- Chinese president Xi Jinping has pledged to end the country’s financing of overseas coal projects — but a surge in Chinese-backed coal-fired power plants to supply electricity to nickel mining and processing undermines that pledge.
- Chinese investment has been flowing into Indonesia’s metal mining and smelting sector in a bid to supply raw materials to electric vehicle battery makers amid a transition to the zero-emission vehicles.
- By the end of the decade, about 44% of processed nickel for use in batteries and also for stainless steel will come from Indonesia.
A surge in the supply of Chinese-backed coal-fired power plants built to supply electricity to Indonesia’s fast-growing nickel mining and processing sector is undermining Beijing’s efforts to dial back support for fossil fuels, a study released Nov. 3 has found.
In his speech to the U.N. General Assembly four years ago, China’s president, Xi Jinping, pledged to end his country’s official financing of overseas coal projects — usually for power plants to supply electricity to tariff-paying customers.
In response, new projects backed by Chinese government entities and state-owned companies have shrunk by more than a third worldwide, according to a report released Monday that was co-authored by the Centre for Research on Energy and Clean Air and People of Asia for Climate Solutions.
Indonesia’s capacity of newly installed coal-fired power plants nearly tripled to more than 7 gigawatts the year following Xi’s announcement, as work wrapped up on projects already in the pipeline before tapering off.
Still, Chinese-backed coal-fired generating capacity is going online.
As of July, two coal plants to power nickel processing started operation in Indonesia’s North Maluku province, according to data from Global Energy Monitor.
Chinese investment has been flowing into Indonesia’s metal mining and smelting sector in a bid to supply raw materials to electric vehicle battery makers amid a transition to the zero-emission vehicles. That inflow of investment is buttressed by a ban on nickel ore exports that was reestablished in 2020 to develop a local processing industry.
Generating capacity among so-called captive coal plants will grow to 29 GW by the end of the decade from roughly 20 GW last year, according to a progress report published last month by the secretariat overseeing the Just Energy Transition Partnership.
Half of the nearly 37 GW of all types of captive plants, including those powered by hydro energy, solar and bioenergy will be used for nickel processing, the report said.
“To truly honor President Xi’s 2021 pledge, China should end all new coal power expansion — private investments in particular and proactively use its clean energy leadership to drive a pivot toward domestic large-scale solar, battery storage and green manufacturing,” Katherine Hasan, CREA’s Jakarta-based analyst, told Mongabay.
Strategic projects
For now, captive coal plants get a pass from policymakers because they are deemed key to developing a strategic industry.
In January 2022, four months after Xi’s pledge, the Jiangsu Branch of China Export Credit Insurance Company, Jiangsu Bank, part-owned by the provincial government of Jiangsu and the Jiangsu Huihong International Group Zhongding Holding Co., Ltd., a state-owned holding company, signed a memorandum of understanding to start work on the third phase of the Delong Industrial Park in Indonesia, which includes a nearly 1 GW coal power plant, media reports show.
The $20 billion JETP, made up of Germany and Japan as co-chairs, along with Canada, Denmark, the European Union, France, Italy, Norway and the United Kingdom, doesn’t include support to retire captive plants early.
By the end of the decade, about 44% of processed nickel for use in batteries and also for stainless steel will come from Indonesia — half again what it produced in 2020, the International Energy Agency said in 2024. Indonesian production will be twice that of China, the next biggest producer by 2030, IEA said.
While captive coal plants are a source of energy to churn out batteries for use in electric vehicles or to buttress intermittent sources of renewable energy such as solar, captive coal plants themselves can spew out greenhouse gases and pollutants such as particulate matter just as grid-connected plants do.
Exempting captive plants from JETP’s target of retiring all of Indonesia’s coal-fired power plants by 2040 may contribute to 27,000 premature deaths owing to air pollution deaths leading to health costs of $20 billion, CREA has said.
China’s overseas captive coal projects have added an estimated 1.5 billion metric tons of lifetime CO₂, which comes to almost half of all emissions currently in operation. The current projects under construction could add a total of around 3.4 billion metric tons of potential lifetime CO₂ emissions upon completion CREA said.
Nickel processing
To be sure, new coal projects in the pipeline backed with official Chinese financing have shrunk to just over 31 GW, down from nearly 50 GW just a year ago as Chinese state-owned companies back off projects.
Since the 2021 pledge, a total of 59.3 GW of projects, mostly for electric grids, have been canceled, which is equivalent to 6.1 billion metric tons of avoided lifetime carbon dioxide (CO₂) emissions, CREA’s Hasan said.
“The rapid expansion of captive coal plants for Indonesia’s nickel processing, largely driven by Chinese investors, is a glaring loophole that can no longer be left unchecked,” Hasan said.
Banner image: A coal truck at a mine in China. Image by Rhett A. Butler for Mongabay.
This story first appeared on Mongabay
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