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To attract more foreign investment in renewable energy projects in Indonesia and accelerate the development of energy transition, Indonesian Minister of Industry, Agus Gumiwang Kartasasmita announced in an official letter in mid-May that the Indonesian government has decided to revoke regulations on the local content requirements (TKDN) within the country’s electricity sector and ease the requirements for the localization of solar module parts.
The country’s Ministry of Energy and Mineral Resources (ESDM) strongly supports this move, believing that it can create opportunities for foreign green investment and accelerate the development of domestic renewable energy.
Indonesia has great potential for green energy, but the growth of the capacity has been slow
Indonesia has a vast potential for renewable energy with the potential reaching 7,879.4 GW, including solar, hydro, wind, and biomass power plants.
Data from the country’s Ministry of Energy and Mineral Resources (ESDM) shows an increase in installed renewables capacity approximately 6% annually. In 2023, the total installed capacity reached 13.155 GW, showing a slight increase from the previous year’s 12.616 GW. The proportion of renewable energy was approximately 13% last year, which still falls far short of the target of 23% in 2025. Therefore, the government must make efforts to formulate policies supporting the investment in renewable energy.
Agus announced the revocation of the Ministry of Industry Regulation No. 54 of 2012 regarding the “Guidance for Using Domestic Products in Developing Power Infrastructure.” This regulation primarily relaxes the localization requirements for solar modules and does not cover all types of power plants, such as wind, wave, hydrogen, biomass, as well as nuclear energy.
Attracting foreign green investment has intensified competition in the country’s solar energy market
The Director General of New Renewable Energy and Energy Conservation (EBTKE), Eniya Listiani Dewi, mentioned that the previous regulation mandating 60% localization of solar components significantly hindered the development of solar and other renewable energy power plants. With the introduction of the new regulations, the government will relax certain localization requirements for solar components, although specific details have not yet been disclosed.
The removal of localization protection has raised concerns for Sky Energy Indonesia (JSKY), Indonesia’s leading solar cell and solar panel manufacturer. Jung Fan, the CEO of Sky Energy Indonesia, stated, “Though not yet in effect, in our view, a relaxation of the local content requirements specifically for foreign investments, could potentially yield some negative impacts on local solar PV manufacturers.” He also noted that local solar power producers must adapt to the increasingly intense business competition brought about by this regulation to remain viable.
Source: KataData, Industri Kontan, Kompasiana
