Why this is important to Wisconsin businesses: As the country prepares to dramatically expand its solar energy production, Wisconsin companies can contribute.

The solar market in Indonesia is expected to gain momentum in the medium term, after a government decree introducing the country's first feed-in tariff took effect in July 2016. This program guarantees purchase prices for renewable energy developers selling to the grid, thus helping to achieve the government’s target of adding 5 GW of solar photovoltaic capacity in the next two years. Projects have 20-year power purchase agreements and feed-in tariff rate that ranges between 14 and 25 cents per kilowatt hour, depending on the project’s region.

Additionally, in the long term, the Indonesian government is aiming to have a renewable power contribution of 23 percent by 2025. Currently, renewable energy comprises only 5-6% of the on-grid capacity. The bulk of therenewable contribution will come from geothermal and hydroelectric power, but growth of solar is expected to accelerate as the cost of solar materials continues to drop, and given Indonesia’s location near the equator, the country benefits from intense sun exposure. According to a 2015 report by the International Energy Agency, Indonesia has a solar energy potential of approximately 1,200 GW.

Solar power first entered the Indonesian market in 2010, but has not yet been fully developed, with only 42.77 MW solar power capacity in 2014, mainly due to lack of clear support and framework. As Indonesia aims to become an upper-middle-income country by 2025, rapid industrialization is needed, and electricity is pivotal to this objective. Additionally, the country's population is forecast to reach 285 million by the year 2025—an increase of 35 million compared to 2015 numbers. Currently, the country is only able to fulfill 86 percent of electrical demand. These factors have put pressure on the Indonesian government to increase generating capacity. Thus in 2015, the Indonesian government announced the development of power plants generating 35,000 MW from various power sources by 2019. To support this goal, the Asian Development Bank loaned $500 million to Indonesia in 2015 to research and develop renewable sources. This support has trickled down to various programs and projects aside from the aforementioned feed-in tariff program and 5 GW solar projects.

In October 2015, Indonesia's state-owned electricity company, PT Perusahaan Listrik Negara (PLN), signed a memorandum of understanding with U.S. company Caterpillar to provide reliable and renewable electricity to 500 remote islands of Indonesia, specifically utilizing more than 35 MW-peak photovoltaic panels and 250 MWh of energy storage capacity. Energy storage is particularly important because these remote islands are not serviced by PLN due to infrastructure constraints.

In addition, the government has implemented numerous tax incentives for power projects such as an import duty exemption for equipment related to renewable energy. Opportunities for privately funded solar projects in Indonesia are also growing, although the largest share still remains with the government and PLN.

Wisconsin and its numerous solar energy companies can benefit from these developments. Since the Indonesian government has just announced the policies, programs and projects to grow its renewable energy mix, now is the time to act—the sooner Wisconsin companies can follow in the footsteps of Caterpillar, the better.

It should be noted also that Indonesia has free trade agreements in effect with China, India, Japan, South Korea, Australia, New Zealand, ASEAN countries and other D8 countries: Bangladesh, Iran, Egypt, Nigeria, Pakistan and Turkey. Therefore, as suppliers from these countries will have a price advantage over products from the U.S., it is imperative for Wisconsin companies to be clear and strategic about their unique value proposition, business model and pricing scheme, and to form relationships with local agents or distributors.

Local agents or distributors are important and, at times, required by law to ensure successful implementation of projects and to monitor changes in market regulations, which can change abruptly. Although it is possible for a foreign company to sell directly to the government and to state-owned companies, many government tenders are awarded based on the proven track record of the supplier or a long-established relationship between bidder and supplier. Other factors affecting purchasing decisions include financing, technical skills and after-sales service. In addition, visiting in person is essential in order for foreign companies to be taken seriously in the market.