Indonesia seeks to expedite renewable energy development in the country and boost the domestic solar panel industry. — Reuters
JAKARTA: The government has relaxed its local content requirements for solar power projects financed by foreign investors, as it seeks to expedite renewable energy development in the country and boost the domestic solar panel industry.
Rachmat Kaimuddin, undersecretary for transportation and infrastructure at the Office of the Coordinating Maritime Affairs and Investment Minister, said on Aug 7 that the move would help Indonesia unlock funding from international partners to build its renewable energy supply.
Rachmat said the country “cannot wait until the domestic industry is ready”. The policy change, enacted through Energy and Mineral Resources Ministerial Regulation No. 11/2024, came into effect on July 30.
Article 17 of the regulation exempts electricity projects from local content rules if at least 50% of their funding comes from foreign multilateral or bilateral lenders.
Article 19 allows solar power plant projects to use imported panels with the approval of the Office of the Coordinating Maritime Affairs and Investment Minister but also requires project operators to sign a power purchasing agreement before the end of 2024 and have it in operation by the first half of 2026.
Moreover, the imported solar panels must be procured from companies that have committed to investing in a production facility in Indonesia. The import window closes on June 30 of next year, “so the imports cannot be (carried out for) long”, Rachmat said.
Under the previous rules, 60% of the components of solar power plants had to be locally made.
The government also introduced Industry Ministerial Regulation No. 33/2024, which revokes a 2012 rule requiring the use of domestic products for electricity infrastructure development, except domestic production is not possible, cannot meet the technical requirements or cannot meet demand.
This was accompanied by Industry Ministerial Regulation No. 34/2024, which changed the method for calculating the local content requirement for solar panels.
The government has pledged to boost the proportion of renewables in the national energy mix, and foreign lenders have promised to provide funding, including more than US$20bil under the Just Energy Transition Partnership from the International Partners Group, led by the United States and Japan.
However, the disbursement of this renewables funding has remained limited, a fact analysts have blamed partly on local content rules. State-owned electricity company said in January that nine renewable energy projects, worth some 51.5 trillion rupiah (US$3.2bil), had been hindered by a lack of international funding because of local content rules.
Indonesian Solar Energy Association (AESI) chairwoman Mada Ayu Habsari told The Jakarta Post last week that the new import rules would have a positive impact on developers, considering that the previous local content rules had hampered multiple solar power plant projects in the country.
“We welcome the new regulation. AESI will participate in creating a road map or milestone (to determine) local content percentages to better accommodate developers,” she said.
Fabby Tumiwa, executive director of the Institute for Essential Services and Reform, told The Jakarta Post last week that the government would have to develop the domestic solar panel industry and attract more tier-1 solar module manufacturing companies.
According to the BloombergNEF classification, tier-1 manufacturers produce solar panels with increased durability, have been in the business for more than five years and have healthy balance sheets, among other criteria. — The Jakarta Post/ANN
