Image: Doc. MIND ID
The Centre for Research on Energy and Clean Air (CREA) has found that nearly 1.8 gigawatts (GW) of captive coal power tied to aluminium processing is already operational, with an additional 8 GW of capacity potentially linked to 32 new projects.
Captive coal plants are off-grid coal facilities built exclusively to power energy-intensive industrial activities, such as nickel and aluminium processing.
“With a total of 9.8 GW of identifiable capacities already operational and highly likely to be linked to new projects, aluminium is repeating one of the worst side effects of Indonesian nickel – turning to off-grid coal power instead of clean energy, thereby feeding into a larger 31 GW boom in captive coal power,” stated CREA in its latest report.
Former president Joko Widodo’s ban on nickel ore exports to grow its domestic processing industry transformed Indonesia into the world’s largest nickel producer within a decade. However, the sector is now buckling under the pace of its own expansion, with excess processing capacity and tightening nickel ore supplies putting pressure on smelters.
Despite these challenges, the country’s current president Prabowo Subianto seems keen to extend the same downstreaming approach to bauxite – a resource of which Indonesia holds significant reserves.
Earlier this year, Indonesia’s sovereign wealth fund launched US$6.7 billion worth of downstream projects, including new aluminium smelter facilities in West Kalimantan that will be powered by a 1.25 GW captive coal plant.
However, CREA warned that the government’s pursuit of “economic sovereignty” through downstreaming could expose the aluminium industry to the same problems that have plagued the nickel industry: dependence on coal, pressure on resources and vulnerability to market fluctuations.
“While Indonesia’s aluminium narrative emphasises a higher value-added industry and ‘economic sovereignty’, the reality does not line up with this message,” said Syahdiva Moezbar, an industry analyst at CREA. “Unrestrained expansion may in fact create new vulnerabilities related to resource security and energy supply.”
“These risks are compounded by an overwhelming reliance on foreign investment – particularly from China – and a workforce dominated by contractual labour. To both safeguard the industry and mitigate its environmental impact, the government should ensure project pipelines are transparent, based on realistic assessments of ore reserves and supply, and include built-in clean energy plans that avoid reliance on fossil-based power.”
Downstreaming strategy creates new transition risks
According to data from Earthwise Institute, roughly 75% of Indonesia’s alumina and aluminium projects are tied to Chinese-backed investment. Bloomberg has also reported that the multi-billion-dollar Chinese investments in Indonesia’s aluminium industry are already rivalling bets made on the country’s nickel sector a decade ago.
CREA also said that much of the projected growth in Indonesia’s alumina capacity is set to be driven by smelter-grade alumina, rather than chemical-grade alumina, which commands a higher value per tonne. If the entire planned project pipeline becomes operational, the think tank estimates that Indonesia’s proven bauxite reserves of 1 billion tonnes could face total depletion in less than 12 years.
Distribution of Indonesia’s bauxite refinery capacity by commodity type across the key Indonesian provinces. Image: CREA
Missed opportunity for renewable integration
West Kalimantan currently has the largest concentration of smelter-grade alumina and aluminium production, with the Riau Islands following closely behind as the second largest operational refinery hub.
Unlike Indonesia’s main nickel-producing regions, both West Kalimantan and the Riau Islands have “far greater potential” for regional grid integration and renewable energy generation, said CREA.
However, off-grid renewable energy currently makes up only a small share of the future pipeline. Of the 45 projects evaluated, only four rely on either grid integration or renewable energy, with the rest either confirmed as reliant or potentially reliant on captive coal.
Distribution map of Indonesia’s operational and prospective alumina production facilities. Image: CREA
The integration of clean energy in aluminium production is currently led by Alamtri’s planned 1.35 GW captive hydropower facility. Some projects, including PT Kemajuan Aluminium Industry in North Maluku and PT Bintan Electrolytic Aluminium (BEA) in the Riau Islands, are also reportedly incorporating solar into their power supply mix.
Prospective bauxite refinery capacities and links to captive coal power generation, mapped across provinces in Indonesia. Image: CREA
Safeguards failing to keep pace with aluminium boom
Existing certification schemes intended to curb the industry’s harmful environmental and social impacts, such as the Aluminium Stewardship Initiative (ASI), have not kept pace with Indonesia’s latest captive coal-backed aluminium boom.
Katherine Hasan, an analyst at CREA, told Green Central Banking that while China’s Shandong Nanshan, for instance, has been an ASI member since 2022, its Indonesian subsidiaries PT Bintan Electrolytic Aluminium (BEA) and PT Bintan Alumina Indonesia (BAI) “don’t seem to shy away from captive coal power for their operations.”
The end-to-end pipeline of PT BEA and PT BAI – which are anticipated to add up to 2.85 GW of captive coal to the special economic zone they share in the Riau Islands, “will not pass the strict carbon emission thresholds required for site-level ASI certification,” said Hasan.
Other Chinese parent companies that are ASI members include China Hongqiao Group and Huafon Group, which are linked to PT Well Harvest Winning Alumina Refinery and Hua Chin Aluminum Indonesia, respectively. Both facilities are powered by captive coal.
As a result, “it seems logical to conclude there is no active intent to market the outputs as ‘green aluminium’ for premium, carbon-regulated markets,” she said.
“Instead, the commercial strategy is clearly to target domestic Indonesian infrastructure or regional markets like China and Southeast Asia, where strict ESG certifications are not required – at least not yet.”
This page was last updated July 23, 2026
Written by
Gabrielle See is an award-winning journalist based in Singapore who has written for Green Central Banking since 2025. She has covered the intersections of finance, geopolitics and energy transition in Asia over the past five years for regional and international publications, including CNBC, Eco-Business, Southeast Asia Globe and the Business Times.
