Indonesia relaxes local shareholding requirements for solar power plants to 20%

Indonesia announced on Monday (August 12th) that it has reduced the minimum local investment requirement for solar power plants from around 40% to 20%, in an effort to attract at least half of the funding from foreign multilateral or bilateral lending institutions for project investment.

We have evaluated the relevant regulations so that renewable energy power plants, especially hydroelectric, wind, and solar power plants, can be immediately integrated into our system... further reducing our carbon emissions, "said Jisman Hutajulu, Director General of the Indonesian Ministry of Energy, at a press conference

The new regulations allow solar power plant projects to use imported solar panels until June 2025, provided that the project operator obtains approval from the minister, signs a power purchase agreement before the end of 2024, and the power plant is put into operation in the first half of 2026.

Indonesia has pledged to increase the proportion of renewable energy in its energy structure, and foreign lending institutions have also promised to provide funding. However, investment is still limited, and analysts attribute this to local investment rules.

The new regulations also stipulate that the localization ratio of hydroelectric power plants should be between 23% and 45% based on their installed capacity, compared to the previous range of 47.6% to 70.76%. For wind power plants, the localization ratio requirement is 15%.

Last year, renewable energy sources such as solar and geothermal accounted for approximately 13.1% of Indonesia's energy structure, falling below the target of 17.87%. The majority of the country's energy needs are met by coal and oil.