In a move to boost its renewable energy sector, Indonesia has lowered the local content requirement for solar power projects to 20%, a significant reduction from previous levels. This policy shift, announced by a senior government official, aims to accelerate the development of solar power plants across the country and attract more foreign investment.
The revised regulation comes as Indonesia strives to meet its ambitious renewable energy targets, which include increasing the share of renewables in its energy mix to 23% by 2025. By easing the local content rules, the government hopes to reduce costs and encourage the rapid deployment of solar technology, which has been hindered by the higher local content requirements in the past.
Dadan Kusdiana, Director General of New, Renewable Energy, and Energy Conservation at the Ministry of Energy and Mineral Resources, stated that the reduction to 20% was implemented to make solar projects more financially viable. “We have adjusted the local content requirement to ensure that solar power plants can be developed more quickly and at a lower cost,” Kusdiana said. He emphasized that the new policy would help Indonesia attract more investment from global solar companies and accelerate the country’s energy transition.
The local content requirement, which mandates a minimum percentage of materials and services used in solar projects to be sourced domestically, has been a contentious issue for developers. Critics argue that the previous higher threshold, which required a larger portion of local content, made projects more expensive and less competitive, thereby slowing down the adoption of solar power.
Indonesia, the largest economy in Southeast Asia, has been exploring various strategies to enhance its renewable energy capacity. The country has abundant solar potential, particularly in its eastern regions, but the growth of the solar sector has been slower than expected due to regulatory and financial challenges.
With the new local content requirement in place, industry experts believe that Indonesia is poised to see a significant increase in solar power installations. The move is also expected to create new opportunities for collaboration between Indonesian companies and international solar technology providers.
However, some local industry players have expressed concerns about the impact of the reduced requirement on domestic manufacturing. They argue that lowering the local content rule could undermine efforts to develop a robust local solar manufacturing industry and lead to increased reliance on imported components.
In response, Kusdiana noted that the government remains committed to supporting the growth of local industries, but that the immediate priority is to expand the country’s solar capacity. “We are not abandoning local industries. Instead, we are creating a more balanced approach that allows for faster development of solar power while still providing opportunities for domestic companies,” he said.
The policy adjustment is part of a broader set of reforms aimed at streamlining regulations and fostering a more favorable environment for renewable energy investments in Indonesia. As the country seeks to reduce its dependence on fossil fuels and curb greenhouse gas emissions, the government is increasingly focused on removing barriers to the adoption of clean energy technologies.
In conclusion, Indonesia’s decision to ease the local content requirement for solar power projects is a strategic step toward accelerating the growth of its renewable energy sector. As the country moves forward with its energy transition, the new policy is expected to attract international investment, enhance solar power capacity, and contribute to a more sustainable energy future.
Source: Reuters
