How can Indonesia build a robust solar PV manufacturing sector?

One of the primary requirements in building a robust solar PV manufacturing sector is attracting substantial investments. To achieve this, Indonesia may consider incentives to entice foreign and domestic investors. These could include: Grants for plant development.

How do Indonesian solar companies compete with China?

One of the biggest challenges is how to compete with the cost of products from China. The cost of solar production declines significantly with the volume produced and, to be competitive, Indonesian manufacturers would need to meet a minimum of around 3 GWp to 7 GWp per year to bring production costs down to around $0.24 per Wp (Exhibit 5).

Is solar PV growing in Indonesia?

Up to now, solar PV growth in Indonesia has been slow compared to various other countries in the region and, to overcome this, Indonesia’s government has set targets to increase solar PV substantially by 2030. 4 The sector, though, will face challenges in producing solar products that can compete with those of other exporting nations.

Why is solar so expensive in Indonesia?

Second, the country has enjoyed an oversupply of coal and gas from Java, which has stunted growth elsewhere in the country. 6 Third, solar is frequently outcompeted by local, low-cost alternatives such as coal. 7 And, finally, Indonesia’s import taxes have created higher costs compared to its peers in rolling out solar PV. 8

What is Indonesia's Energy Plan?

Indonesia’s electricity capacity is planned centrally, directed by its long-term Electricity Business Plan (RUPTL). 9 According to the plan, solar PV is set to contribute around 5 GW by 2030.

Could Indonesia seize the opportunity of new demand streams for solar PV?

Vishal Agarwal is a senior partner in McKinsey’s Singapore office; Karambir Anand is an associate partner in the Jakarta office, where Bayu Purba is a consultant; and Enrico Furnari is a consultant in the Kuala Lumpur office. Indonesia could seize the opportunity of new demand streams for solar PV by learning from other Southeast Asian countries.