Indonesia planned to build a methanol plant to increase energy production using local coal and plant resources. There is an alternate option. They can increase the number of EVs in the country.
Energy finance experts are advising Indonesia to adopt electric vehicles (EVs) as an alternative to its plan to build an expensive methanol production plant following a failed similar project in China.
A paper published by the Ohio-based Institute for Energy Economics and Financial Analysis found that Indonesia’s aging vehicle fleet and humid climate are not suitable for methanol fuel due to potential condensation. Methanol is extracted from natural gas, wood, coal, and biomass.
The 2021 white paper by the International Council on Clean Transportation stated that although methanol-blended fuel may cause lower emissions and improve vehicle performance, its advantages are easily offset by its lower energy content and increased material corrosion. The non-profit organization noted that electric vehicles are a more environmentally friendly option than methanol fuel.
There are three risks specific to Indonesia. The first one is the high sulfur content in the country’s gasoline. The second is a high proportion of older, alcohol-incompatible cars, and the last is the country’s hot and muddy weather. Humidity increases the possibility of corrosion and the risk of water contamination from condensation. The study concluded that modifying the fuel for transportation storage and pumping infrastructure to make it fuel-compatible would be expensive, and vehicle owners and retail fuel pumps need to pay more for its maintenance.
Indonesia planned to build a methanol plant to increase energy production by using its local coal and plant resources. There is an alternate option. They can increase the number of electric vehicles and motorcycles in the country.
Ghee Peh, the Asia-based specialist who authored the research paper, stated that it is less complicated and economical to increase the use of EVs, especially motorcycles, than methanol. EV charging networks have already been established in neighboring countries (like Vietnam).
Citing a Jakarta Post report, the institute stated that Indonesia was building a US$1.2 billion coal-based methanol factory in East Java to increase biodiesel supply by 2027. The country’s methanol output is short by 2 million tons per year, but the government has not disclosed the source of the gas.
Chinese coal mining and energy company Shanxi Lanhua shut down its coal-based dimethyl ether (DME) plant in Jincheng, central China, in 2023 after facing significant losses. Its output dropped to 8,100 tonnes in 2023 from 17,000 tonnes in 2022 and 256,000 tonnes in 2021. The company faced a loss of US$73 per tonne in 2022 and 2023. DME is formed when water is separated from methanol.
When methanol is mixed with gas and used in automobiles, it requires expensive infrastructure for storage and pumping. The car consumers were not okay to pay such prices that were more than the manufacturing costs. It made the production unprofitable at the plant level due to high coal input and conversion costs.
The good news is that it is not difficult for Indonesia to adopt to EV because the market there is already expanding. Global EV registrations increased from 4,000 in 2020 to 116,000 in 2023. There is no deficiency in demand since 43,000 EVs were sold nationwide in 2024.
Switching to electric vehicles would be the most cost-effective and environmentally friendly course of action for the government, given the significant expansion in the region.
In 2023, Thailand had 207,000 electric cars on the road, while China had 20.4 million. Vietnam has the highest number of electric motorbike registrations, with 2.3 million, compared to 75,000 in Indonesia, less than 0.1%.
