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08/07/2020

The Indonesian government has issued a regulation that removes the Build-Own-Operate-Transfer (BOOT) requirement for developers of power plants that utilizes renewable energies. This and other provisions in the latest renewable energy regulation also provides a number of interesting changes that could make the industry more enticing for investors.

On February, the Ministry of Energy and Mineral Resources (MoEMR) issued the Ministry Regulation no. 4/2020, which is the second amendment to MoeMR Regulation no. 50/2017. Focusing on the utilization of renewable energy for the supply of electricity, the latest amendment provides a number of interesting changes that could make the industry more enticing to investment. 

Below is a summary of the changes: 

• The purchase of electricity from renewable energy-based power plants is conducted through a direct selection mechanism as opposed to the direct appointment mechanism stipulated in the amended regulation. However, direct appointment mechanism is still applicable for several cases; 
• The direct selection mechanism shall be completed within 180 days, while the direct appointment mechanism is expected to be completed in 90 days; 
• PT PLN is required to operate the renewable energy-based power plants continuously.  
• PT PLN (Persero) is entitled to purchase electricity from any photovoltaic-generated power plants (PLTS Photovoltaic) in the event that the local electricity system is able to receive electricity supply that utilizes solar-energy source. This article is also applicable to other renewable energy-based power plants; 
• For hydro power, there is a capacity factor determining the purchase conditions, described as follows:  
  • capacity factor equals to 65% for hydro powered power plants (stream, river and waterfall) generating up to 10MW, 
  • capacity factor shall meet the standard requirements for hydro powered power plants (stream, river and water fall) generating energy greater than 10MW
  • capacity factor below 65% in accordance of plant readiness or system requirements for hydro-powered plants (stream and waterfall from dams/irrigation channels); 
• It is possible to utilize government-owned dams/reservoirs, irrigations channels to supply electricity; 
• The purchase of power plants shall be implemented based on the assignment from the MoEMR to PT PLN (Persero) in purchasing electricity from power plant developers that have been determined by local governments in accordance with existing laws and regulations; 
• Regarding biomass and biogas-powered power plants, the purchase of electricity by PT PLN (Persero) can only be conducted with power plant developers possessing sufficient feedstock for the operation of power plants during the duration of contracts; 
• The purchase of electricity from waste to energy power plants by PT PLN (Persero) is to support the government and/or local governments in overcoming waste problems; 
• The purchase of electricity from geothermal-generated power plants by PT PLN (Persero) can only be conducted with power plant’ developers that have a geothermal area with proven-reserves after exploration; 
• The purchase of electricity from biofuel power plants can only be conducted with power plant developers possessing sufficient feedstock for the operation of power plants during the duration of contracts; 
• In selecting power plant developers, PT PLN (Persero) shall prioritize power plant developers utilizing domestic component levels in accordance with existing laws and regulations;

Furthermore, the Tariff Concept in the new regulation can be summarized as follows: 

*The above-mentioned principal cost of production supply for national electricity system and local electricity system is referred to the previous year’s basic cost of production supply determined by the Ministry based on a proposal from PT PLN (Persero). 

In order to accelerate the purchase of electricity from power plants that utilize Renewable-Energy Sources, PT PLN (Persero) shall draw up and publish:  

1. standards for documents on procurement of power plants which utilize Renewable-Energy Sources,  
2. standards for PJBL (Project-Based Learning) for each type of power plants which utilize Renewable-Energy Sources, and  
3. technical instructions for the implementation of direct appointment;  

And finally, this new regulation removes the requirement of BOOT for power plants utilizing renewable energy. 

Upcoming Digital Delegation on Energy Efficiency 

As Indonesia’s economy continue to grow, so will its people’s demand for energy. All the while, pressure to reduce fuel imports and CO2 emissions has prompted the Indonesian government to reduce energy subsidies and promote energy efficiency. Presidential Decrees No. 11/2011 and No. 71/2011 provide a legal basis for the promotion of energy-efficient measures. National and regional administrative units are obliged to promote the efficient use of energy. In addition, since 2014, the Indonesian government has had the goal of reducing energy intensity by 1% annually. Since then, large companies have been obliged to carry out regular energy audits and draw up energy management programs.

In the past, the subsidized energy prices provided few incentives for foreign companies to invest in measures to improve energy efficiency. This has led to large parts of the industry operating with partly outdated and less energy-efficient infrastructure. Since there are hardly any Indonesian manufacturers or suppliers of energy-efficient technology, software or services, there are good opportunities for foreign companies in this area.  

In this regard, EKONID, in cooperation with the German Ministry of Economic Affairs and Energy (BMWi) and German-based consultancy firm Eclareon, will hold a Webinar and online B2B meetings for companies interested in exploring the potential of the renewable energy industry in Indonesia. To be held from October 19 to October 23, EKONID hopes that this Webinar and B2B meeting would prove useful in further promoting a more efficient and sustainable energy industry across the globe as well.