietnam, for instance, saw a 31% rise in thermal coal imports in 2024 despite plans to cease building new coal plants after 2030 and aim for renewables to make up a third of its power mix by then.

The exit of the United States as a co-leader from Indonesia's Just Energy Transition Partnership programme has thrown a spanner in the works for previously allocated funds of up to US$2 billion. This development could hinder Indonesia's efforts to transition towards a more sustainable energy future.

In response to activists' complaints, Indonesian state-owned utility PLN was ordered to disclose the emissions data for the country's largest coal-fired power plants. Japanese banks such as Mitsubishi UFJ Financial Group (MUFG) and Sumitomo Mitsui Banking Corporation (SMBC) continue to finance the coal power plants of the Harita Group in Indonesia despite their announced coal restrictions.

The challenges facing Indonesia's energy sector are complex and multifaceted. As the country continues to grapple with these issues, it remains to be seen how it will navigate its path towards a more sustainable future.