Indonesia: Private Firms Reject New Clean Energy Tariff

Indonesia: Private Firms Reject New Clean Energy Tariff

Chairman of the Indonesian Renewable Energy Society, Surya Darma, urged
Indonesian government to review the implementation of the clean energy
policy under the Minister Regulation No. 12 / 2017 on the Utilization of
Renewable Energy for Electricity Supply.

Surya views the new policy actually hampers clean energy investments. "We
must think about the appeal of the clean energy business," he said Thursday,
March 2, 2017.

He claims that the subject has been discussed with the banking industry. The
banks mostly do not want to fund clean energy projects that use the new
tariff since it does not guarantee payback.

Surya argues that development of the clean energy business could not be
assimilated to normal business practices. In the electric supply market,
businesses are only faced with one buyer which is PT PLN. Surya says that
PLN plays a huge role in determining the market's tariff. Based on the
regulation, the clean energy tariff is calculated based on PLN's cost of
electricity production (BPP).

Surya opposes the concept. He states that the contribution of fossil energy
in the calculation of the BPP is still dominant, which is 49.5 percent for
gas, 33.5 percent for coal, and 13 percent for fuel (BBM). "In this case, it
seems that clean energy must provide subsidy for fossil fuels," he said
Friday, March 3, 2017.

Geothermal firms have also refused this regulation. According to the
Chairman of the Geothermal Association, Abadi Purnomo, three developers have
cancelled the construction of their geothermal power plants following the
tariff policy change.

"All of them are from the private sector, none of them are SOEs," he stated.

Abadi highlights Article 11 stating that the geothermal electricity contract
could only be signed if the developers already have proved reserves.
Meanwhile, in order to obtain proved reserves, companies must conduct
exploration drilling. The average cost for an exploration drilling reaches
US$ 8 - US$ 10 million per well, developers would be responsible for the
risks if the exploration fails.

Energy Minister Ignasius Jonan stated that he is adamant in not changing the
clean energy tariff policy since he is sure that it is the only fair
alternative in order to develop clean energy without having to deal with the
risk of raising the basic electricity tariff (TDL).

"We have to compromise, whether to prioritize the businessmen or the ability
to pay for the electricity? The sense of injustice would be extraordinary
when there are electrical cables in front of people's houses but they
couldn't afford it,"

The new policy, according to Jonan, sides to the electricity development in
Indonesia's eastern region.

According to the General Plan on National Energy, by the year 2025, the use
of clean energy in electricity production must reach 25 percent.

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Link to Original Article:
https://en.tempo.co/read/news/2017/03/03/056852224/Private-Firms-Reject-New-
Clean-Energy-Tariff

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com