Accelerating Indonesia’s energy transition through a competitive and sustainable battery industry

Batteries have emerged as a central enabler of the energy transition.

For Indonesia, developing the domestic battery industry is important for decarbonising the energy sector and supporting economic growth.

The window for Indonesia to tap into this emerging market is closing and warrants swift government action, following the rapid development of similar industries in Viet Nam and the Philippines.

In our collaborative research, Climateworks Centre and Purnomo Yusgiantoro Centre have identified four important contexts that the government can consider to accelerate the development of the domestic battery industry:

1. Indonesia has significant critical mineral assets, particularly nickel, positioning it as a potential major player in the battery supply chain. However, not all batteries require nickel. This means the opportunities to secure economic benefits depend heavily on global research and development on batteries.
2. The global market is shifting toward lithium iron phosphate technology, which doesn’t leverage Indonesia’s resource strengths, so the window of advantage is real but not guaranteed.
3. At the moment, the policy framework for developing the battery industry – the mix of regulations, incentives and standards – is inconsistent. A national battery industry roadmap, which would organise, sequence and coordinate these policies over time, can unlock Indonesia’s ability to attract investment and build industrial capability at scale, including the missing midstream.
4. Sustainability credentials are increasingly a market-access requirement, and Indonesia’s battery sector doesn’t yet meet that standard because it is fossil-fuel-dependent and lacks sufficient recycling infrastructure.

Our research identified four priorities to help Indonesia build a competitive and sustainable battery industry:

1. A broader perspective: Indonesia could expand its focus on developing its battery industry, recognising that non-nickel batteries are gaining popularity, and position itself in the global battery supply chain.
2. Comprehensive, integrated policy instruments: Indonesia could develop a national battery industry roadmap as a national-level primary directive.
3. Revisiting protectionist and fiscal policies: Indonesia could align the protectionist and fiscal policies as part of the development of a national battery industry roadmap.
4. Embedded sustainability considerations: Indonesia could embed sustainability into the industry development, including sustainability standards and decarbonising the power sector.

Indonesia has all the resources required to be a global battery powerhouse, but it needs strong policy support and commitment from all stakeholders to realise its full potential.

The recommendations outlined in this brief offer a clear trajectory for Indonesia to achieve that.