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Indonesia Solar Market Will Accelerate After Government Decree

When in Indonesia, add a government decree to the formula for boosting solar energy, and all things begin to look more attractive to clean electricity developers and investors.

Until now, the solar market of Southeast Asia has been tepid, at best. But a new decree from Indonesia’s Ministry of Energy and Mineral Resources is set to change the situation and open the heavily government controlled solar market, writes Solarplaza.

The decree for a new regulation, signed in mid-July, will provide proper support mechanisms for utility-scale solar PV systems. Importantly, the regulation does not utilize a tender mechanism or a reverse auction system like what has been used in past efforts. Rather, it is a Feed in Tariff (FiT) that’s promised to registered project developers once they meet certain milestones..

Indonesia Hindu temple shutterstock_306573191
Famous temple in Bali, Ulun danu Hindu temple. Credit: Sthaporn Kamlanghan

The struggles of the Indonesian commercial solar market are largely due to lack of clear support mechanisms and transparent framework, states clean energy consultant Andre Susanto:

“Until the reverse auction regulation in 2013, solar PV development in Indonesia was strictly possible only through government project tenders and a handful of power auctions by PLN (the state-owned electricity company). Even now, mid-2016, the largest share of solar PV projects are government and PLN projects. Privately funded project opportunities are growing, but have not reached the level of success that’s needed to qualify Indonesia’s solar PV industry as mature.”

A New Decree

The policy is seen as being similar to the Philippines’ last regulation, the difference being Indonesia’s regulation will use the approval of the project and its feasibility study as the necessary milestone.

Once the project developers meet the requirements and reach this milestone, they’re awarded the promise of the PPA tariff for the region where their project is located.

Highlights of the regulation’s main points:

  • An FIT of 14.5 cents to 25 $cents per kWh (20 year PPA) depending on the project’s region
  • Each region (divided by PLN’s operational regions) has its own tariff and its own quota
  • Total quota for Indonesia is 250 MW
  • Largest quota is in Java at 150 MW and the smallest quota is 2.5 MW in Papua/West Papua combined provinces
  • There is a maximum limit of project size per developer based on the available quota in the region:
    • Quota above 100 MW, the limit is 20 MW
    • Between 10-100 MW, the limit is 20%
    • Below 10 MW, there’s no limit
  • Local content on the project is required, subject to the minimum based on the Ministry of Trade and Industry’s regulations
  • Projects not meeting the minimum local content will be penalized on the tariff according to the ratio of the achieved local content
  • Other milestones (Financial close, Commercial Operational Date, etc) are given timelines as well and need to be observed to avoid any consequences

Mr. Susanto has collaborated with Solarplaza on trade missions hosted in Southeast Asia. Solarplaza reports it has organized two trade missions to Southeast Asia (Indonesia; 2013 & Vietnam/Thailand; 2016) and is keeping a close eye on the market developments.

Image via Shutterstock




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