JAKARTA (Reuters) -Indonesia said on Monday it has cut the minimum local content requirement for solar power plants to 20% from around 40% previously, as it looks to unlock investment in projects that get at least half of their funding from foreign multilateral or bilateral lenders.
“We evaluated the rules, so that the renewable energy power plants, especially hydro, wind and solar could immediately be installed in our system … and further lower our emissions,” Jisman Hutajulu, the energy ministry’s director general, told a press conference.
The new rule allows solar power plant projects to use imported panels until June 2025, provided the project operator obtains ministerial approval, signs a power purchase agreement before the end of 2024 and the plant is operating by the first half of 2026.
Indonesia has pledged to boost the proportion of renewables in its energy mix and foreign lenders have promised to provide funding. However, investment has remained limited, which analysts blamed partly due to the local content rules.
The new rule also set the local content requirement for hydro power plants in a range of 23% to 45%, depending on its installed capacity, versus a previous range at 47.6% to 70.76%. For wind power plants, the requirement is set at 15%.
Renewables such as solar and geothermal power accounted for about 13.1% of Indonesia’s energy mix last year, falling short of a 17.87% target, with the majority of the country’s energy needs met by coal and oil.
(Reporting by Stefanno Sulaiman; Editing by John Mair)
