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As the fourth most populous country in the world, Indonesia is experiencing an increase in energy consumption, generating new opportunities for renewable energy companies. As a result, the government has set itself ambitious renewable energy targets to meet its greenhouse gas emissions target in the energy sector, also increasing national energy security.
These are some of the multi-faceted aspects of investing in Indonesia’s solar panel manufacturing sector.
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Prospects for solar power generation in Indonesia
The solar photovoltaic (PV) market is expected to reach $ 769.3 million, with large-scale PV accounting for $ 675.5 million and rooftop PV $ 93.8 million. Both divisions are in their infancy, with government rules and state-owned energy supplier (PLN) procurement processes recently implemented.
According to the International Renewable Energy Agency, the installed solar power capacity in Indonesia is expected to increase significantly by 2030, thanks to the initiatives of its government and PLN. Additionally, the projects include plans to dramatically improve energy availability by deploying solar power systems to nearly 1.1 million people in rural areas without electricity.
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Opportunities and challenges for the Indonesian solar energy sector
Business opportunities in renewable energies
The main business prospects of the energy sector relate to the independent power producers (IPPs) built and financed by the private sector who sell power to PLN under a power purchase agreement ( ASF) in the long term (up to 30 years).
In addition, consulting and engineering studies, the significant supply of electromechanical equipment and the management of engineering, procurement and construction (EPC), especially for projects with a capacity greater than 10 megawatts (MW), offer the best prospects (in value) for foreign companies.
Many foreign companies have opened offices in Indonesia to conduct market research, build relationships with PLN, and assess potential business partners.
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More favorable regulations
MEMR (Ministry of Energy and Mineral Resources) amended the rules to establish Regulation No.26 of 2021, which includes the following incentives for the development of solar photovoltaic energy:
- eliminating the net metering discount for energy exported from rooftop solar PV projects to the PLN grid
- increase the compensation period for unused credits (until the end of the semester in question)
- reduce permitting time and integrate data into an online system.
Regulation 26 also lays the foundation for carbon trading, described in detail in a subsequent MEMR rule. Rooftop solar PV projects constructed outside of PLN’s commercial regions, such as industrial zones, are subject to Regulation 26.
- The highly fragmented structure of the Indonesian network, the problems of functioning in off-grid areas, the prospects for financing new projects currently limited by local banks and the problems of acquiring land are all obstacles in the sector of the sector. electricity.
- Additionally, there is a lack of appropriate design requirements for thermal heating and water heating in industrial buildings, a lack of understanding of the renewable energy potential, space constraints, and inadequate attention. to liquid biofuels.
- Another major obstacle is the relatively high prices. Indonesia has an average cost per megawatt of solar PV capacity 65% ââhigher than India and a cost per megawatt 10% higher than Thailand.
According to the IEA report on Indonesia, public sources and state-owned enterprises have played an important role in financing the production of fossil fuels rather than renewables. In addition, about half of the capital invested in renewable energy sources came from private sources.
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