Jakarta, INTI - The rapid expansion of industry-owned power plants, commonly known as captive power plants, is making decarbonization efforts in the electricity sector increasingly challenging. This is largely because most captive plants still rely on fossil fuels, particularly coal.
The Institute for Essential Services Reform (IESR) recorded that captive power capacity surged from just 14 gigawatts (GW) in 2019 to 33 GW in 2024, more than doubling within five years. The majority of this capacity comes from coal-fired steam power plants.
The dominance of fossil fuel-based captive power generation is expected to persist. As of 2024, planned captive power projects fueled by coal and gas amount to 17.4 GW.
IESR also reported that captive power plants make a significant contribution to national electricity sector emissions. In 2024, emissions from captive power generation reached 131 metric tons of CO2, accounting for approximately 37% of total electricity sector emissions.
Without government intervention, meaning growth continues as outlined in the 2025 National Electricity General Plan (RUKN), emissions are projected to climb to 166 metric tons of CO2 by 2037.
IESR’s Director of Research and Innovation, Raditya Wiranegara, outlined four possible approaches to address this issue. First, connecting captive plants to the PLN grid. Second, encouraging a shift from coal to gas-fired captive generation. Third, promoting renewable energy-based captive plants. Fourth, utilizing carbon capture technology.
Raditya believes the first option would have the greatest impact. “Grid connection has the greatest potential that can be implemented,” he said during a discussion in Jakarta on Thursday, February 19, 2026. However, this pathway is not without obstacles, as many of these plants are located far from PLN’s transmission network.
Meanwhile, solar power plants are considered one of the most viable renewable energy options for industrial players. For instance, solar installations could be developed on former coal mining sites. The challenge, however, lies in capacity limitations, as solar generation may not be sufficient to fully meet industrial energy demand.
Risk of Declining Export Competitiveness and Losing Energy Transition Momentum
IESR warned that heavy reliance on fossil energy could leave Indonesia vulnerable to shrinking market access, declining competitiveness, and reduced investment flows. This concern arises amid increasingly stringent green policies adopted by various countries and global corporations.
The European Union, for instance, plans to impose carbon charges on high-emission products through the Carbon Border Adjustment Mechanism (CBAM). This policy could undermine the competitiveness of several Indonesian exports due to their high emission intensity. Products such as aluminum and steel are particularly exposed, with emission intensities ranging from 45.5% to 89.9%, higher than the European Union’s benchmark levels.
Without measures to curb the development of coal-fired power plants, Indonesia also risks failing to meet its emission reduction commitments under the Paris Agreement. “If not limited, fossil-based captive power plants could further lock Indonesia into dirty energy dependence and make it extremely difficult to transition to clean energy in the coming decades,” Raditya said.
ESDM Prepares New Policies to Accelerate Energy Transition
The Ministry of Energy and Mineral Resources (ESDM) is currently reviewing electricity regulations, with one of its objectives being to accelerate the energy transition of captive power plants.
Fadolly Ardin, Coordinator for Electricity Downstreaming and Economic Zones at the Ministry, explained that a draft of the new policy has been prepared, although the government remains open to input from various stakeholders.
At least three key points are outlined in the proposed policy. First, an affiliation scheme for Self-Supply Electricity Business Licenses (IUPTLS). “Previously, captive or IUPTLS had to be under a single entity; in the future, they may involve different entities. With this flexibility, it will most likely become the easiest option for industries to adopt,” he said.
Second, new provisions regarding the development of captive solar power plants (PLTS). “We are opening options so that policies on solar power plants will not be limited to rooftop installations, but may also include floating and ground-mounted systems under captive schemes,” he added.
Finally, the government plans to impose penalties for failure to meet the required energy mix targets. “In our plan, the penalties for PLN and non-PLN entities will differ, but there will be penalties,” he stated. This sanction mechanism is intended to ensure the achievement of national energy mix targets.
Conclusion
The rapid growth of fossil fuel-based captive power plants presents a significant challenge to Indonesia’s energy transition pathway. Without stronger regulatory intervention and accelerated adoption of cleaner alternatives, the country risks rising emissions, weakened export competitiveness, and potential setbacks in meeting its Paris Agreement commitments. Policy reform, grid integration, renewable captive development, and carbon management will be critical to ensuring that industrial growth aligns with long-term sustainability goals.
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