A significant step in Indonesia’s renewable energy ambitions took shape with the launch of a new manufacturing plant in Batam, specializing in floating solar panel systems. The facility, operated by Surabaya-based Utomo Solar Panel Terapung Erpo (Usopater), aims to leverage opportunities presented by a landmark agreement to supply solar power from Indonesia to Singapore.
Usopater, a subsidiary of the Utomodeck Group, which is also known for its development of electric vehicle charging stations across Indonesia, will manufacture essential components for floating photovoltaic (PV) systems, including anchors and pontoons. While Managing Director Anthony Utomo declined to disclose investment figures, he confirmed that the 8,000-square-meter plant has been operational for three months and currently employs 100 workers.
A Growing Renewable Energy Market in Indonesia
Despite the slow adoption of solar power at the national level, Indonesia’s renewable energy sector is seeing an influx of investments, largely driven by government initiatives and international collaborations. Experts attribute the country’s sluggish embrace of solar energy to its continued dependence on low-cost, coal-fired power generation.
Singapore, meanwhile, is set to begin importing two gigawatts (GW) of renewable energy annually from Indonesia within five years—its most ambitious effort to date to secure low-carbon electricity. To facilitate this transition, the Indonesian government is actively promoting floating solar farms, particularly in reservoirs and offshore locations, to circumvent the high costs associated with land acquisition and residential displacement.
“We are aiming to support that project,” Mr. Utomo said, referring to Batam’s renewable energy export initiative. “We are glad the government is enforcing a 40% local content requirement, ensuring that Indonesian companies play a pivotal role in the solar energy value chain.”
Policy Adjustments to Attract Foreign Investment
Until 2023, Indonesia mandated that 60% of materials used in solar farm systems be locally sourced—a regulation that was later relaxed to 40% to encourage foreign investments. In August 2024, authorities further introduced a temporary regulation lowering the requirement to 20% for projects that could guarantee operational readiness by June 2026.
These policy shifts have spurred significant foreign investment in solar manufacturing. A January 2025 report by the Jakarta-based Institute for Essential Services Reform (IESR) highlighted a surge in capital influx, attributing it to strategic initiatives such as the Indonesia-Singapore Green Corridor project.
Among recent major investments:
- Chinese solar panel giant Suntech announced plans in August 2024 to establish a 2GW-capacity plant in Indonesia.
- Houston-based SEG Solar broke ground on a 5GW-capacity manufacturing facility in Batang, Central Java, in October 2024.
- Sembcorp Industries (Singapore) and Perusahaan Listrik Negara (PLN) (Indonesia) launched a 50MW solar farm with a 14.2MWh battery storage system on January 20, 2025, in Indonesia’s new capital, Nusantara, situated in Kalimantan.
Challenges in Indonesia’s Renewable Energy Transition
Despite these promising developments, Indonesia continues to lag in solar energy adoption compared to its ASEAN neighbors. The nation’s installed solar capacity remains at just 718MW, a stark contrast to Vietnam’s 18.6GW, Malaysia’s 2.2GW, and Thailand’s 4GW.
Experts cite government policies favoring coal as a major impediment to renewable energy growth. Indonesia, the world’s largest thermal coal exporter, produced 811 million tonnes in 2024, exporting 53% of this output. Regulatory measures ensure that domestic coal prices remain capped at US$70 per tonne, far below the market benchmark price of over US$100 per tonne, making coal an economically attractive option for power generation. This price cap policy, coupled with a 25% domestic coal allocation requirement for PLN, significantly dampens the competitiveness of renewables.
“Given the artificially low coal prices, renewable energy struggles to be financially viable,” noted Fabby Tumiwa, Executive Director of IESR. “Indonesia has abundant coal, and we use it extensively while also exporting it. Without policy reforms, the transition to renewables will remain slow.”
Residential Solar Adoption Hampered by Regulations
Beyond industrial-scale solar farms, the adoption of rooftop solar panels for private homes has also faced considerable setbacks. Green energy analyst Firdaus Cahyadi, founder of Indonesian Climate Justice Literacy, criticized PLN’s restrictive policies, which allow homes to generate only 15% of their electricity needs from solar panels, requiring the remainder to be purchased from the national grid.
“These policies make home solar installations financially unappealing,” he explained. “Households are increasingly aware that photovoltaics have become affordable, but restrictive regulations deter them from making the switch.”
The Road Ahead for Indonesia’s Solar Industry
Energy analyst Katherine Hasan of the Centre for Research on Energy and Clean Air emphasized that Indonesia holds vast potential for solar power expansion due to its geographical advantages and abundant sunlight.
“If the government removes the regulatory roadblocks, Indonesia could outpace its ASEAN peers in solar energy development,” Ms. Hasan stated. “The current hurdles are systemic, from coal industry lobbying to policy constraints, but with the right incentives, the country could become a leader in renewable energy.”
While Indonesia continues to grapple with the complexities of its energy transition, the latest investments in solar manufacturing and cross-border energy trade with Singapore signal a positive shift. If the government successfully aligns its policies with its decarbonization commitments, the country stands to become a major player in the global clean energy movement.
Comments