Key facts
- Indonesian solar developers are advocating for streamlined land acquisition and permitting processes.
- The country has a national solar target of 100GW, with under 2GW currently installed.
- Vacant mining land is being explored as a potential site for solar facilities.
- The government has earmarked 9,000 hectares for an initial 30GW solar target.
- Demand for rooftop solar has surged, but development is constrained by quotas.
- Financing challenges persist, particularly for smaller rural projects, due to currency weakness and rising interest rates.
Indonesian solar power developers are seeking improvements in land acquisition and permitting processes to accelerate the development of photovoltaic projects, as the nation aims to significantly expand its solar energy capacity. Delegates at the Indonesia Sustainable Energy Week conference highlighted that varying land approval procedures across the archipelago pose a significant hurdle for solar projects, which typically require substantial land areas.
This push for better regulations comes as President Prabowo Subianto has set an ambitious 100GW national solar target, a substantial increase from the current capacity of under 2GW. The government is exploring the use of vacant mining land in regions like East Kalimantan and South Sumatra for solar facilities, in addition to ground-mounted and floating reservoir models. Approximately 9,000 hectares have been identified to support an initial 30GW tranche of the national target.
The Indonesian Solar Energy Association (AESI) also suggested improvements to the selection process for private developers by state utility PLN. AESI noted that some projects awarded based on the lowest tariff bid have failed due to difficulties in acquiring land. An alternative approach, where PLN first reviews initial project plans and then allows developers up to a year to secure land tenure before tariff negotiations, could be more effective.
Changes in how state agencies engage private developers are crucial, as the country's 10-year power development plan anticipates the private sector undertaking over 70% of new clean energy buildouts by 2034.
Demand for industrial and rooftop solar systems has seen rapid growth over the past two years, driven by sustainability mandates from multinational corporations and, more recently, by diesel shortages. However, companies like Sun Energy have had to delay clients because Indonesia's allocated quota for rooftop solar installations has been fully subscribed. The country allocated about 485MW for grid-connected rooftop projects this year, with a significant portion reserved for those previously on a waitlist. The latest power development plan projects over 3GW of rooftop solar additions between 2025 and 2034, managed through yearly quotas.
Project financing remains another significant obstacle. Developers cited both institutional rules and recent economic headwinds, including Indonesia's weakening currency and rising lending rates, which have impacted the bankability of previously viable renewable energy projects. Some institutional investors also have blanket bans on sectors like mining, creating difficulties for solar projects associated with mining firms. Despite these challenges, opportunities exist with investors such as pension funds seeking stable, long-term returns, given that solar projects can secure power supply agreements for 20-25 years.