According to theJakartaPost report, renewable energy has been a major focus for Southeast Asian nations in recent years. As of 2020, renewable energy accounted for 33.5 percent of ASEAN’s electricity generation capacity, mainly due to the increase of solar photovoltaic (PV) energy.
Indonesia is targeting the addition of 4.68 gigawatts (GW) of solar power capacity by 2030 and is aiming to source 51.6 percent of its added power capacity from renewable sources under a new national master plan. Moreover, by 2060, solar energy is projected to dominate Indonesia's energy landscape, accounting for over 60 percent of the nation's total energy generation. There is still significant potential for solar power, especially given that currently, solar power generation only realizes less than 1 percent of its total potential.
Achieving this ambition will require Indonesia to ensure a supply of good-quality solar PV modules going forward. Localization of the solar PV value chain is essential to secure access to high-quality solar PV modules for the long term. In addition, the localization of the value chain will reduce dependency on imported products, ensuring greater resilience in the face of potential supply disruptions. It will also drive foreign direct investments, increase green jobs and ensure the security of supply for Indonesia. Solar PV localization is projected to contribute more than US$5 billion to $10 billion in additional investment (both direct and indirect) to Indonesia by 2035.

However, the development of renewable energy — especially solar energy — has stagnated for a number of reasons, including the oversupply of fossil-fuel based power generation in the Java region, as well as the lack of a reliable and local renewable energy value chain to support its growth. This encompasses the inadequate supply of high-quality solar PV modules and financial barriers arising from the bankability issue due to the absence of tier-1 PV modules domestically produced in Indonesia.

Localizing solar energy in Indonesia – opportunities and challenges

Indonesia currently possesses an annual solar PV module manufacturing capacity of approximately 2.2 gigawatt-peak (GWp). However, Indonesia relies heavily on solar PV module technology that offers relatively low power capacity and around 15 percent to 17 percent module efficiency. With Indonesia’s PV manufacturing limited to only module assembly using imported cells with relatively high prices, the utilization of Indonesia’s manufacturing capacity remains relatively low at below 10 percent. Localizing a next-generation solar PV manufacturing value chain, with high quality and affordable prices, is a crucial step toward achieving renewable energy targets for Indonesia. Localizing the value chain will allow Indonesia to secure sufficient supply of tier-1 solar PV modules and unlock economic value for Indonesia in the long run.  However, the localization of solar PV will require substantial capital investment and need critical scale to make it economically feasible. In addition, the government must also consider both economic and operational feasibility to help determine where to make initial investments. The current strategy for solar development combined with the recent plan for power export of 2 GW alternating current (AC), or 12 GWp of solar power plants, will provide a good initial traction for Indonesia to start localizing the manufacturing of solar PV modules. However, the scale might not be sufficient to justify the localization of the entire solar PV value chain.   Indonesia should focus on localizing solar PV modules and cells in the next few years, which requires at least 2-3 GW production capacity to be economically viable. As the scale increases, Indonesia should expand gradually to polysilicon and ingot/wafer production, which requires a minimum 5-10 GW production capacity to justify the investment. Given the current scale, localizing solar modules and cells would be the best starting point for Indonesia at this current stage of solar PV energy production.