Indonesia proposes changes to renewable energy prices

Out-Law News | 29 Oct 2020 | 5:58 am | 1 min. read

The Indonesian government is overhauling renewable energy pricing, establishing a fixed feed-in-tariff (FiT) for renewable projects so that developers do not need to negotiate pricing with Perusahaan Listrik Negara (PLN).

Harris Yahya of the Ministry of Energy and Mineral Resources (EMR) said in a webinar on 22 October that the government would fund the gap between pricing and PLN’s basic cost of electricity supply. He said the regulation would include three prices - a feed-in-tariff, ceiling price and a negotiated price.

"This approach will facilitate investor interest due to more certainty on pricing and a more streamlined process, combined with government support," said Priya Dalal, a projects expert at Pinsent Masons, the law firm behind Out-Law.

Indonesia's EMR is planning to complete the draft regulation by the end of the year.

In February Indonesia started to consider revising its FiT system and dividing it into two stages: a fixed electricity tariff that lasts for 12 years, then a lower tariff starts from the 13th year until the end of the contract, according to Enerdata. The measure will apply to new hydropower, solar and wind power plants and aim to get developers get faster returns on investments.

Indonesia has around 442GW potential capacity of renewable energy from sources such as hydropower, geothermal and solar energy but only around 2.5% had been utilised. The target for 2025 for the new and renewable energy mix is at least 23%, which will require an additional 10 gigawatt (GW) renewable energy, and 31% by 2050, according to a report of Indonesia's Ministry of Energy and Mineral Resources.