Jakarta – Amid Indonesia’s big push to become a major player in the clean energy transition, the Domestic Component Level (TKDN) policy has become a serious obstacle in attracting foreign investment in the renewable energy sector. This was stated by Hashim Djojohadikusumo, the President’s Special Envoy for Energy and Environment, while attending the Bloomberg New Energy Finance (NEF) Summit 2025 in New York.
According to Hashim, in a written statement, Friday, 2 May, although investment licensing in the energy sector has shown progress, local content regulations are still a major stumbling block, especially for investors from the United States (US) and other Western countries.
“I think the ease of licensing is quite good. But there are still obstacles that our trading partners always discuss – namely, TKDN. This is a big issue, especially for the United States, and is one of the reasons for retaliatory tariffs on our products,” said Hashim.
An instrument of nationalism that is questioned globally
TKDN is a policy that requires using local components in infrastructure projects, including new and renewable energy (NRE). Although designed to support domestic industries, this policy is considered to hinder the efficiency and competitiveness of foreign investment.
According to Hashim, international industry players have repeatedly complained about the existence of TKDN. In fact, he cites this policy as one of the main causes of the retaliatory tariffs the US imposed on Indonesian exports. “Countries like the US are very concerned about this kind of policy. They see it as a form of protectionism. If we want to compete and attract more investment, then there must be adjustments,” he explained.
Hashim emphasised that foreign investment interest in Indonesia’s renewable energy sector remains high despite the regulatory hurdles. In his meetings with financiers at the Bloomberg NEF forum, he noted strong interest from investors in the US, Europe, and China.
“Quite a lot of investment funds from America, Europe, and China have shown high interest in renewable energy opportunities in Indonesia. But of course, they also ask about regulations and legal certainty,” he added.
The Indonesian government has responded to this pressure through the TKDN relaxation policy in the Minister of Energy and Mineral Resources decree Number 11 of 2024. The regulation provides leeway for solar power plant (PLTS) projects that have signed power purchase agreements (PJBTL) before 31 December 2024 and started operating no later than 30 June 2026.
However, this policy is considered only temporary and does not adequately address the long-term concerns of global investors. “This relaxation is a good first step, but we need structural reforms and more comprehensive regulatory adjustments,” said Hashim.
Amid efforts to improve the competitiveness of local industries, the government is faced with a dilemma: maintain TKDN to boost domestic growth or relax regulations to attract investment and accelerate the energy transition.
Hashim hopes the government can take a middle path, allowing domestic producers and foreign investors to collaborate. “If we want Indonesia to become Southeast Asia’s renewable energy hub, then it must be open and flexible regarding regulations. That is the key,” he concluded. (Hartatik)
Banner photo: Image generated by OpenAI’s DALL·E via ChatGPT (2024)
