Indonesia eyes ditching coal to become sustainable battery hub

Indonesia’s investment minister Bahlil Lahadalia discusses the country’s outlook for electric vehicles amid big-ticket investments.

For years, Indonesia has missed a trick. It has the world’s biggest nickel reserves, at over 20 per cent, and significant reserves of cobalt – two key ingredients in electric vehicle (EV) batteries – but while it has exported critical minerals used in EV battery production, the country has seen little to no manufacturing activity.

However, this may change after it won several big-ticket investments, including a $1.1bn EV battery plant led by South Korean heavyweights Hyundai Motor Group and LG Energy Solutions. Investment minister Bahlil Lahadalia explains why Indonesia is betting on becoming an EV battery manufacturing hub – and why it will not be readily influenced by Chinese investors or by any sole country.

Q: What are the Indonesian government’s ambitions for EV battery manufacturing?

A: Our dream is to better contribute to diversifying and distributing the global EV battery ecosystem, as well as to ensure the accessibility of EV battery products to consumers worldwide. This is not just a mere ambition; it has turned into a reality because we have secured commitments from carmakers and chemical companies, including LG, Volkswagen, CATL and BASF.

In terms of subjective and personal ambition, I think it is only fair that Indonesia – with huge resources of nickel, cobalt and manganese – can become a major critical hub for EV battery manufacturing. In this way, we house not only the resources, but also the manufacturing and the value-added parts of the value chain. EV batteries are therefore an important instrument for us to catch up to become a major industrialised player in the world.

Q: Coal is still predominantly used in Indonesian nickel processing. Does it concern you that foreign investors with environmental commitments might be put off by this?

A: Going forward, we will increasingly rely on green and renewable energy. This is something that we believe to be important because without renewables, we will lose our competitiveness in the international market. The existing power plants that rely on coal will be diverted into other parts of the nickel-processing ecosystem, such as stainless steel. 

Then, EV battery manufacturing will increasingly rely on power coming from renewable energy. For example, the strategic industrial park in North Kalimantan, which will host battery manufacturing, will be powered by hydropower and in Batang in Central Java, the energy will be increasingly generated from hydropower and solar photovoltaics.

Q: China remains one of Indonesia’s biggest investors. Are you concerned by its rivalry with the US and tensions over Taiwan?

A: China is the second biggest source of foreign investment into Indonesia after Singapore, and Chinese investments in Indonesia are only slightly larger than other major sources of investments, including Japan, the US and South Korea.

In terms of the tension between China and Taiwan, I do recognise the possibility that there might be ramifications for Indonesia, which has pursued a neutral position on this issue.

One important thing I would like to underscore, however, is that Indonesia will not be dictated to by any one particular country. We remain open to investments coming from all countries. So, if there are more investments from Europe, the UK or the US, I will fully support their realisation and development in Indonesia.

This article first appeared in fDi Intelligence. Photo credit: Bloomberg