IESR: Policy certainty key to accelerating solar energy investment

Investment in solar power plants must proceed in tandem with the development of transmission, interconnection, grid digitalisation and energy storage systems. Institute for Essential Services Reform (IESR) Chief Executive Officer Fabby Tumiwa stated that investment decisions by investors are not based solely on the magnitude of solar energy potential, but also on regulatory certainty, bankable projects, manageable risks, and competitive long-term returns on investment. “Investment in solar power plants needs to proceed alongside the development of transmission, interconnection, grid digitalisation and energy storage systems. The success of solar energy development is determined not only by the size of the generating capacity built, but also by the ability of the electricity grid to accommodate and utilise the electricity produced,” Fabby explained. He said policy certainty must be realised through consistent development targets, accompanied by transparent information regarding project implementation schedules, construction locations, and the capacity to be built each year. This certainty, translated into a credible project pipeline, signals that Indonesia’s investment climate is stable whilst enabling investors to prepare financing, supply chains and workforce requirements early on. IESR assesses that the availability of bankable projects and the support of attractive financing instruments, such as concessional loans and blended finance, attract investors to harness solar energy potential. In addition, an efficient procurement process with contract clarity, fair risk allocation, and power purchase mechanisms also provide certainty for developers. During the Indonesia Solar Summit (ISS) 2026, IESR also presented the results of a study on the potential of floating solar photovoltaics (FPV). The study shows Indonesia has financially viable floating solar PV potential of 77.8 GW across 179 locations, consisting of 42.5 GW on reservoirs and lakes and 35.3 GW in near-shore waters. “The development of floating solar PV is important to support Indonesia’s ambitious targets in accelerating solar energy, including the 100 GW solar PV programme. If designed properly, floating solar PV can be part of the solution to provide clean electricity for industrial zones, special economic zones, regional electricity systems, and to replace fossil fuel plants entering retirement,” he said. Fabby assessed that this potential could be a major driver for accelerating solar energy investment, provided it is supported by policies that offer certainty to businesses. Simplifying licensing, integrating potential sites into energy and spatial planning documents, and clarifying regulations on marine space utilisation are considered important to reduce investment barriers. IESR also encourages the implementation of a reverse auction mechanism based on price, supported by preliminary feasibility studies from the government. This scheme is considered capable of creating more competitive electricity tariffs whilst accelerating the realisation of solar energy projects that are ready for development.