The Government has moved with uncharacteristic speed to make various changes to the local content requirements for electricity infrastructure projects including, most importantly, solar energy power plants.
The recent changes follow widely reported comments, made by a senior executive of the State electricity company in late May, to the effect that Indonesia’s local content requirements were making it impossible to obtain international funding for a significant number of high value electric infrastructure projects utilizing renewable energy resources.
It remains to be seen, however, whether or not the conditions attached to the partial relaxation of local content requirements, in certain situations, are commercially realistic. If the conditions are not commercially realistic, then the hoped for positive impact on encouraging the much-needed development of electricity infrastructure projects utilizing Indonesia’s potentially huge renewable energy resources will, inevitably, be minimal. In addition, it is unclear whether or not the partial relaxation of local content requirements is, by itself, enough to ensure a significant increase in electricity infrastructure project development.
In this article, the writer will review the recent changes to the local content requirements and their possible significance.
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