Indonesia Solar Energy Market Outlook to 2030

Indonesia Solar Energy Market Overview

• The Indonesia Solar Energy market is valued at 177.20m kWh based on a five-year historical analysis. This growth is driven by government policies aimed at achieving energy independence, increasing demand for renewable energy, and declining solar panel costs. The integration of solar power into Indonesias energy mix is being accelerated through favorable subsidies, tax incentives, and supportive legislation.

• The dominant regions within the market include Java and Sumatra. These areas benefit from high population densities, rapidly growing urbanization, and industrial development, which increase energy demand. Java, in particular, stands out due to its established infrastructure and proximity to large energy consumers.
• The Indonesian government, through its National Energy Policy, set a goal to generate 23% of its total energy from renewable sources by 2025. A major component of this policy includes increasing solar power capacity, with financial and policy support for utility-scale and distributed solar power projects. The government has allocated over 15 trillion IDR to renewable energy initiatives, including solar, in its 2024 budget, emphasizing the importance of solar energy in achieving energy transition goals.

Indonesia Solar Energy Market Segmentation

By Product Type: The market is segmented by product type into solar photovoltaic (PV) systems and concentrated solar power (CSP). Recently, solar photovoltaic (PV) systems have dominated the product type segment. This dominance is due to the growing demand for on-grid solar power solutions and increasing installation of solar rooftops for residential, commercial, and industrial use.

By End-User: The market is segmented by end-users into residential, commercial, industrial, and utility sectors. The industrial sector currently holds the largest share, driven by the growing demand for cost-effective energy solutions in manufacturing and heavy industries. Many large corporations are transitioning to renewable energy to meet sustainability goals, with industrial solar farms becoming a vital energy source in reducing operational costs.

By Region: The market is segmented by region, with Java, Sumatra, Bali & Nusa Tenggara, Kalimantan, and Sulawesi contributing significantly. Java leads the market due to its extensive infrastructure and favorable government policies that support the development of solar projects. The region's high population density and growing demand for energy have further solidified its role as a leader in the country's solar energy market.

Indonesia Solar Energy Market Competitive Landscape

The market is dominated by key players that play a crucial role in shaping the market dynamics. The market shows a trend of consolidation, with both local and international firms expanding their presence through joint ventures, partnerships, and large-scale solar projects.

Indonesia Solar Energy Market Analysis

Market Growth Drivers

• Government Policy Support: In August 2024, Indonesia's Energy Ministry reduced the local content requirement for solar power plants from approximately 40% to 20%. This policy change aims to attract foreign investment and expedite the deployment of renewable energy projects, including solar power.
• International Collaboration: In September 2024, Singapore announced plans to import an additional 1.4 gigawatts (GW) of low-carbon power from Indonesia, supplementing a previously agreed 2 GW. This initiative underscores Indonesia's potential as a key exporter of renewable energy, particularly solar power, to neighboring countries.
• Private Sector Investment: In November 2024, Indonesian President Prabowo Subianto announced plans to retire all coal and fossil-fuel power plants within the next 15 years and significantly boost renewable energy capacity by over 75 gigawatts. This ambitious plan is expected to attract substantial private sector investment into the solar energy market.

Market Challenges

• Regulatory Hurdles: Despite recent policy changes, Indonesia's solar energy sector still faces regulatory challenges, including complex permitting processes and inconsistent implementation of policies, which can delay project development and deter potential investors.
• Infrastructure Limitations: The existing energy infrastructure in Indonesia is primarily designed for fossil fuel-based power generation. Integrating a significant share of solar energy requires substantial upgrades to the grid to handle intermittent power generation and ensure reliable distribution.

Indonesia Solar Energy Market Future Outlook

Over the next five years, the Indonesia Solar Energy industry is expected to experience growth, driven by continuous government support, declining solar technology costs, and a rising emphasis on renewable energy to meet national energy targets.

Future Market Opportunities

• Adoption of Floating Solar Projects: Over the next five years, Indonesia is expected to become a leader in floating solar projects due to its vast water resources. By 2029, the total installed capacity of floating solar plants in Indonesia is expected to exceed 1,000 MW. This trend is supported by the governments commitment to diversify its solar portfolio, with several floating solar projects already in the pipeline in 2024. Floating solar projects will help mitigate land-use challenges while providing clean energy to both rural and urban regions.
• Development of Large-Scale Solar Farms in Eastern Indonesia: Between 2024 and 2029, large-scale solar farms are expected to proliferate in eastern Indonesia, particularly in regions such as Papua and Maluku, which have high solar irradiance levels. Government plans and foreign investments amounting to 10 trillion IDR have already been allocated for these projects. These regions are targeted due to their underdeveloped energy infrastructure, and large-scale solar farms will help meet the rising energy demand in the coming years.