Indonesia’s energy and industrial transformation is gaining pace.
In 2025, Southeast Asia’s largest economy is turning its natural resource advantage — particularly in nickel — into a strategic lever for clean energy and green manufacturing growth.
Nickel at the Heart of the Transition
Nickel, a key component in electric vehicle (EV) batteries, has become central to Indonesia’s development strategy. The Ministry of Energy and Mineral Resources (ESDM) estimates that nickel-based exports contributed US$33 billion in 2024, up 15 percent from the previous year.
By banning unprocessed mineral exports and promoting domestic smelting, Indonesia has effectively anchored a new industrial policy around value addition. Over 43 nickel smelters are now operational across Sulawesi and Maluku, producing nickel matte and mixed hydroxide precipitate (MHP) for global battery manufacturers.
President Joko Widodo’s downstreaming vision — integrating mining with processing, manufacturing, and clean energy — is reshaping Indonesia’s economic architecture.
Building a Green Industrial Ecosystem
Beyond mining, Indonesia is leveraging its mineral base to power its energy transition roadmap. New renewable energy plants, primarily hydropower and solar, are being built near industrial clusters to supply smelters and manufacturing facilities.
The Indonesia Investment Authority (INA) has partnered with global investors, including Masdar (UAE) and Sumitomo Corporation (Japan), to develop integrated green industrial estates such as North Kalimantan’s Green Industrial Park, the largest in ASEAN.
The park will host hydropower-based aluminium smelting and EV component factories, demonstrating how renewable energy can anchor industrial expansion.
Attracting Global Investment
Indonesia’s industrial policy is also drawing foreign capital into strategic sectors. In 2025, total investment in the energy and minerals sector reached US$27.4 billion, led by projects from LG Energy Solution, CATL, and Hyundai.
The government’s New Energy and Renewable Energy Bill (RUU EBET) — expected to pass this year — aims to accelerate decarbonisation and set a 2060 net-zero target in law. It includes fiscal incentives for renewable developers, carbon pricing mechanisms, and provisions for power purchase agreements between industries and renewable generators.
Balancing Growth and Environment
While the downstreaming model is driving jobs and growth, environmental concerns persist. Smelting activities are energy-intensive and heavily reliant on coal. The government has pledged to cut coal-fired electricity in industrial parks by half by 2030 through hydropower substitution and carbon capture pilots.
“Indonesia’s challenge is balancing industrial ambition with environmental integrity,” said Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR). “Sustainable downstreaming requires integrating clean power, not just building refineries.”
The Just Energy Transition Partnership (JETP), co-financed by the Asian Development Bank (ADB) and World Bank, is mobilising US$20 billion to retire coal plants and expand renewables.
Strategic Outlook: From Exporter to Innovator
Indonesia’s long-term goal is to move from resource extraction to technological leadership. The government’s Battery and EV Roadmap 2035 envisions domestic EV production capacity of 600,000 units per year by the end of the decade.
If implemented effectively, Indonesia could become a global leader in green industrialisation — combining mineral wealth, clean energy, and manufacturing expertise into a single ecosystem.
For now, Jakarta’s bet on downstreaming is paying off: creating jobs, attracting investors, and signalling that the future of energy in Southeast Asia will be forged not just in the mines — but in the factories powered by clean electricity.
