Chinese clean energy firms are investing in solar panel manufacturing in Indonesia as competition and policy changes squeeze their domestic market. However, strict quotas set by Indonesia’s state-owned utility PLN limit rooftop solar installations, dampening investor enthusiasm despite the country’s vast potential.
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Rooftop solar panels of a tourist resort in Bali. (Photo: iStock)
In late June, China’s LONGi Green Energy Technology announced a tie-up with Indonesian state-owned oil and gas company Pertamina to make solar panels in West Java province.
That news came just a week after its rival, Trina Solar, opened a smaller factory in Central Java province.
During the first six months of this year, Indonesians bought nearly as many electric vehicles as they did in all of 2024 — almost all from Chinese brands.
As competition among clean energy firms intensifies in China, its biggest EV and renewables companies are making inroads into Indonesia, positioning themselves for the day Southeast Asia weans itself off fossil fuels.
One example: Trina’s 1.5 trillion rupiah ($90 million) solar panel factory at Kendal Industrial Park in Central Java. PT Trina Mas Agra Indonesia (TMAI), the company’s joint venture with a local partner, employs 640 workers producing 1 gigawatt (GW) of next-generation solar panels that last longer and perform better in cloudy conditions.
TMAI chief financial officer Martha Octavia told Mongabay the factory could triple production if needed.
“The important point is that we are fully prepared, both in terms of technology and infrastructure, to scale when the timing is right,” Octavia said in emailed remarks.
For now, the company is positioning itself to supply panels for some of the nearly 15 GW of utility-scale solar projects in Indonesia’s pipeline, according to data published in February by Global Energy Monitor.
At present, Indonesia has just over 560 megawatts (MW) of solar power feeding the grid — roughly the same as Honduras, and far behind smaller neighbors like Malaysia, which has 2 GW.
Indonesia’s slow uptake of clean energy risks slowing the pace of Chinese investment that otherwise would be coming as producers there seek new markets.
Indonesia remains a largely untapped renewables market, while Chinese solar panel makers face brutal competition at home and mounting losses after Beijing ended solar incentives amid a domestic supply glut.
That presents a rare opportunity for Indonesia to woo investment from China, said Edwin Widjonarko, co-founder of Xurya Daya, which installs and maintains rooftop solar panels for clients such as Tokopedia, the Indonesian e-commerce giant.
“There’s been a bit of a shock for them,” Widjonarko said of conditions at home for Chinese panel makers.
“Indonesia is not yet developed in terms of solar usage. You can produce panels here for the domestic market and you wouldn’t have to export. This is a really big market.”
The problem is that tight quotas, set by Indonesia’s state-owned utility PLN, limit rooftop solar installations for PLN customers, dampening enthusiasm among foreign investors.
PLN’s latest 10-year electricity supply road map caps rooftop solar capacity at 3 GW. Annual quotas range from 162 MW next year to 410 MW in 2028.
By comparison, China installed 198 GW of solar capacity — hundreds of millions of panels — during the first five months of this year alone.
In June, LONGi announced it would build a 1.4 GW solar panel factory in West Java in partnership with Pertamina’s renewables arm, Pertamina New and Renewable Energy.
“Indonesia holds immense potential in renewable energy, and LONGi is proud to contribute our world-leading solar technology to this transformative journey,” Dennis She, the company’s global vice president, said in a statement at the time.
TMAI said its Central Java factory simplifies supply chains, supports domestic suppliers, and reduces demand for energy imports.
Falling battery storage costs and greater grid investments should improve prospects for intermittent renewables such as wind and solar.
TMAI said it’s taking the long view of the Indonesian market.
“Over time, technologies like energy storage, smarter grids and better management will help balance variable supply and keep systems stable,” Octavia said.
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A factory in Indonesia with solar panels on the roof. (Photo: iStock)
According to PLN’s 10-year blueprint, published in May, Indonesia will add about 53 GW of renewable generating capacity and storage over the next decade, though nearly three-quarters of it is slated for the second half of the 2025-2035 period, after a surge in gas-fired capacity scheduled for the first half.
“Global outlooks show that integrating renewables is both feasible and increasingly cost-effective, especially as storage becomes cheaper.”
Electricity generated by solar or wind costs roughly three-quarters that of coal, the Institute for Energy Economics and Financial Analysis, a U.S. nonprofit, reported last year.
Beijing is scaling back incentives after hitting its clean-energy goals six years early. With more than half of China’s installed generating capacity now coming from renewables, clean-energy projects that go online from June no longer benefit from guaranteed minimum tariffs.
That has many Chinese companies scrambling for new markets.
Since 2022, Chinese renewable energy firms, EV battery makers and automakers have announced about $70 billion in investments in Indonesia, spanning mining, processing and manufacturing.
One of those, a $6 billion power battery venture launched in 2022 by Indonesian Battery Corporation and China’s Contemporary Amperex Technology Co., Limited (CATL), is scheduled to begin operations at the end of next year.
In June, Indonesia’s deputy energy and mineral resources minister, Yuliot Tanjung, said CATL would also begin making EVs in Indonesia by next March.
Consultancy PwC estimates EVs will account for 29% of new car sales in Indonesia by 2030, up from 15% in 2024.
Growth in the EV sector is a bright spot in Indonesia’s otherwise shrinking vehicle market, buoyed by rebates on value-added tax and luxury goods tax. The government earmarked 5 trillion rupiah ($301 million) for rebates in 2025, but has said it will end subsidies for imported EVs at the close of this year.
Failing to deal with red tape and ending incentives too soon risks failing to capitalize fully on the sudden shift in Chinese clean energy investment, Xurya’s Widjonarko said.
“This is a rare opportunity — probably a once-in-a-lifetime chance for us to build a reliable domestic supply chain with Chinese technologies,” Widjonarko said.
“The timing is quite sweet.”
Author: Jeff Hutton
This article was originally published on Mongabay under the Creative Commons BY NC ND licence. Read the original article.
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