Indonesia: new policy scheme and PV projects

Indonesia: new policy scheme and PV projects

Indonesia recently brought in a new renewable energy law that changes the
remuneration tariffs for renewable energy projects, including solar PV
systems. Furthermore, the country's state-owned utility recently signed
agreements for new photovoltaic capacity.

A few weeks ago, Indonesia's government approved the Energy and Mineral
Resources Minister Decree (MD) No. 12/2017, altering the calculation method
for the renewable power projects' feed-in tariff (FIT).

So, whereas before the FITs were set by the government, the MD No.12/2017
allows the FITs to be the result of negotiation between the country's
state-owned power utility PLN and independent power producers (IPPs).

The new law

Specifically, the new law provides a FIT cap based on the electricity supply
costs of the region where the renewable power project is to be developed.
This is the cost state utility PLN needs to generate each kWh in the
region's electricity system and sub-systems.

Indonesia consists of more than 17,500 islands, of which 6,000 are inhabited
and 1,000 are permanently settled. The dispersed geography of the country is
a challenge for electricity production, with costs varying between different
regions and islands.

Thus, when a region has supply costs above the national average, the FIT
will be capped at 85%. If a region has an electricity supply cost lower than
the national average, then the renewable energy project will receive a FIT
equal to the regional cost. This capping mechanism is valid for all types of
renewable energy, apart from geothermal and waste-to-energy plants.

The new law is controversial, however, it is rather obvious that the
government is trying to convince the PLN to sign more PPAs with independent
power investors. Under the old regime, where tariff prices were higher and
fixed, the PLN was unwilling to sign renewable power contracts. The new law
will perhaps lead to a surge of solar PV projects in eastern parts of the
country where electricity supply costs are higher.

250 MW of new PV capacity via Akuo Energy

An example of how quickly Indonesia's renewable energy development moves is
the MoU signed recently between the PLN and Akuo Energy, a French IPP
headquartered in Paris. Based on the MoU, Akuo Energy, which created a
subsidiary in Bali, Indonesia in 2012, will conduct a feasibility study for
a hybrid system (solar PV, wind, energy storage and genset) in Indonesia
with a potential capacity of 500 MW and a total investment US$ 850 million.

Christophe Moyon, of Akuo Energy Indonesia, told pv magazine that of the 500
MW capacity, about 250 MW will be solar PV installations. These projects
will be developed in small to medium islands in Indonesia, with small and
isolated electricity systems, where the grid relies mainly on genset, added
Moyon.

Asked why the hybrid project needs to include genset, Moyon replied that "a
small amount of genset is needed to avoid an over-sized storage capacity in
order to reach the target PPA price that PLN expects in each particular
location."

Meanwhile, the PLN has also signed power purchase agreements to buy
electricity generated from six new solar PV plants to be built in the
country. These are four PV plants of 5 MW each, a 10 MW plant and a 15 MW
plant. The tariff for the projects has not been revealed. PLN did not
immediately respond to requests for information from pv magazine.

Indonesia has a target to provide 23% of its energy mix from renewable
energy sources by 2025. The recent renewable energy activity is encouraging,
however in March the PLN has also signed engineering, procurement and
construction contracts for about 1 GW of fossil fuel-based generation, like
a 650 MW combined-cycle power plant in Bekasi, West Java.

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Link to Original Article:
https://www.pv-magazine.com/2017/04/28/indonesia-new-policy-scheme-and-pv-pr
ojects/

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com