Indonesia Enforces New Regulation To Boost Domestic Product Use In Electricity Infrastructure Projects

The Indonesian Ministry of Energy and Mineral Resources (ESDM) has introduced Regulation Number 11 of 2024, effective July 31, 2024, to accelerate the development of electricity infrastructure while prioritizing the use of domestic products. The regulation aims to address challenges in renewable energy projects, particularly concerning foreign funding issues.

Minister of Energy and Mineral Resources Arifin Tasrif stated that the new regulation is designed to resolve issues related to the cost and availability of renewable energy projects, which often face delays due to domestic product regulations. He emphasized that the updated policy allows for more flexibility in obtaining foreign funding, thereby facilitating smoother project execution.

The regulation mandates that all electricity infrastructure developments, including power plants and supporting infrastructure such as transmission networks and substations, adhere to specified minimum Domestic Component Content Levels (TKDN). This requirement applies to projects funded by state budgets, regional budgets, and both domestic and foreign loans or grants.

According to Articles 2 and 3 of the regulation, every project must comply with TKDN values as outlined in the Domestic Product Appreciation Book. This book, determined by the Director General of New, Renewable Energy and Energy Conservation (EBTKE) and the Director General of Electricity, categorizes mandatory, maximized, and empowered domestic products and services.

The regulation also specifies that in the absence of a Domestic Product Appreciation Book, procurement must follow the list of domestic products issued by the Minister of Industry. Furthermore, Articles 8, 9, and 10 outline how the TKDN value for goods and services will be determined and periodically reviewed.

For non-compliance, users of goods and services may face administrative sanctions including fines or suspension of business licenses. Conversely, companies that meet TKDN requirements can receive awards such as certificates or public recognition.

Additionally, the regulation includes provisions for relaxation until June 30, 2025, for Solar Power Plant (PLTS) projects. These projects, with agreements signed by December 31, 2024, and operational by June 30, 2026, may import components under certain conditions.

Eniya Listiani Dewi, Director General of EBTKE, highlighted the importance of this regulation in supporting the growth of domestic solar module manufacturing. The relaxation period allows for imports while domestic manufacturing capabilities are developed, provided that there is a commitment to local production.

Overall, the new regulation aims to streamline the development of electricity infrastructure in Indonesia by balancing the use of domestic products with the need for foreign investment, thereby enhancing the country’s energy transition efforts and supporting local industries.