Weekend read: Made in Indonesia

From pv magazine 03/2022

Abu Dhabi-based Masdar and Indonesia’s PJBI expect to complete a 145MW floating PV array on Cirata Reservoir by the end of this year. The developers have already identified ways to meet a 40% local content requirement, which is one of the project’s biggest challenges.

Indonesia is aiming for at least 6.5GW of local PV manufacturing by 2025, but produced just 154MW in 2021. With a significant catch-up required in the next three years, the country will have to overcome several major obstacles to get close to this ambitious goal.

The Indonesian Solar Panel Manufacturers Association (APAMSI) records 10 manufacturers with a total capacity of 515MW, the largest contributor being PT Len Industri, with a capacity of 70MW. APAMSI chief and Len Industri’s director of business and portfolio strategy, Linus Andor Mulana Sijabat, points out that coal remains the competition in terms of Indonesia’s electricity supply.

“Currently, everything from generating electricity to distribution is covered by the state-owned company Perusahaan Listrik Negara (PLN) which has a monopoly. PLN mostly generates electricity from Indonesian coal at a cheaper price in comparison to PV,” said Sijabat. “So the regulator needs to give assurances that PV will be able to compete with non-renewable energy sources.”

In January 2022, Indonesian news outlet Kontan reported that the Ministry of State Owned Enterprises (BUMN) wants to restructure PLN. Under this plan, PLN will focus on the country’s transmission infrastructure, while the generation of energy will be conducted by sub-holding companies. Sijabat said he is looking forward to this development, but warns that security on investment and clear regulation will still be needed to assure growth in Indonesia’s PV industry.

“As the provider of the national grid, PLN shall also be responsible for building the grid extensions to PV power stations. [It must not] leave developers alone with private investments and unclear regulation on land acquisition.”

Domestic components

By the end of 2021, the government of Indonesia demanded that 85% of the components of solar panels should be produced domestically. As stated by the Ministry of Industry, this development will be supported by the development of ingot- and solar-grade polysilicon factories. The government even wants to establish metallurgical-grade silicon factories that can hopefully boost the share of nationally made components to up to 90% in 2025.

Sijabat, as head of APAMSI, sees the government plan as a chance for domestic economy growth. He also describes how raw silicon materials from Indonesia are exported at too low of a price.

“In one province they sold 1 tonne of silicon sand to [a company in] China at a price of US$35. The price for solar wafer, which requires about six tonnes of silicon sand per megawatt, is something like US$0.05 per watt. Can you imagine the price difference there?” asked Sijabat.

“In order to prevent this kind of thing from happening, just like in the field of nickel production, we need to first produce it locally before we export it to China. That is what I saw from the plan on ingot factories and smelters – but again, to process these raw materials and build our own solar cells the investors need assurance that the end product will be utilised. It is a big investment, we need all stakeholders to be well connected, from industry to the investors.”

Sijabat also explained that PT Len Industri initially wanted to further invest in wafer production, but the demand on the domestic market is still too small. “Our company currently assembles about 70MW/year but the utility is just about 10% to 15%.”

Dealing with tech

PT Deltamas Solusindo is another of Indonesia’s solar panel producers. The company offers mono and multicrystalline modules branded as Solar Quest, with a maximum power rating of about 400W, and also produces lithium ferrous phosphate batteries.

Its solar modules and lithium batteries have been incorporated into PLN’s solar plant projects in various villages of Eastern Indonesia. The company claims to have pioneered the use of robotic machinery in a PV module assembly line in Indonesia in 2018. “The challenge for us as a solar module manufacturer is to keep up with the technology and to produce the most efficient and safest products. It has been a dynamic industry and it will stay that way for the next couple of years,” said Faustin Saputra, director of manufacturing for Solar Quest.

“Unfortunately, the Chinese are dominating the international market. They are more mature and advanced compared to Indonesia in terms of manufacturing technology. They are also able to sell their products at a cheaper price due to their scale and vertically integrated business model.”

Currently, PT Deltamas Solusindo has accomplished a total of 45.5% domestic components for their PV module by acquiring components such as glass and aluminium frames from domestic suppliers.

PV potential

With the high tariffs imposed on Chinese products by the United States, Southeast Asia has become a big solar manufacturing hub, mainly producing modules for export. Yali Jiang, solar analyst for BloombergNEF on solar manufacturing in Southeast Asia, noted the heavy focus on exports, and said that local markets are still supplied by imports from China.

“Right now, according to BloombergNEF data, as we track global manufacturing capacity, there is over 30GW of cell and 40GW of module capacity already in place in Southeast Asia. This is mostly located in Malaysia, Thailand and Vietnam,” she explained. “There are also at least two Chinese manufacturers with production capacity in Indonesia. Local markets, however, do not really develop there. It is mainly just to supply the US.”

Jiang is unsure about labelling Indonesia as a future solar production hub, given the weight of China. “There is enough capacity in Southeast Asia to supply the US market. And China is a mature manufacturing hub with its driven technology, and complete supply chain in operation to supply the rest of the world.”

With its existing scale and experience, China has the advantage when it comes to scaling up further. “In terms of polysilicon production, Chinese players with experience and expertise can build new plants within one to one and half years,” Jiang continued. “But it could take three to five years, or more, if a new entrant would like to start polysilicon production in Indonesia. There are many cases we have seen that never came true in solar manufacturing in the past, particularly for polysilicon.”

Indonesian manufacturing has its challenges, but not all hope should be lost, given political impacts on trade. “It highly depends on politics, rather than economics, that countries led by the US turn against Chinese imports,” said Jiang. “Indonesia could also maximise the local content requirements for its domestic market, but it still needs scale to compete with the remaining production for global markets.”

Author: Sorta Caroline