Indonesia's new solar regime

Indonesia's new solar regime

1. Overview

The Indonesian Government recently responded to concerns about the country's
stalled solar sector by passing a Regulation entitled 'Purchase of Power by
Perusahaan Listrik Negara from Solar Photovaltaic Panel Plants' (Regulation
19). Regulation 19 was passed on 12 July 2016 and replaces Regulation No. 17
of 2013, entitled 'Purchase of Power by Perusahaan Listrik Negara from Solar
Photovaltaic Panel Plants' (Regulation 17).

Regulation 19 includes a mechanism for capacity allocation, with capacity
quotas to be allocated by the Government on a first-come, first-served
basis. The Government intends to offer at least 5000 MW of solar PV capacity
by 2018.

Projects which have already been awarded under Regulation 17 will now be
required to sign a PPA by 12 October 2016, so as to ensure their project is
not revoked by the Government.

2. Pre-qualification

Any interested developers will need to pre-qualify with the Directorate
General of New and Renewable Energy and Energy Conservation (EBTKE).
Pre-qualification documents required by EBTKE include, for example,
corporate documents, proof of financial capability and Indonesian taxation
documents.

3. Allocation and Quotas

The previous tendering process for solar PV projects, has been removed in
favour of a first-come, first-served allocation mechanism.

EBTKE will publish quota allocations online, and those allocations will
remain in place for two months. Only pre-qualified developers (refer to
previous section) may apply for quota from EBTKE.

Developers may make their submissions online. Developers are required to
submit documents relating to the amount of capacity applied for, as well as
feasibility and interconnection studies, certification of their solar module
and inverter, and a self-assessment of the local content requirements. The
capacity that a developer can propose is limited as follows:

Available capacity Per developer cap

Greater than 100 MW 20MW

Between 10 - 100MW 20% of offered capacity

Less than 10MW No limit

In addition, the number of proposals that can be approved per round per
region is limited to three for each developer. However, following the lapse
of one month following EBTKE's quota allocation, a developer who has already
been allocated capacity for three projects may apply for further capacity
within the same region.

4. Feed in Tariffs

The rate of the Feed in Tariff (FiT) for any solar PV project will depend on
the project's location. The rates vary between: 0.145 USD/kWh (for Java) and
0.25 USD/kWh (for Papua). A list of FiT rates for each region for round one
is included at the end of this e-bulletin.

Unlike Regulation 17, Regulation 19 requires all developers of solar plants
to fully comply with the local content requirements, as detailed in the
Ministry of Industry's Regulation No. 54/M-IND/PER/3/2012 of 2012 on
'Guidelines to Utilize Domestic Products in Erecting Electricity
Infrastructures'.

Developers will be required to certify that they are meeting the local
content levels, by appointing an approved official verifier. The results of
those verifications must be submitted to the EBKTE within the 30 day period
immediately prior to the commercial operation date. A copy of those results
must also be supplied to PLN. Developers which fail to comply with local
content requirements will be given a 60 day grace period in which to comply.
If developers continue to fail to comply, then their tariff will be reduced
on a basis which is proportionate to the amount of local content actually
utilised.

5. Power Purchase Agreements

Under Regulation 19, PLN is to provide a "model PPA" to the Ministry of
Energy and Mineral Resources by the end of August 2016. The model PPA will
include a 20 year term from commercial operation.

6. Timetable

Regulation 19 sets out a project timetable to incentivise developers to
proceed promptly to commercial operation. That timetable is:

PPA with PLN must be signed within 1 month

Financial close must be achieved within 6 months of signing the PPA

An electricity generation license (IUPTL) must be obtained following
financial close. A copy of the IUPTL must be submitted to EBTKE and PLN
within three working days of receipt.

Commercial operation must be achieved within 12 months of obtaining an IUPTL
for project capacities up to 10 MW or 24 months for those over 10 MW.
Tariffs will be reduced if commercial operation is not achieved within the
timescales outlined above. Reductions of 3%, 5% and 8% will apply for delays
of up to three, six and 12 months respectively. Other delays and sanctions,
such as termination for further delays are expected to be dealt with under
the model PPA.

Round two quotas cannot be offered until the two month period for which the
round one offering remains online has lapsed or 80% of the round one quota
has been utilised.

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com