SMM says TKDN, grid constraints could challenge Indonesia's solar expansion

By Dominikus

Indonesia’s solar power expansion could face challenges from local content requirements, project quotas, and grid and storage constraints in mining regions, even as the country seeks to accelerate deployment under its 100-GW solar ambition, an analyst at Shanghai Metals Market (SMM) said.

Speaking at the Coal and Energy Transition Forum during the Indonesia Critical Minerals Conference 2026 in Jakarta on June 5, Ryan Tey Tze Yang, PV Analyst at SMM, said Indonesia has significant potential for solar development, supported by the government’s 100-GW target and state utility PT PLN’s plan to add 17 GW of solar capacity under its 2025–2034 Electricity Supply Business Plan (RUPTL).

Tey said the 100 GW program could be divided into two broad categories, with around 80% located in villages and integrated with storage, while around 20 GW would be centralized utility-scale solar.

However, he said the utility-scale component is large for Indonesia and would require policy and infrastructure support to help developers and manufacturers meet the target.

Tey said higher local content, or TKDN, requirements can support domestic manufacturing and stimulate the local economy, but may also raise module costs.

He said modules shipped from China currently offer higher efficiency and lower prices, creating a challenge for Indonesian policymakers in balancing local content development with affordable solar deployment.

 “I think this is the main part for the Indonesian government to solve,” Tey said, referring to how developers can support local content while dealing with lower efficiency and higher costs.

Read also : Indonesia holds largest PV module capacity in Southeast Asia, SMM says

He said Southeast Asian solar manufacturing capacity could shift toward higher efficiency technology in the future, but this would not happen in the short term.

Tey said Indonesia and other Southeast Asian markets are also facing broader supply chain and trade shifts. Indonesia currently has the largest PV module capacity in Southeast Asia at around 27 GW, followed by Vietnam, Thailand, Malaysia and the Philippines, he said.

He said a number of manufacturers are expected to enter Indonesia through joint ventures, while Southeast Asia’s overall module capacity is expected to decline to around 75 GW this year as the region adjusts to trade restrictions and capacity rationalization.

Tey said the United States began applying anti-dumping and countervailing duty measures against Cambodia, Vietnam, Malaysia and Thailand from 2024, and later initiated investigations against Indonesia and Laos in 2026.

He said imports of PV modules from China into Southeast Asian countries are expected to fall by around 40% this year after China cancelled export tax rebates for PV products.

For Indonesia, Tey said solar deployment could benefit from falling module prices, China-linked investment and the country’s potential to build a regional role in module assembly and downstream integration.

But he warned that policy design would be important at the early stage.

 “If in the initial phase the restriction is too strong, I don’t think it is very beneficial for solar deployment development,” he said.

Tey also pointed to challenges including quotas for individual solar projects and grid and storage bottlenecks in mining regions such as Kalimantan and Sulawesi.

He said the government could consider subsidies to support the overall development of the solar industry.

Editing by Reiner Simanjuntak