Coal and the energy transition: what it means for investors

Indonesia is the world’s largest exporter of thermal coal, and coal still generates most of its electricity. Policies at home and abroad now aim to cut its use over the coming decades, while industry, smelters above all, has added new demand.

None of this says what coal will be worth in a given year. It does shape how long a coal asset can sell its output, to whom and under what rules.

The national power plan

PLN, the state electricity company, builds and buys power under a 10-year electricity supply business plan (Rencana Usaha Penyediaan Tenaga Listrik, RUPTL) approved by the Ministry of Energy and Mineral Resources. The current plan covers 2025 to 2034 and was launched on 26 May 2025. Most of the new capacity in it is renewable generation and storage, but it still adds coal plants.

New coal plants are governed by Presidential Regulation 112 of 2022, signed on 13 September 2022, which bans them with two exceptions. The first is plants already in the RUPTL before the regulation took effect. The second is plants tied to industry that adds value to natural resources, or to national strategic projects. Their owners have to commit to cutting greenhouse gas emissions by at least 35% within 10 years of start-up, compared with the average for Indonesian coal plants in 2021, and the plants can run until 2050 at the latest.

The second exception covers captive plants, built inside industrial parks and mostly serving nickel smelters in Sulawesi and North Maluku. They sit outside PLN’s plan. A study published on 17 December 2025 by the secretariat of the Just Energy Transition Partnership (JETP) found that captive power makes up nearly a quarter of Indonesia’s installed electricity capacity and relies heavily on coal. These plants burn Indonesian coal, so for a Kalimantan mine they’re part of the domestic market alongside PLN.

Domestic buyers took 254 million tonnes of coal in 2025 and exports took 514 million tonnes, out of total output of 790 million tonnes, according to the energy minister on 8 January 2026. Part of every mine’s sales has to go to domestic buyers, at a capped price for power plants, as the domestic market obligation explains.

Early retirement and the JETP

The same regulation asks the energy ministry for a roadmap to end coal plants’ operation early, and lets PLN retire its own plants or end its power purchase contracts with private plants ahead of time. The criteria it lists are a plant’s capacity, age, utilisation, emissions and economic value, and whether funding and technology are available from Indonesia or abroad.

Money is the hard part. The JETP was launched at the G20 summit in Bali on 15 November 2022 with an initial commitment of USD 20 billion. Of that, USD 10 billion was pledged by a group of governments co-led by Japan and the United States, and as much again was to come from private finance. The United States withdrew in March 2025. The Asian Development Bank opened talks in November 2022 on retiring a privately owned coal plant in Cirebon, West Java, early. Closing a plant before its contract ends means compensating its owners and lenders and replacing its power, and who pays for that has been the main point of debate.

At the G20 summit in November 2024, President Prabowo Subianto said Indonesia planned to phase out coal and other fossil-fuel power plants within 15 years. The power plan published six months later still adds coal plants. The national target is net-zero emissions by 2060.

Export demand from China and India

Exports took about two-thirds of Indonesia’s output in 2025, and China and India are its largest buyers. Both mine a lot of coal themselves and import to fill the gap, so their purchases move with their own output, rainfall for hydropower, stock levels and the price of coal from other suppliers. Both are adding renewable capacity while still building coal plants. China aims to peak its carbon emissions before 2030 and reach carbon neutrality before 2060, and India’s net-zero target is 2070.

Indonesian policy sets volumes too. The work plan and budget (RKAB) each mine needs is approved one year at a time again under Energy and Mineral Resources Minister Regulation 17 of 2025, and the national plan for 2026 is about 600 million tonnes, with deep cuts for many licence holders. Under Government Regulation 24 of 2026, coal exporters still sell to their buyers directly but have reported those sales to a state export company, PT Danantara Sumberdaya Indonesia, since 1 June 2026. From 1 January 2027 it’s set to be the only exporter, which the coordinating economic minister confirmed on 5 October 2026.

Banks, insurers and buyers

Many international banks and insurers limit their exposure to thermal coal. Their policies typically rule out financing or insuring new thermal coal mines, or companies that earn more than a set share of their revenue from coal. Each institution sets its own policy and revises it from time to time.

For a buyer, that shows up as fewer lenders willing to look at the deal, shorter loan terms, higher costs and less choice of insurer for equipment, barges and terminals. Indonesian banks, state-owned banks among them, still lend to coal, and many deals also rely on equity or on equipment financed through mining contractors. Some export buyers screen their suppliers as well, asking about reclamation, land conflicts and emissions before they sign.

Setting the time horizon

A coal production licence runs for up to 20 years, with two 10-year extensions guaranteed once the requirements are met. For most investments the useful horizon is shorter: it’s the period over which you can see the buyers, the approved volumes and the rules that apply to both.

• Base the case on volumes the mine can sell under the contracts and approvals it holds now, and test it against lower volumes and prices.
• Ask where the coal goes and under what contract: PLN, a captive plant, other industry at home or export. Each comes with its own price rules and risks.
• Set the payback period against that visibility. A plan that needs 15 years of steady sales depends on more policy decisions than one that pays back in 5 years.
• Price the end of mining from the start. Reclamation and closure costs fall due whatever the market does, as reclamation and closure and void pits and communities explain.
• Ask lenders and insurers about their coal policies early, before the deal depends on them.