By 2025, the Indonesian government aims to achieve a minimum of 23% renewable energy in the national energy mix and 31% by 2050. Despite the ambitious target, the Electricity Law (Law No. 30 of 2009 as amended by Government Regulation in lieu of Law No. 2 of 2022) requires independent power producers (“IPP“) to prioritise the use of domestic products in developing power generation projects, including renewable energy projects. This means that IPPs must comply with the minimum local content requirements (Tingkat Komponen Dalam Negeri), which apply for goods and services, in the development of electricity infrastructure. Failure to comply with these local content requirements may result in administrative and financial sanctions.
The local content requirements are stipulated under Minister of Industry Regulation No. 54/M-IND/PER/3/2012 on Guidelines for the Use of Domestic Products for the Development of Electrical Infrastructure and its amendment from time to time (“Regulation 54/2012“). Regulation No. 54/2012 has undergone several amendments, with the most recent in 2023, encompassing local content requirement for the module of solar power plants (pembangkit listrik tenaga surya or “PLTS“) and exemptions on local content requirements for PLTS in Ibu Kota Nusantara. It is imperative to note that most of the local content threshold under Regulation 54/2012 dates to 2012, and consequently, the threshold does not reflect the current market condition for renewable energy power plants.
Drawing from past transactions and experience, we will discuss the imperative need to revise the calculation and stipulation of the local content requirements for renewable energy projects.
For more information, click here to read the full Legal Update.
