Indonesia’s aluminium industry to be hit by 317% inflated power hunger, with a potential 9.5 GW demand by 2028

Indonesia’s aluminium industry is growing fast, tackling all the stalled sites and upgrading technology at processing units. The RKAB structure has made sure that the ore and the subsequent production process are streamlined. But what about the electrons? Globally, electricity alone accounts for roughly 30-35 per cent of the cost of producing one tonne of primary aluminium. By 2028, Indonesia’s primary aluminium smelting capacity is projected to rise from 0.75 million tonnes per annum in 2024 to 3.13 million tonnes in 2028, a 317 per cent increase in just four years. That expansion is the final leg of Jakarta’s downstream pivot: converting bauxite reserves into integrated alumina and aluminium output. But the decisive constraint is neither geology nor capital. It is power.

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Indonesia’s multi-GW demand shock that other regions have already faced

The projected increase by SMM to 3.13 million tonnes per annum by 2028 is the culmination of Indonesia’s post-2023 bauxite export ban strategy, which redirected ore into domestic refining and smelting. Since the ban, Indonesia has accelerated alumina refinery construction (with 14.2 million tonnes of additional alumina capacity in the pipeline) and mapped out more than 7,150 thousand tonnes of additional aluminium smelting capacity.

Also, the power demand increase is concentrated in regions where smelter projects are under construction or planned, including North Kalimantan, West Kalimantan, Sulawesi and parts of Sumatra. But is Indonesia ready for such a demand leap?

International experience shows that resource availability and project financing alone do not guarantee execution. Europe’s aluminium curtailments during the 2022 energy crisis and Mozambique’s Mozal smelter dependence on dedicated power supply arrangements illustrate how electricity availability ultimately determines operating continuity and cost competitiveness. In Indonesia’s case, with aluminium value-chain power demand projected to rise from 1 GW in 2024 to 9.5 GW by 2028, power supply, not geology or capital, is the binding constraint.

Likewise, several European smelters were curtailed in 2022 as high power prices made continued operation uneconomic, demonstrating how a regional power shock can directly remove capacity and raise downstream premiums.

By contrast, jurisdictions that link smelters to secured low-cost baseload capacity can sustain large-scale primary aluminium operations. For example, Iceland’s smelters (for example, Alcoa’s Fjarðaál) were sited deliberately to exploit geothermal power under long-term arrangements, a model that ensures low unit energy costs.

Similarly, Malaysian developments in Sarawak have been explicitly tied to new hydropower projects that create the generation margin required for expansion of smelting capacity.

In any stance, why are we worried about the power source? Let’s look back a bit to better understand the picture.

Also read: Indonesia’s 900Kt aluminium goal’s reality check: 7 stalled refineries, 24Mt of lost bauxite demand

The first bout of news that Indonesian aluminium industry grabbed

Especially for the aluminium industry, Indonesia grabbed the international headlines when it became the stock feeder of bauxite from Kalimantan Province 10-15 years ago to China, when the latter’s alumina refiners were hit by a depleting domestic bauxite ore reserve and needed to replace them with imported bauxite. Indonesia had excellent quality, and the freight cost back to the major eastern coastal ports of China was reasonable.