Looking forward to the future of Indonesian solar power

Jakarta (ANTARA) –

Indonesia has the opportunity to become a leader in the solar photovoltaic (PV) industry, especially in Southeast Asia, given its huge solar energy potential.

At the Indonesia Solar Summit in Jakarta on August 21, 2024, Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan emphasized the importance of expanding the development of the green energy industry, including solar energy, to maintain Indonesia’s status as an energy exporter and build a sustainable energy industry.

This step is not only important to meet Indonesia’s energy transition targets, but also to reduce dependence on fossil fuel exports.

According to data from Bank Indonesia (BI) and the Ministry of Energy and Mineral Resources, Indonesia’s fossil fuel exports in 2023 are quite significant, namely 518 million tons with a value of USD43 billion.

Meanwhile, national pipeline gas exports reached 181 million British thermal units (MMBTu) and liquefied natural gas (LNG) exports 474 million MMBTu, with a total value of USD8 billion.

Pandjaitan noted that Indonesia’s renewable energy potential, including solar, wind, hydrogen, bioenergy, geothermal and ocean energy, is very large.

The country’s solar power potential alone reaches 3,286 GW, while the potential for wind, hydrogen, bioenergy, geothermal, and ocean power is 155 GW, 95 GW, 57 GW, 24 GW, and 20 GW, respectively. However, current renewable energy production is still limited, at only around 7 GW.

To develop the green energy industry, Indonesia last year collaborated with Singapore to develop the renewable energy industry, including the production of solar panels and battery energy storage systems (BESS).

This collaboration has attracted significant investment in the green energy sector, particularly in the development of solar power plants (PLTS) and battery supply chains.

Total investment reaches tens of billions of US dollars, including USD30 billion–USD50 billion from energy development companies, USD1.7 billion from solar panel manufacturers, and USD1 billion from battery and inverter manufacturers.

Minister Pandjaitan also highlighted the importance of developing the domestic solar panel manufacturing industry to reduce dependence on imports.

State-owned electricity company PLN plans to communicate with global solar panel manufacturing companies to attract investment and build factories in Indonesia, in line with the government’s efforts to increase the use of local components in renewable energy projects.

Realization and development

According to data from the Ministry of Energy and Mineral Resources, the realization of the installed capacity of Indonesia’s renewable energy power plants in 2023 will reach 13,155 MW or 13.16 GW.

The largest capacity is recorded in Hydroelectric Power Plants (PLTA) of 6,784 MW, followed by Bioenergy Power Plants (3,195 MW) and Geothermal Power Plants (2,417 MW). While the potential for solar energy is very large, namely 3,300 GW, its realization has only reached 573 MW.

In 2023, the addition of PLTS capacity was recorded at 290.69 MW, consisting of 30.09 MW of underground solar panels, 68.06 MW of rooftop PLTS, and 192.54 MW of floating PLTS.

To boost the use of solar energy, the government is currently accelerating the development of PLTS as a renewable energy solution.

PLN recently signed a power purchase agreement with Saudi Arabian power generation company ACWA Power for the development of the Saguling Floating Solar Power Plant in the Saguling Reservoir, West Java, with a capacity of 60 MW, which is expected to start operating in 2025.

Similar projects will be implemented in Lake Singkarak, West Sumatra, with a capacity of 50 MW, and Karangkates, Malang, East Java, with a capacity of 100 MW.

Indonesia has the potential to develop floating PLTS on lakes and dams in around 325 locations. Based on data from the Ministry of Public Works and Public Housing, floating PLTS can be developed in 259 dams with a potential capacity of up to 14.7 GW.

Challenges and solutions

ReforMiner Institute Executive Director Komaidi Notonegoro highlighted the challenges faced in developing renewable energy, such as solar power plants, which are highly dependent on weather conditions.

Therefore, PLTS requires conventional generators for backup power at night, which can significantly increase operational costs.

“The problem is not only emissions, but also costs. Imagine, if we have a 5 GW capacity solar power plant, we also need another 5 GW capacity power plant for backup. This means we have to spend twice as much to produce the same amount of electricity,” he explained.

Therefore, the development of new renewable energy (EBT) requires a strong commitment and further intervention from the government. Moreover, the development of EBT in Indonesia faces unbalanced market conditions and high-risk situations, but produces low profits.

Notonegoro said that currently many renewable energy developers are having difficulty selling their products because there is only one main buyer, namely PLN.

He suggested that the government intervene in the development of renewable energy, including intervention for PLN.

Such intervention is deemed necessary to ensure that PLN, as a buyer, is willing to purchase electricity from renewable energy developers at a fair price.

If PLN is unable to buy all the electricity generated, the government needs to prepare a power-wheeling mechanism so that renewable energy developers can sell electricity to other parties.

Power wheeling is a mechanism for transferring electric power from private generators to state-owned/PLN operating facilities by utilizing PLN’s transmission/distribution network.

“If power wheeling is not possible, the government must provide subsidies. So, there must be a guarantee that the electricity produced by renewable energy developers is absorbed 100 percent,” he said.

Meanwhile, the Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, said that Indonesia needs to develop the value and supply chain for the PLTS industry to realize the great potential of solar energy as the backbone of the national energy transition and become a solar hub in Southeast Asia.

There are several reasons why Indonesia needs to build a value and supply chain for the photovoltaic solar power industry.

First, as a middle-income country with a large population, Indonesia’s energy needs will continue to increase. Investment in solar panels can ensure energy sufficiency while reducing carbon emissions, thereby contributing to global efforts to combat climate change.

Second, the development of the photovoltaic solar power industry can create a broad industrial ecosystem, including creating new jobs, innovation, and technology transfer.

Furthermore, it can also strengthen the supply chain for the production of polysilicon, wafers, solar cells and solar modules, as well as related component industries such as the glass industry, which will promote the growth of local industries and reduce dependence on imports.

Third, the current global conditions have opened up opportunities for Indonesia to attract foreign investment, such as in the case of the electric vehicle battery industry. Indonesia can position itself as a photovoltaic solar power center in Southeast Asia, which is expected to spur economic growth and technological progress.

Tumiwa emphasized that the PLTS industry is capital intensive, highly competitive, and high risk. Therefore, the government needs to build a national strategy that includes long-term plans and short-term and medium-term targets with clear and consistent policies.

In addition, a comprehensive policy framework, fiscal and non-fiscal incentives, and ease of licensing and land acquisition processes are also needed.

To encourage domestic demand, the government should implement a mandate adoption policy, which requires the use of solar power plants in buildings, public facilities, and projects funded by the state and regional budgets.

The government also needs to explore the possibility of exporting solar modules or electricity and support research and development of the latest solar technology.

Building a solar PV industry and its supply chain is not only an opportunity but a necessity to support the sustainable energy transition in Indonesia.

By leveraging its natural resources and large market, Indonesia can create an attractive investment climate for investors.

Moreover, the country also has the potential to become one of the leaders in the global photovoltaic solar power market, driving economic growth and ensuring a sustainable future for future generations.

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Editor: Rahmad Nasution
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