Written by: Michelle Limenta and Jennifer Junardi Chua
Indonesia is at a critical point in its transition to renewable energy and has recently relaxed local content requirements (TKDN) to attract more investment, especially in the solar sector. Historically used to support domestic industries, these requirements have also deterred foreign investment. In mid-2024, the government issued ESDM Regulation No. 11/2024, allowing greater flexibility for imported solar modules under specific conditions. This was followed by ESDM Decree No. 191/2024, which lowered the TKDN threshold for solar projects from 53.07% to 20%. The MOI Regulation No. 54/2012 was formally revoked by MOI Regulation No. 33/2024, leaving TKDN rules solely under ESDM’s authority.
However, this policy shift raises two main concerns:
- Legal bindingness: Unlike regulations, ministerial decrees are not generally binding or publicly promulgated, potentially limiting the enforceability of the new TKDN thresholds.
- WTO trade implications: The relaxation may trigger concerns over trade discrimination, as it could favor imports from specific countries, potentially violating WTO non-discrimination rules.
In sum, while these changes may boost renewable energy development, they also pose legal and international trade risks that require careful management.