Fostering Courage to Resolve Dilemmas in Indonesia’s Solar Energy Industry Development

Jakarta, July 26, 2023 – Indonesia’s swift progress in the energy transition hinges upon the nation’s ability to cultivate a robust domestic solar energy industry. This imperative message was conveyed by Fabby Tumiwa, the Executive Director of the Institute for Essential Services Reform (IESR), during a compelling discussion at the Indonesia Solar Summit 2023 (26/07). Tumiwa emphasized that prompt government action is pivotal to address several critical aspects such as obtaining market data for solar PV, ensuring the bankability of the industry to facilitate obtaining business loans, adhering to the 40% local content requirement for domestic solar PV products, and surmounting the constraints within the solar industry’s supply chain. Moreover, the willingness to invest in the solar energy sector will play a pivotal role in shaping the trajectory of Indonesia’s solar industry growth.

Tumiwa accentuated, “Regulators must consolidate dispersed data regarding the emerging solar PV market, thereby providing potential investors in Indonesian solar PV manufacturing an insightful data. Additionally, Indonesia currently lacks tier-1 manufacturers, those compliant with bankability prerequisites. This shortfall impedes the production of highly efficient solar modules. The establishment of tier-1 solar manufacturing facilities within Indonesia would be a monumental stride.”

He further evaluated that once the bankability predicament is alleviated, it will not only invigorate larger-scale solar projects to set foot in Indonesia but also stimulate burgeoning market demand.

Similarly, Rachmat Kaimuddin, the Deputy Minister for Infrastructure and Transport, Coordinating Ministry of Maritime and Investment Affairs, Republic of Indonesia, reiterated the importance of proactively preparing the groundwork for solar energy demand to foster the development of a solar energy industry in Indonesia during the same event. He underscored that governmental intervention in shaping a solar energy market can be effectively achieved through the Just Energy Transition Partnership (JETP).

“The solar industry in Indonesia is still in its pioneering stages, relatively underdeveloped. Meanwhile, our power generation heavily relies on coal. Our objective is to establish a thriving solar industry, necessitating the cultivation of demand. Through JETP, we are intervening by reducing our reliance on fossil fuels and infusing renewable energy sources like solar PV. This demand extends beyond Indonesia’s borders, for instance in Singapore, where there’s interest in sourcing green electricity generated using modules and batteries manufactured in Indonesia,” elaborated Rachmat.

Pramudya, the Deputy Director of Power Plant Planning at the Directorate General of Electricity, Ministry of Energy and Mineral Resources, Republic of Indonesia, anticipates that the renewable energy mix will only constitute 11.3% of the targeted 23% by 2025. He posits that the gap in achieving this target can be addressed by the inclusion of solar power plants..

“Solar PV possesses a promising opportunity due to its potential for rapid development. While aiming to achieve the 23% renewable energy mix target, a substantial 15 GW of solar PV is required. However, the realization of this goal within a 2-year timeframe is subject to challenges, encompassing local content requirement considerations and the essential adaptation of network flexibility,” remarked Pramudya.

Wilson W. Wenas, a Solar Practitioner from ISG Solar, outlined three key strategies to expedite the growth of the solar industry in Indonesia. Firstly, it is imperative to select the appropriate solar energy technology, such as TOPcon, Heterojunction, Advanced Heterojunction and TOPcon, and Perovskite Solar Cell Tandem. Secondly, robust research and development initiatives should be primed to support the chosen technology. Thirdly, the collaboration should extend to machine makers, not solely module makers.

“Making an erroneous technology or machine maker selection could lead to catastrophic consequences,” he emphasized.

Additionally, Daniel Kurniawan, a Solar Energy Specialist at IESR, elucidated that investing in polysilicon technology stands as a strategic imperative for both the cell and panel sectors. He underscored that propelling the growth of Indonesia’s solar energy industry demands the presence of bold stakeholders willing to undertake investment risks.

Continuous Effort in Paving the Way for Solar Energy in Indonesia

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Jakarta, July 26, 2023 – The Indonesia Solar Summit 2023, hosted by the Ministry of Energy and Mineral Resources and co-hosted by think tank Institute for Essential Services Reform (IESR), affirms the commitment to accelerate solar deployment in the country.  Solar energy has made it significantly into Indonesia’s NZE pathway, projected at 61% of total electricity sources by 2060. A previous separate study by IESR placed solar energy as the backbone for a zero-emission energy system by 2050.

Minister of Energy and Mineral Resources, Arifin Tasrif, mentioned solar energy is a crucial strategy to achieve 23% of the renewable energy mix within the next two years before 2025. However, he also emphasized the significance of having access to technology and funding to successfully utilize solar energy and meet the renewable energy mix target. According to him, investment in solar energy will easily flow into Indonesia if there is a significant demand in the country. 

“There are two crucial factors that must be considered to accelerate the use of solar energy. The first is the availability of technology, which requires support from the industry. The second is the availability of international and domestic coverage that needs to be mobilized. The target for the renewable energy mix is 23% by 2025, but currently, it only stands at 12.5%, leaving only two years to achieve this goal. Additionally, the aim is to reduce greenhouse gas emissions by approximately 290 million tons in 2030, which has increased to 358 million tons. To achieve this, various efforts are being made, including de-dieselization programs and converting fossil-fueled motorized vehicles to electric motors, to absorb emissions,” said Arifin. 

The progress towards solar energy adoption in Indonesia remains slow. The actual installed capacity of solar PV in 2022 is 271.6 MW or far below the plan of 893.3 MW, based on data from the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE), MEMR. There are several factors that have hindered widespread adoption of solar energy, including complications with land ownership, lack of local experience and unattractive tariffs. Whereas, the latest technical potential is at 3,295 GWp, acceleration of solar deployment will be critical in achieving renewable energy and NZE targets. In the short term, 18 GW of solar energy is needed to attain a 23% renewable energy mix target by 2025, with an investment value of US$14.1 billion, based on BloombergNEF and IESR study

With the announcement of Just Energy Transition Partnership (JETP) last year at G20 Summit 2022 in Bali, Indonesia – a comprehensive investment and policy plan is currently drafted in consultation with relevant stakeholders, covering early coal retirements, just transition measures, and acceleration of renewable energy development. The US$20 billion partnership aims to peak Indonesia’s power sector emission by 2030, and solar energy has become a significant part of the planning due to its techno-economic advantage and high potential for greenhouse gases emission reduction. The first version of such a plan will be unveiled in August 2023.

Rachmat Kaimuddin, Deputy Minister for Infrastructure and Transport, Coordinating Ministry of Maritime and Investment Affairs revealed that to build solar energy industrialization, Indonesia needs to prepare the demand first. 

“Reflecting in this, we intervene in the country, for example through JETP, how we minimize dependence on fossil energy, can be in several forms such as reducing the output of coal-based power plants and creating new demand,” he explained. 

He also emphasized that Indonesia’s cooperation with Singapore for green electricity requires that solar modules and batteries must be produced in Indonesia, so that the demand that arises becomes a trigger for the PLTS industry in Indonesia to form. 

“We don’t want to only import in the future. We hope that a domestic industry will be formed while we are in the process of energy transition,” he said.

Antha Williams, who leads Bloomberg Philanthropies’ Environment Program stated that developing a homegrown solar industry is a key component to advancing Indonesia’s transition to clean, affordable, and reliable energy.

“By cultivating international partnerships to mobilize capital and scale domestic solar manufacturing capacity, Indonesia has the potential to realize its net-zero energy pathway goals through rapid deployment of clean energy projects. Bloomberg Philanthropies welcomes the opportunity to support Indonesia’s goal of becoming a leader in solar energy development.”

Fabby Tumiwa, the Executive Director of IESR, stated that over the last two years, a new market has emerged, utilizing solar PV not only for selling electricity but also for producing new value-added products, such as green hydrogen and ammonia. Based on IESR data, there are currently 10 green hydrogen and ammonia projects that have been initiated since last year, intending to use solar energy as their primary electricity source. These projects are currently in the study phase and are expected to be realized within the next 2-3 years. Fabby also pointed out that experiences from various countries, including some developing ones, demonstrate that constructing Gigawatt-scale solar power plants within a year is an achievable feat.

Fabby highlighted three essential supporting factors to encourage the development of solar PV, “Firstly, it requires political will and strong, active leadership from the government, along with the establishment of transparent and sustainable policies and regulations. Secondly, there is a need for the development of an integrated ecosystem, which involves defining quality standards and guarantees for solar modules, ensuring the availability of qualified and trained human resources. Lastly, it is crucial to foster the growth of an integrated and competitive solar PV manufacturing industry.”

Indonesia’s Chairmanship in ASEAN 2023 presents an opportunity to engage the public and raise awareness about the benefits of solar PV adoption. Public outreach campaigns, educational programs, and community-driven initiatives can inform people about the environmental advantages, economic benefits, and energy independence that come with solar PV usage. Building public support and understanding can facilitate smoother and more widespread adoption of solar PV technology. Besides that, Indonesia’s Chairmanship can set a precedent for solar PV adoption in ASEAN through policy alignment, regional cooperation, investment promotion and innovation. It is timely to promote and drive domestic solar industries and supply chains in parallel with fast deployment of solar projects.