Indonesia Solar Energy Market - Growth, Trends, and Forecasts (2023 - 2028)

The Indonesia solar energy market is expected to register a CAGR of more than 1.6% during the forecast period, 2022-2027. The COVID-19 pandemic led to the shutdown of solar system components manufacturing units during Q1 2020 in China, which impacted the supply chain. The door-to-door sales of solar PV systems were also limited as the households were reluctant to make big purchases. However, from H2 2020, the market recovered from the COVID-19 impact and led to the resumption of several stalled PV projects in the country. The declining cost of solar PV technology, the flexibility, and the green method of power generation is expected to drive the market during the forecast period. However, heavy dependence on fossil fuels is expected to restrain the growth of the market.

Key Highlights

• The off-grid segment is expected to witness significant growth in the Indonesian solar energy market during the forecast period.
• The Indonesian government has set a target to achieve 23% energy use through renewables by 2025 and 31% by 2050. This target set by the government is likely to present significant opportunities for the players involved in the solar energy market.
• Increasing adoption of alternative renewable energy sources such as wind, geothermal, etc., are likely to restrain the growth of the market during the forecast period.

Indonesia Solar Energy Market Trends

Off-Grid Segment Expected to Witness Significant Growth

• Indonesia is a populous country with peculiar geography, as it includes more than 17,508 islands. The country's dispersed geography is a significant challenge for the nation's power sector. Around 40% of off-grid areas are located mostly outside the Java island and are unlikely to be reached by the national grid.
• Over the past few years, solar PV development has only been a minor part of the overall energy mix. Most of the current solar development activity consists of stand-alone solar PV systems located in remote areas and some on-grid systems with a larger capacity.
• The electrification ratio of Indonesia has been planned to increase to 99.7% by 2025. The Indonesian government is pushing forward with plans to electrify rural areas of the country using new and renewable energy, and PV mini-grids are considered the least-cost option for the electrification of rural areas.
• In March 2022, Beiersdorf AG entered into a long-term solar power deal with TotalEnergies SE involving a solar rooftop project in Indonesia. The plant will be a 540-kWp solar PV array on top of a manufacturing site to generate 830 MWh of electricity per year to meet 20% of the plant's needs.
• Over the past years, the government has launched several programs and projects for solar PV deployment, with the objective of supplying electricity to un-electrified villages or replacing diesel-based generation in remote regions. This strengthens the case for large-scale usage of the off-grid solar energy segment.
• Therefore, based on the above-mentioned factors, the off-grid segment is expected to witness significant growth in the Indonesian solar energy market during the forecast period.

Alternative Renewable Energy Sources Restraining the Market Demand

• Indonesia is naturally endowed with renewable energy sources, particularly wind energy. According to Asia Wind Energy Association, the average wind speeds in Indonesia range from 1.3 to 6.3 m/s. The main wind energy potential lies in East and West Nusa Tenggara, which have average wind speeds of more than 5 m/s. The approximate wind power potential in Indonesia is estimated to be 9.5 GW.
• According to the Ministry of Energy and Mineral Resources, as of 2020, the wind power installed capacity stood at 154 MW. However, the country has plans to install 1.8 GW of wind energy by 2025.
• In March 2022, French Development Agency signed an agreement with PLN to help in the development of a 200 MW wind farm in Pandeglang, Banten. The construction is likely to begin in 2022, and commercial operations are expected by 2025.
• Other than wind energy, in September 2021, the World Bank approved an estimated USD 380 million in loans to develop the first pumped-storage hydropower plant in Indonesia, aiming to improve power generation capacity during peak demand while supporting the country's energy transition and decarbonization goals. The pumped storage hydropower plant, to be located between Jakarta and Bandung, has an expected capacity of 1,040 MW.
• Such alternative renewable energy projects shave off solar energy in the country's renewable energy mix, thus, restraining the market growth.
• Thus, considering the above-mentioned points, alternative renewable energy sources are likely to hamper the growth of the solar energy market in the country during the forecast period.

Indonesia Solar Energy Market Competitor Analysis

The Indoesia solar energy market is moderately fragmented. Some of the major players in the market include Canadian Solar Inc., PT. Surya Utama Nuansa, PT Solardex Energy Indonesia, PT. Sumber Energi Surya Nusantara, and PT Sumber Energi Sukses Makmur.

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