JAKARTA: The planned export of solar energy from Indonesia’s Batam to Singapore appears to have hit a snag, as appointed electricity exporters face challenges in securing financing under Jakarta’s licensing rules.
Several Indonesian and multinational companies have been commissioned to build solar farms in Batam and sell the output to Singapore, based on multiple memorandums of understanding (MoUs) inked between the two countries in 2023. The projects involving billions of dollars are expected to begin commercial operations by early 2028.
However, The Straits Times understands that none of the solar farms has seen significant construction progress yet as companies face challenges in securing financing for the projects.
The projects would have had to begin construction by now, in order to meet the delivery deadline, analysts said.
Senior executives from the Jakarta-based companies told ST that one important detail seems to have rendered the projects “unbankable”, or deemed too risky for a bank loan.
Specifically, Indonesia requires renewable energy exporters to renew their permits every five years under Clause 37 of the Ministry of Energy and Mineral Resources’ (ESDM) 2021 regulation on electricity business operations. This creates uncertainty, since the government can revoke a licence, or reduce the permitted export quota, if it determines that electricity exports are disrupting domestic supply and causing local blackouts.
In Indonesia’s major economic hub of Java island and its main tourist island of Bali, electricity supply has typically exceeded demand, thanks to the government’s aggressive push to build power plants.
The industrial island of Batam generally mirrors this situation, enjoying a comfortable electricity surplus, but this does not always extend past the main coastlines. Dozens of more remote islets off the coast of Batam are frequently left disconnected from the robust main grid due to geographical challenges.
For major infrastructure projects such as solar farms to secure financing, they typically have to be considered “bankable” for about 20 to 25 years – which means project developers must be able to fulfil their financial obligations for the entire duration.
A senior executive at one of the companies told ST on condition of anonymity that these projects – involving the construction of vast solar farms, laying of undersea transmission cables and procuring solar panel electric storage – require billions of dollars of investment and would not be able to proceed without external financing.
“Projects of such a magnitude, there is no way any company can fully finance it with internal cash,” he added.
“How can we continue to generate revenue and service debts if after five years, we are told to stop exporting?”
The mismatch between permit tenure and financing horizon is why several companies find themselves caught in a bind, analysts noted.
“They are expected to secure a 20-year electricity sale and purchase contract, so this five-year review cycle obviously creates uncertainty”, hence the situation is going “nowhere”, said Fabby Tumiwa, chief executive officer of Jakarta-based think-tank Institute for Essential Services Reform.
Fabby noted that the previous Indonesian energy minister, Arifin Tasrif, had initiated a review to revise Clause 37 sometime after he met Singapore’s then Second Minister for Trade and Industry Tan See Leng in Jakarta in September 2023.
However, Arifin was replaced in a Cabinet reshuffle in August 2024, before the revision could be completed.
ST understands that companies with electricity export licences had discussed this matter with the ESDM sometime in 2025.
Ministry spokeswoman Dwi Anggia declined to comment when contacted by ST.
Indonesia and Singapore have been discussing terms of a possible agreement for a planned sale of solar power from Batam to Singapore via an undersea cable, aligning with Singapore’s broader efforts to import low-carbon electricity.
The planned sale of solar power is part of an MOU on renewable energy signed by the two countries in March 2023. It was witnessed by then Indonesian President Joko Widodo and then Prime Minister Lee Hsien Loong during the annual leaders’ retreat in Singapore.
In September 2024, Singapore’s Energy Market Authority (EMA) granted two more companies conditional approvals to import low-carbon electricity: Singa Renewables, a joint venture between TotalEnergies and RGE, and Shell Eastern Trading, which is in partnership with Vena Energy.
This came on top of the five conditional licences EMA gave out the year before to entities including Pacific Medco Solar Energy, Adaro Solar International and Keppel Energy.
EMA’s move raised the anticipated import volume of clean electricity from 2GW in September 2023 to as much as 3.4GW a year later. The EMA had also raised its overall 2035 low-carbon electricity import target to 6GW, from 4GW in September 2023.
Still fledgling, Indonesia’s solar energy market is expected to grow steadily from 2.15GW in 2025 to 14.91GW by 2031, according to global research company Mordor Intelligence.
In February 2025, ESDM asked Singapore to invest in local supply chains – such as the manufacturing of solar panels – in Indonesia, tying the request to the electricity sale to Singapore, according to the Indonesian government.
In June the same year, Indonesia’s Minister for Energy and Mineral Resources Bahlil Lahadalia and Dr Tan signed MOUs in Jakarta to jointly develop a sustainable industrial zone in the Riau Islands province, where Batam is located.
When asked about updates on the planned sale of electricity to Singapore, the parties involved declined to comment on questions regarding Clause 37.
“We are always prepared to support government programmes and are waiting for the next directives,” Karina Novianti, head of corporate communications at Alamtri, formerly known as Adaro, said in a written response to ST.
MedcoEnergi’s chief executive officer Roberto Lorato said his company is engaging with potential electricity distributors in Singapore to ensure its delivery timeline aligns with market demand. One of MedcoEnergi’s subsidiaries is part of the Pacific Medco Solar Energy consortium.
“We remain committed and support the government’s efforts to create a positive investment climate, while ensuring that the project fully complies with all applicable regulations and delivers benefits for both countries,” he said.
However, Fabby doubted that the companies involved could meet the projected 2028 timeline.
“If they were to meet the 2028 first delivery target, they should have started major construction by now, by 2026,” he said. “How could they start if external financing cannot be secured?”
Responding to ST’s queries regarding the projects’ potential delay, ESDM’s acting director general of electricity Tri Winarno replied in a text message: “Up to now there is no deal, on what benefit(s) we get if we export electricity to Singapore.” He did not elaborate.
Yet, energy analysts pointed out that Indonesia’s renewable energy sector stands to gain if the project proceeds.
“The sale to Singapore will help Indonesia’s renewable industry sector to properly develop and thrive. If we were solely to rely on the domestic market, renewables would struggle to take off due to limitations in local purchasing power,” said Komaidi Notonegoro, executive director of the Jakarta-based ReforMiner Institute, a think-tank focusing on energy, economy and mineral resources.
Having a neighbouring country willing to purchase Indonesia’s renewable energy at an attractive price would increase the country’s revenues and offer an opportunity to develop its solar industry, he added.
Exporting 3.4GW of clean electricity to Singapore is estimated to generate between US$4 billion (S$5.1 billion) and US$6 billion in annual foreign exchange earnings, according to media reports.
Komaidi pointed out that there has been a longstanding tendency for new administrations to introduce new development projects and deprioritise the ones from before.
Agreeing, Yusri Usman, executive director of Jakarta-based think-tank Centre of Energy and Resources Indonesia, said the core issue in this case is “a deficit of ownership”.
The initiative was championed by the previous government, while the new leadership likely sees little political capital in pushing it across to completion, he said.
“The person in charge of this particular project now was not part of the initial plan. This caused the slow progress,” he added.
Fabby said the project may be hindered by personal or political biases at the expense of national interests, warning that reneging on this project may carry negative implications for Indonesia’s broader investment climate.
“People would see that Indonesia made a commitment – with ministers and the president agreeing to do it – but once the leadership changed, the execution did not proceed,” he said. “President Prabowo Subianto should weigh in on this. If he knows about this, he will take the necessary steps.”
Prabowo officially took over as Indonesia’s eighth president in October 2024, replacing his predecessor, Widodo, who was president for 10 years from 2014. - The Straits Times/ANN
