China is a potential major funder of Indonesia’s renewables targets, but experts are flagging potential political and strategic obstacles
The Jatigede dam in Indonesia’s West Java province was completed in 2017, and its associated hydroelectric power plant began commercial operations in 2024. To date, Chinese involvement in Indonesia’s renewable energy sector has largely focused on a few large-scale hydropower projects (Image: Xinhua / Alamy)
Following the US exit from the Just Energy Transition Partnerships in March, China will likely become Indonesia’s strongest financing partner as the country accelerates towards its renewables targets. But China has its own domestic issues, and experts consulted by Dialogue Earth say this makes its position in global climate financing ambiguous.
“China, alongside Germany, presents a strong potential for leadership,” says Putra Adhiguna, managing director of the Energy Shift Institute, an Asia-focused energy finance think-tank. But he notes that this could be impacted by various issues, such as China’s resistance to being classified as a developed country, “to avoid contributing to the COP’s USD 100 billion commitment to emerging markets”. This annual funding target, flowing from developed to developing countries to realise climate change mitigation goals, was established at COP15 in 2009
- Just Energy Transition Partnerships (JETP)
These finance agreements support developing countries in transitioning to cleaner energy sources and are primarily shaped to be as equitable as possible. The funding is provided by the International Partners Group (IPG). This group initially comprised Canada, Denmark, France, Germany, Italy, Japan, Norway, the Netherlands, the United Kingdom and the US.
The first JETP was announced at COP26 in 2021 and was dedicated to South Africa. Since then, Indonesia, Vietnam and Senegal have also established Just Energy Transition Partnerships.
Adhiguna says this puts China in a delicate position: ready to lead in the push for renewables through diplomatic influence but unwilling to fully commit financially. He says its domestic production of clean technology, such as solar panels and batteries, has reached overcapacity. This is prompting China to expand its supply chain to additional countries cautiously, because regions such as Asean are currently unable to absorb its production volumes. “Nevertheless, commercial financing from China is projected to continue,” Adhiguna adds.
Indonesia’s clean energy push entails expanding renewables to represent 35% of its energy mix by 2034. Its new Electricity Supply Business Plan (RUPTL), published in May, reinforces this by detailing how the country plans to get there. Is financing from China still the answer?
China’s financing dominance in Indonesia
In the past two years, Indonesia has struck significant green deals with China, totalling USD 22.6 billion. These are a USD 12.6 billion package of 11 separate deals struck during the 2023 Indonesia-China Business Forum, which was followed by a USD 10 billion deal struck at the forum’s 2024 gathering. They cover clean energy and clean technology investment, such as electric vehicles (EVs), lithium batteries, photovoltaic products and industrial infrastructure for renewable energy. Under President Prabowo Subianto, Indonesia has also signed two memoranda of understanding with China on green mineral cooperation.
Indonesia is expecting China to be one of its strategic partners for EVs and renewables – particularly solar and wind energy – says Putra Maswan, a financial and economic analyst at the Institute for Essential Services Reform (IESR) in Jakarta. “Indonesia is a potential strategic market for EVs and the emerging energy transition,” he adds. “Meanwhile, China owns the technology that works for us.”
A Chinese-made electric truck in use at a PT Vale nickel mine in Indonesia’s South Sulawesi province. Last year, the Chinese battery materials producer GEM signed a deal with PT Vale to build a high-pressure acid leaching plant for nickel extraction in Central Sulawesi (Image: SOPA Images / Alamy)
According to the US-based non-profit Center for Global Development, China has provided an average of nearly USD 4 billion annually for climate projects in developing countries since 2013. This amounted to over USD 34 billion by 2021, chiefly through bilateral lending using its policy banks.
A May 2025 report by Zero Carbon Analytics found China to be the key source of public clean energy investments in Southeast Asia between 2013 and 2023, providing just over USD 2.7 billion. Indonesia received just under half of these funds, the largest share. The report also says Indonesia received the second largest proportion of the Belt and Road Initiative’s clean energy financing in 2024: USD 404.6 million.
A June 2025 policy report by AidData and Foreign Policy Talks says China has invested USD 45 billion in over 43,700 Indonesian infrastructure projects in the past decade. This includes energy, mining, construction, transportation and telecommunications. The report found that in 2024 alone, Chinese foreign direct investment totalled USD 8.1 billion across 21,464 projects.
However, Adhiguna points out that China’s overseas financing has been dropping since 2016, and Beijing is yet to enter Indonesia’s renewables space with public financing.
Adhiguna says that, nowadays, the presence of China’s public banks at business or energy transition events is rare. “What seems to be moving is [directly] from the private sector, because private financing, renewable investment, power grids and so on will continue,” he adds.
China’s shift to renewables
To Adhiguna, the moment seems ripe for China to enter Indonesia’s renewables arena, particularly since it is transitioning from being a significant financier of coal projects to one of “green overseas development”. This aligns with President Xi Jinping of China’s commitment to cease involvement in new coal-fired projects abroad.
Maswan adds that the Belt and Road Initiative is becoming greener, focusing on smaller projects to mitigate climate change and energy crises, among other issues. Indonesia has had a “long-standing partnership with China, primarily focused on fossil fuels”, he says, although he thinks funding earmarked for Asean countries will shift towards renewable and clean energy.
Adhiguna says China’s renewables involvement has so far been largely concentrated on just a few large-scale hydropower projects: inaugurated in January, the 110 megawatt Jatigede hydropower plant in Sumedang District, West Java, was built by the state-owned PowerChina construction group.
On the other hand, China has seemingly turned away from another large Indonesian hydropower plant, the nine-gigawatt-capacity Kayan project in North Kalimantan. In 2019, PowerChina and Central Asia Capital committed an estimated USD 27 billion to its development, but PowerChina withdrew citing construction issues created by Covid-19 travel restrictions. In March this year, Japan announced its support for Kayan in a letter of intent signed by its minister for economy, trade and industry.
“We anticipate further developments to ascertain the depth of [China’s] commitment,” says Adhiguna, “particularly given its position as the leading renewable energy investor in Southeast Asia among all nations.” He notes that, with renewables, “the primary impediment to progress is not China but rather PLN” – Indonesia’s state-owned electricity company. He criticises the lack of transparency across PLN’s tender and procurement processes for renewable energy projects: “While the latest updates on PLN’s plan [via Indonesia’s Electricity Supply Business Plan] should be appreciated, investors measure progress in the short-term, making clarity on procurement timelines critical. Without this clarity, investors will exit the market and go elsewhere.”
In addition, commentary issued by Singapore’s S Rajaratnam School of International Studies in February says a major proportion of China’s Indonesian investments remain in fossil fuels. The school says phasing out existing China-backed coal infrastructure is challenging given its importance to industrial operations.
A key player in Indonesia’s energy transition
Indonesia has committed to adding 71 gigawatts of solar, hydro and geothermal energy capacity over the next decade. To meet its nationally determined contribution (NDC) to reducing greenhouse gas emissions under the Paris Agreement, an estimated USD 80 billion in funding will be required between 2024-2033 to realise Indonesia’s renewable energy projects; in November, PLN’s finance director said an additional USD 30 billion will be needed for electricity transmission and distribution network projects in the country.
Tiza Mafira, associate director of the Climate Policy Initiative Indonesia (CPI), says the country’s energy transition will require all types of financing sources, especially as many of its renewable energy projects are not yet commercially viable. The reasons for this include the slow implementation of the required regulations.
“The regulations aren’t yet supportive, so we can’t rely on private funding because they haven’t yet come in,” says Mafira. “Because we can’t attract private funding in Indonesia, we must trigger it by disbursing public funds. If disbursed properly, for example through a blended mechanism or guarantee, private investors who weren’t interested will become interested. So, it must come from concessional loans … and private funds as well.”
She says Indonesia will “inevitably have to involve China as a key player”, because it stands at the forefront of technological innovations in renewable energy, and holds the largest global supply of these products.
However, Mafira argues that Indonesia needs to push for more than Chinese investment only: “We need to balance affordable prices and investments in renewable energy power plants with the need to develop our domestic industry.”
Author: Fidelis Eka Satriastanti
This article was originally published on Dialogue Earth under the Creative Commons BY NC ND licence. Read the original article.