EXECUTIVE BRIEF: Indonesia’s Captive Coal Surge Is Creating a Parallel Power System Risk

Captive coal power plants are becoming the sharp friction point in Indonesia’s energy transition: they sit outsidePLN’s grid decarbonisation levers, expand alongside industrial growth, and create a parallel power system that is harder to regulate, harder to retire, and easy to undercount in national transition planning. The result is emissions lock-in risk, policy credibility risk, and carbon-competitiveness risk—especially for nickel-linked supply chains marketed as “green.”

Why Captive Coal Matters in Indonesia

 Captive plants are privately owned power plants built for self-supply, typically located within or near industrial parks, and often not dispatched by PLN. The concern is specifically industrial captive coal—because it adds long-lived emissions outside the “official” grid transition pathway.

Indonesia is one of the world’s largest coal producers. Roughly 60% of production is exported, while domestic consumption is dominated by coal-fired power generation (PLTU).

Importantly, Indonesia’s coal power system is effectively split in two:

• On-grid PLTU: connected to the PLN system, serving public and general economic demand.
• Off-grid / Captive PLTU: built for self-supply to industrial parks and large users, often operating independently from PLN.

This split creates a visible inequality in reliability: an industrial park can remain fully powered while nearby communities experience outages because they rely on different systems.

Scale Shift: Captive Coal Is Rising in Lockstep With Downstreaming

Captive coal capacity is rising sharply alongside the rapid buildout of smelters and PSN- labelled industrial parks supporting downstreaming ambitions.

Nickel smelter expansion:

• Operating nickel smelters increased from 11 (2019) to 49 (2024)
• 35 additional smelters were under construction and 36 were in planning (as of last year)

Captive coal expansion:

• Captive coal capacity surged from 5 GW (2019) to 16.6 GW (2024)
• By mid-year, plans were cited for an additional ~8 GW of new captive coal capacity
• Researchers also estimate >31 GW of captive coal across operational + under construction + planned assets, indicating the “true” baseline may be materially larger than common planning assumptions.

Why the scale matters: as a simple benchmark, 1 GW can power roughly 876,000 homes or meet the annual energy needs of ~6.2 million people—highlighting how significant this off-grid fleet is becoming.

Regulatory Loopholes: How New Coal Still Gets Built

Presidential Regulation No. 112/2022 prohibits new coal plant construction, but includes two major exceptions:

1. Legacy pipeline exception: coal plants already included in PLN’s RUPTL prior to the regulation can proceed.
2. Industrial-park exception: new coal plants may proceed if integrated with industrial parks and committo at least a 35% GHG reduction within 10 years (e.g., via specific technologies).

The second exception has become a key enabling pathway for captive coal development inside PSN industrial parks—including parks processing nickel for EV battery supply chains.

Transition Credibility Risk: “Green Industry” With Coal Power

Captive coal introduces a core contradiction: EV supply chains are promoted to reduce transport emissions, yetnickel processing—the upstream enabler—can be powered by coal-heavy captive generation. Like on-grid coal plants, captive coal produces gases such as CO₂ and CH₄, raising questions about the “green label” when upstream electricity is carbon-intensive.

At the same time, while captive coal is referenced as limited to operating until 2050, a detailed roadmap and enforceable emissions-reduction plan for captive plants is still missing, unlike grid assets that are more directly tracked through transition frameworks (e.g., JETP-related programs).

Political Economy: Who Benefits (and Why This Is Hard to Stop)

Every coal company is required to set aside a portion of its production for the domestic market to ensure supplyfor on-grid coal-fired power plants and various industries. This is called the domestic market obligation (DMO).

• Coal for PLN on-grid power is capped at US$70/ton
• Certain industries have a cap at US$90/ton
• Smelters are exempt, and must purchase coal at market prices (typically higher) This exemption makes captive coal demand economically attractive for coal suppliers— especially when export demand Coal demand for captive power serving smelters is estimated to reach ~70 million tons in 2025, up from 10.06 million tons in 2019 (roughly 7x growth).

Implication: captive coal can become a domestic “demand backstop,” creating resistance to tighter controls.

Cost Lens: Captive Coal Is Not Necessarily the “Cheap” Option

Indicative generation cost comparisons cited:

• Captive coal: ~US$0.077/kWh
• On-grid coal: ~US$0.057/kWh
• Solar and wind have lower-cost than these benchmarks

Implication: captive coal’s persistence is not purely about LCOE; it is also about reliability control, captive offtake structures, and incumbent incentives—meaning policy solutions must address governance + financing + industrial power reliability.

Skylight’s Opinion

Indonesia’s transition signals serious intent, but decarbonising PLN alone is not enough if captive coal continues to expand as a “shadow grid” for industrial parks. Without stronger governance and credible alternatives for industrial reliability, captive coal will lock in emissions, weaken policy credibility, and raise carbon-competitiveness risk for export-facing value chains (e.g., nickel).

To translate ambition into execution, coordinated action is required across three stakeholder groups:

1.Policymakers

• Build a mandatory captive power registry and require emissions disclosure;
• Implement enforceable Monitoring, Reporting, Verification (MRV) for the “35% in 10 years”requirement;
• Tighten the industrial-park exception by requiring time-bound transition plans and limiting new captive coal approvals.

2. Industrial Parks

• Develop park-level power transition roadmaps (grid upgrades, renewables + storage, hybrid solutions);
• Secure clean baseload supply (PLN-backed supply or from renewables such as hydro/geothermal) as the system backbone;
• Scale on-site renewables (rooftop/carport/land-based solar) to displace daytime coal generation;
• Implement energy-efficiency programs to reduce total load and lower the cost of decarbonization.

3. Financiers & Investors

• Redirect capital toward clean, reliable industrial power (grid connection, storage, renewables integration);
• Tie financing to MRV compliance and transparent reporting.

Latest Update

• Danantara-INA Signs IDR 3.37 Trillion Investment Agreement with Chandra Asri
  • Danantara, the Indonesia Investment Authority (INA), and Chandra Asri Group have signed a Conditional Share Subscription Agreement (CSSA) to develop a Chlor Alkali–Ethylene Dichloride (CA-EDC) plant, which will produce key chemical inputs including caustic soda and ethylene dichloride (EDC).
  • The project is estimated to require US$800 million in total investment. Danantara and INA will jointly invest US$200 million (approximately IDR 3.37 trillion).
  • Under the investment structure, the funding will support the construction of the CA-EDC facility operated by PT Chandra Asri Alkali (CAA), a subsidiary of Chandra Asri The plant is targeted to begin operations in 2027.
  • Caustic soda is widely used in soap and detergent manufacturing, alumina refining, and paper production. EDC, meanwhile, is a key feedstock for industries such as construction and packaging.
  • In its first phase, the plant will have an annual production capacity of 400,000 tons of dry caustic soda and 500,000 tons of EDC.
  • The project is expected to generate around 3,000 jobs during the construction phase and 250 permanent positions once operations begin.
• De Heus Acquires CJ Feed and Care to Further Expand its Portfolio in Asia
  • Global animal nutrition company from Netherlands, De Heus Animal Nutrition has officially completed the acquisition of CJ Feed & Care from CJ (Cheil Jedang). This move is part of De Heus’ long-term strategy to expand its business while strengthening its support for livestock farmers in theAsia- Pacific region.
  • The acquisition strengthens De Heus’s position in a number of rapidly growing markets such as Vietnam, Indonesia, and Cambodia, and opens up access to new markets such as South Korea and the Philippines.
  • In total, the transaction includes 17 animal feed mills and livestock operations spread across various countries in Asia, including
  • The combination of De Heus’s global experience and CJ Feed & Care’s technical capabilities willcreate added value for farmers, business partners, and local communities.
  • In Indonesia, De Heus is leveraging the business foundation established by CJ Feed & Care to strengthen and further develop the animal nutrition sector and the livestock value chain.

• Indonesia Chooses Chinese Partner for Its Waste to Energy Partner
  • Indonesia’s sovereign wealth fund Danantara has selected Chinese partners to develop waste-to-energy (WtE) facilities in the waste-stricken cities of Bekasi and Denpasar.
  • Over the past several months, Indonesia has been running a China- dominated tender process to kick-start its multibillion-dollar WtE rollout. Danantara has now announced the first round of project winners:
    • Wangneng Environment, a Huzhou-based waste management company that reports generating 3.04 billion kilowatt-hours (kWh) of clean energy annually, will develop the WtE facility in Bekasi.
    • Zhejiang Weiming Environment Protection has secured the project in Bali’s Denpasar. The company reportedly proposed a US$225 million investment with the Balinese government in 2024. As of 2023, Weiming’s portfolio includes 49 waste-to-energy incineration power projects, including one currently in trial operation.
  • Danantara requires both Wangneng and Weiming to form consortium with Indonesian firms to facilitate technology transfer, although their local partners have not yet been The fund is expected to announce the winners for additional projects in Yogyakarta and Bogor in the near term.
  • The Bekasi and Denpasar facilities form part of Indonesia’s broader plan to build WtE incineration plants in 33 cities nationwide, with total investment estimated at IDR84 trillion (US$5 billion). The first phase of construction is scheduled to begin in Q3 2026, with completion targeted for Q4 2027. Danantara estimates the program could generate 3,500 direct and indirect jobs, alongside a significant multiplier effect across the broader economy.

• Sinarmas JV with Chinese AI Company For Digital Transformation in Indonesia
  • PT Dian Swastatika Sentosa (DSSA), through its subsidiary PT DSST Mas Gemilang, has signed a strategic partnership agreement with the prominent Chinese AI company iFLYTEK Co., Ltd. to establish a joint venture named PT Brilian Teknologi Sejahtera (BTS).
  • This collaboration is aimed at accelerating the adoption of AI and Large Language Model (LLM) technologies to drive the digitalization of various industrial sectors in Indonesia.
  • In the initial phase, the JV will utilize iFLYTEK’s AI SMART CLASS Solutions to support the digitization of education, including helping to address the shortage of approximately 3 million teachers and narrowing the gap in learning quality across various regions.
  • In addition to the education sector, this initiative also targets the healthcare sector through the SparkMedical Large Model, a medical AI model used to enhance primary healthcare capacity and accelerate disease screening processes, such as for tuberculosis.
  • Moving forward, this collaboration will also open opportunities for AI applications in other sectors, such as telecommunications, finance, and energy, to support the development of the national digital ecosystem.

• UK-Based Arm Agrees to Train 15,000 Indonesian Engineers in Chip Design
  • Arm (UK) and Danantara have signed a framework agreement aimed at building Indonesia’s semiconductor talent The program targets up to 15,000 engineers to gain chip-technology know-how through Arm’s ecosystem, including in-person training at Arm’s headquarters. Arm will also partner with Indonesian universities, providing trainers and learning modules.
  • Arm deals with the early part of the semiconductor supply chain and currently provides vehicle technology for 94% of the global Many of the world’s data centers and AI technologies are also Arm-powered.
  • This aligns with Indonesia’s aim to develop its own semiconductor IP blocks for multiple applications—such as automotive, IoT, data centers, home appliances, and emerging areas including quantum computing. Semiconductor IP blocks are pre-designed, reusable components that can be licensed or reused to accelerate complex chip design, bringing Indonesia one step closer to developing homegrown semiconductor IP and a stronger, future-ready engineering workforce.

• Unicharm Expand in Emerging Markets With Shift Away From Manufacturing
  • Unicharm announced its five-year mid-term management plan through fiscal 2030, under which the company will accelerate expansion in Global South markets, including Asia and Latin America, by adopting a “post- manufacturing” strategy that utilizes outsourced The company also plans to invest around ¥400 billion in initiatives such as digital transformation (DX).
  • In Indonesia, price competition with rival manufacturers has intensified in recent years. While Unicharm has traditionally emphasized in-house production, it combine local OEM and ODM manufacturing as it expands into emerging markets.
  • As part of its overseas growth strategy, the company also plans to enter the pet care markets in India and Brazil in 2026. Both countries have rapidly growing pet food markets that already exceed Japan in size. Unicharm intends to first strengthen brand recognition by introducing high value- added products such as premium pet snacks, followed by expanding its price range to capture a broader consumer base.

• INET Expands to Data Center
  • PT Sinergi Inti Andalan Prima Tbk (INET), a rapidly growing medium-sized company in the telecommunications and internet infrastructure sector (B2B), specializing in fibre optic network services. officially expands its entity structure through the establishment of a new subsidiary, PT Sinergi Inti Data Indonesia (SIDI), on February 2026 the vehicle for INET to enter the data center sector.
  • Based on the company’s disclosure, SIDI currently manages ~200 data center racks located in Cyber Building I, Jakarta, chosen for its direct integration with INET’s core operational footprint.
  • Beyond Jakarta, the company is currently preparing to build a Green Data Center on 180 to 200hectares of land in This project is designed to meet the need for large-scale, environmentally friendly data center facilities.
  • INET positions SIDI as a key pillar in building and operating sustainable national digitalinfrastructure, with management projecting full operations and initial commercial revenue in Q3 2026.

• Marubeni Transports Hydrogen Absorbed in Metal Alloy
  • Marubeni Corporation conducted an international demonstration project transporting renewable-energy-derived green hydrogen produced in Australia to Indonesia using hydrogen storage alloy containers. The hydrogen was successfully extracted and used for power generation with a fuel cell at the company’s industrial estate near Jakarta, confirming the feasibility of cross-border hydrogen energy supply.
  • The project also required regulatory coordination between the two countries, including customs procedures, safety standards, and tariff treatment, with approvals obtained after approximately one year of consultation.
  • The company is considering applications such as medium-scale power supply for remote islands and emergency backup power, positioning Indonesia as a potential hub for future hydrogen utilization.

• Indonesia Renews ExxonMobil Deal in Cepu Until 2055, Alongside Investment Commitment of US$10 Billion
  • The Indonesian government has decided to extend its upstream oil and gas cooperation contract in the Cepu Block with US-based company ExxonMobil, until 2055, alongside an investment commitment of US$10 billion.
  • ExxonMobil has been operating in Indonesia for more than 100 years. Currently, the oil and gas giant’s lifting in Indonesia reaches 170-185 thousand barrels per day (bph) in Block Oil and gas reserves in the Cepu Block were discovered in 2001. The Cepu Block cooperation contract was signed on September 17, 2005, with ExxonMobil Cepu Limited (EMCL) as the operator.
  • Participating Interest in the Block Cepu is being manage by The ExxonMobil Corporation subsidiary, holding a 45% participating interest, alongside Pertamina EP Cepu, which holds a 45% stake, and the Cepu Block Cooperation Agency (BKS), which holds a 10% stake.
  • In parallel, the government signalled its intention to increase Indonesia’s participating interest and has floated the option of transitioning operatorship over the longer term.

• Indonesian Government Plans to Build a 1,000 MW Grindulu Pumped Storage Hydroelectric Power Plant in East Java
  • PT PLN is strengthening its commitment to accelerating the transition to clean energy through plans to build the Grindulu Pumped Storage Hydroelectric Power Plant (PLTA) in Pacitan Regency with a capacity of 1,000 megawatts (MW), which is projected to be the second largest pumped storage hydro electric power plant in Indonesia.
  • A feasibility study is currently undergoing for its development in Ketro Village, Tulakan District, and Pucangombo Village, Tegalombo District. This project is expected to have a multiplier effect on the local economy in
  • Unlike conventional hydroelectric power plants, pumped storage technology functions as a large-scale energy storage system (giant battery). This system has two reservoirs (upper and lower) connected by a water tunnel and pump turbine units, which are highly effective in maintaining system reliability during peak loads.
  • The Grindulu Pumped Storage Hydroelectric Power Plant will be the new backbone of the electricity system in East Java and With a capacity of 1,000 MW, this project plays a vital role in maintaining the stability of electricity supply from intermittent renewable energy sources.

• Châteraisé Expansion to East Java
  • Japanese confectionery manufacturer Châteraisé has opened its first store in Surabaya, East Java, onFebruary 26, 2026, marking its expansion into Indonesia’s second-largest city. Located in Galaxy Mall 1, the outlet offers approximately 100 products, with 80% imported from Japan and 20% produced at its Bogor factory in West Java. The company plans to gradually increase the share of locally manufactured items. Nobuyuki Hirai from Châteraisé’s Overseas Business Department stated that the company aims to expand its store network in Surabaya and other cities across Java, targeting over 200 stores nationwide in Indonesia.
  • Châteraisé, which entered the Indonesian market in 2017 with its first store in Jakarta, has since expanded to Bandung and established a factory in Bogor in To support further growth, the company is constructing a second factory at the Greenland International Industrial Center (GIIC) in Cikarang, West Java, set to be completed in 2027. This new facility will increase production capacity tenfold and serve as a halal-certified base for both domestic and export markets, including other Asian countries and the Middle East. While the first Surabaya store lacks a dine-in space, futureoutlets in the city are expected to include such facilities.

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