Indonesia Will Ease Solar Power Rules to Unlock Green Investment

Country’s net zero goals depend on policy reform, global aid

Indonesia will temporarily relax rules that have slowed development of solar energy in the coal-dependent country, lifting one of the many regulatory and legal roadblocks to the archipelago’s pledge to reach net zero emissions by mid-century.

The government will remove the requirement that solar projects use a majority of domestically produced materials until 2025, when Indonesia’s first solar panel factory is expected to begin production. By conservative estimates, the equatorial country could generate more than 4,000 times its current solar output.

Speeding up the energy transition has been a signature priority for President Joko Widodo, and lifting the “local content” requirement for solar was one of more than a dozen policy reforms laid out in the draft investment plan for the $20 billion Just Energy Transition Partnership that Jokowi negotiated with US President Joe Biden and other wealthy countries.

Bloomberg reviewed a copy of the plan, which was written by the JETP Secretariat, the coordinating body for stakeholders hosted in Indonesia’s Ministry of Energy and Natural Resources and supported by the Asian Development Bank. Dadan Kusdiana, the energy ministry’s secretary general, confirmed that the government is in discussions to relax the rules for solar power projects.

The plan points to several significant challenges for the JETP, including not enough in grants or low-cost loans from wealthy countries, and the reluctance of private financial institutions to fund anything related to coal, including early retirements.