Southeast Asia has been a solar manufacturing hub for Chinese companies. Source: Wikicommons. CC BY-SA 20

In April 2025, the United States Department of Commerce finalized a new tariff of up to 3,521 percent on imports of solar panels from four Southeast Asia countries: Vietnam, Malaysia, Cambodia, and Thailand. This came after the American Alliance for Solar Manufacturing Trade Committee alleged that major Chinese solar panel manufacturers operating in those four countries are exporting panels below production cost, resulting in unfairly cheap goods flooding the US market. They demanded that the US government implement a tariff increase to protect their US operations, which are worth billions of dollars. The final decision on the new tariffs is due in June 2025.    

The US-China solar trade dispute has been ongoing for decades. In 2012, the US Department of Commerce imposed punitive import tariffs of 30 percent or more on Chinese solar firms after US solar companies accused Chinese manufacturers of undercutting prices through unfair subsidies, a move they say forced several domestic firms out of business.  To circumvent this, China shifted its production to Southeast Asia. This transformed Malaysia, Cambodia, Thailand, and Vietnam into China’s solar manufacturing hub.

Those four countries produced more than 40 percent of the solar module manufacturing capacity outside China and contributed roughly 20 percent to global solar exports. According to BloombergNEF, 80 percent of their production was exported to the US in the first half of 2024. In 2023, their exports to the US grew to USD 12 billion. These manufacturing hubs strengthen China’s dominant force in global solar exports, accounting for 80 percent of worldwide shipments in 2023. 

However, with new tariffs around the corner, and fierce competition at home with marginal profit, China sought to sidestep by relocating to other appealing countries that have thus far evaded the tariffs, one of which is Indonesia. The reasons are clear, said Yana Hryshko, director of global solar supply chain research at Wood Mackenzie, to VOA:

 事实上，在所有东南亚国家中，印尼是最佳选择，因为印尼本身就是一个非常有前景的太阳能市场。例如，印尼在海上浮动太阳能方面拥有最大潜力，这些太阳能设施可以安装在靠近海岸的海域上。此外，印尼幅员辽阔，有足够的空间建设其他太阳能项目，如内陆太阳能项目。

Indonesia is the best choice among all Southeast Asian countries because it is a very promising solar energy market. For example, Indonesia has the greatest potential in floating solar at sea, which can be installed in the waters near the coast. In addition, Indonesia is vast and has enough space to build other solar projects, such as inland solar projects.

Illustration of solar panel factories. Source: Pxhere

China’s solar firms boom in Indonesia

The relocation of Chinese manufacturers to Indonesia has been “rapid and significant.” In the last 18 months, at least four China-linked solar projects have started operation in Indonesia and Laos, with two more to come. 

As a potential market in a “strategic location for manufacturing bases” with “low production cost,” several China-based firms, including Thornova Solar (拓纳瓦太阳能), Trina Solar (天合光能股份有限公司), New East Solar (新东方太阳能), and China Lesso Group (中国联塑集团控股有限公司), have announced plans to expand their production capacity in Indonesia.  

In addition to solar firms, the Power Construction Corporation of China (中国电力建设集团有限公司) under the Belt and Road Initiative (BRI, China's series of intercontinental mega-development projects) built Cirata reservoir in West Java, the largest floating photovoltaic power generation project in Indonesia. Furthermore,  in March, China Gezhouba Group Co. (中国葛洲坝集团股份有限公司) signed a contract with the Indonesian government for a 60 MW floating solar panel farm in Saguling, West Java. Pertamina New and Renewable Energy, a state-owned company, has also begun talks to collaborate with a Chinese manufacturer to build a solar factory in Karawang, West Java.

Cirata floating solar farm in West Java, Indonesia. Source: Screenshot from Indonesia’s Ministry of Energy and Mineral Resources YouTube channel.

In 2024 alone, 22 Chinese solar energy firms invested in 30 projects in 18 countries, including two projects in Indonesia, according to Guang Fu Men, a media group focusing on China's solar industry.

Despite the investment boom, Chinese solar energy companies face various challenges in Indonesia. Chinese firms have limited access to international financial institutions and foreign banks, said Gu Xincen, director of international environmental organization Greenpeace’s climate and energy program, in an interview with Global Voices.

 中国企业的一些国际竞争对手则利用其低成本和长贷款期的融资优势，在项目竞标时报出很低的价格。中资企业应该借鉴国际同行的经验，充分利用境外国际金融机构、外资银行的资金以加快发展。

Some international competitors of Chinese companies use their low-cost and long-term financing advantages to bid very low prices in project bidding. Chinese companies should learn from the experience of their international counterparts and make full use of funds from overseas international financial institutions and foreign banks to accelerate development.

Indonesia’s renewable energy sector 

As a major coal-producing country, Indonesia still relies heavily on coal as its primary electricity source. In November 2024, Indonesia’s president Prabowo Subianto stated that he wants Indonesia to retire from utilizing coal and fossil fuels in the next 15 years. He aimed to build 75 GW of renewable energy by 2040. Prabowo said:

Kami memiliki sumber energi terbarukan lainnya dan itulah sebabnya kami sangat optimistis bahwa kami dapat mencapai nol emisi sebelum 2050.

We have other renewable energy sources, and that is why we are very optimistic that we can achieve zero emissions before 2050.

Pollution in Jakarta, Indonesia. Image from Wikipedia CC BY SA 3.0

Coal-fired power plants come with high health risks. Research from the Centre for Research on Energy and Clean Air (CREA) found that pollution from the coal-fired power plant Suralaya in Banten causes at least 1,470 deaths each year and has caused health losses of up to IDR 14.2 trillion (over USD 871 million). A resident living around the power plant told the BBC that his child was suffering from lung disease due to pollution. This power plant is also one of the main causes of air pollution in Jakarta and its surrounding districts. 

​​This situation makes the transition to renewable energy more urgent. Shifting to solar panels could bring a healthier and improved quality of life while also reducing greenhouse gas emissions and dependence on fossil fuels.

In recent years, the Indonesian government has tried to lure more investments in renewable energy, including solar panels.  However, Indonesia’s renewable energy sector investment has been stagnant for the past seven years, with only USD 1.5 billion in investment in 2023. China, as Indonesia’s second-largest foreign investor, has only a quarter of its investment targeted at the energy sector. Between 2006 and 2022, only 14 percent of China’s energy investments were in renewable energy, while the rest focused on fossil fuels. In 2023, only 13.1 percent of energy produced in Indonesia came from clean sources, below the state's 17.1 percent goal. An expert called Indonesia’s “lack of progress” in its commitment to shift to renewables is concerning. 

Mutya Yustika, an IEEFA energy finance specialist, told Dialogue Earth that Indonesia is facing several structural challenges to increasing renewable energy investment. First is a government-mandatory partnership scheme that requires private companies to collaborate with PLN (Indonesia's state-owned electricity company). Also, low solar tariffs at just nine cents per kilowatt-hour limit the financial appeal for investors, while lengthy, non-transparent procurement processes add delays.

Indonesia still relies heavily on coal for electricity. Source: Pxhere

Will China’s investment accelerate Indonesia’s green transition? 

As a tropical country, Indonesia has immense solar potential, namely 3.294 GW. But, thus far, it only has 140 MW of rooftop solar installations, placing Indonesia eighth among other Southeast Asian countries in the utilization of large-scale solar, according to Global Energy Monitor.

The Indonesian government has set an ambitious target: 3.61 GW of rooftop solar by 2025, 26.65 GW of floating solar, and a 4.68 GW large-scale solar power plant by 2030. Indonesia's National Electricity Plan 2024–2060 projects a significant surge in domestic solar demand over the coming decades, but experts say local manufacturing capabilities must be increased to produce billions of solar panels.

Domestic demand has indeed increased in the last five years, said Erlangga Bayu from Indonesia’s Rooftop Solar Power Installers Association (Perkumpulan Pemasang PLTS Atap Indonesia), to Global Voice. Statistically, there has been a 160 percent surge in solar panel installation demand from 2020 to 2024. 

However, for many customers, solar panels are still too expensive. Lani Diana, 30, has been considering installing a solar panel in her home in Tangerang Selatan, Banten. She kept doubting due to the high price and its significant impact on the environment. 

“Solar panels are not popular yet. I’ve been thinking about its environmental benefit, whether it’s significant or not, but it’s still expensive,” said Lani to Global Voices. 

Here, Chinese investment could play a significant role in fuelling domestic solar equipment and infrastructure. Erlangga said that Chinese solar firms could enhance the domestic market because of their advanced technologies that captivate capital and create employment. 

“With solar panels made in Indonesia, the price will also be cheaper logistically, compared to importing from China. So, when there is something cheap, the multiplier effect is that demand will also be greater,” said Erlangga to Global Voices. 

Yang Muyi, a senior energy analyst at global energy think-tank Ember, told Dialogue Earth that he is optimistic that China’s new solar firms could elevate Indonesia’s green transition ambition. As a global dominant player with a 90 percent share in key parts of the solar supply chain, China offers strategic advantages for Indonesia’s renewable energy growth. Its advanced technologies could support Indonesia’s ambition to produce large-scale solar power generation facilities. 

However, experts also emphasised the need to develop local manufacturing industries because China might not bring the most advanced technologies to Indonesia. It’s also possible — and even likely — that in the future, the US will impose a new tariff on Indonesia’s solar industry.

There are also some environmental risks to account for, especially when industry requires a massive amount of land for large-scale solar production. Head of campaign from Wahana Lingkungan Hidup Indonesia (Forum for the Environment), Fanny Tri Jambore, told Tempo, one of Indonesia’s largest independent news sites, that problems will occur if the factory displaces ecologically important ecosystems, such as protected animal habitats or air catchment areas.