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New scheme set out to spur investment
The government is considering introducing different feed-in tariffs for renewable energy sources in the regions in an attempt to entice more investors to contribute to the sector
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he government is considering introducing different feed-in tariffs for renewable energy sources in the regions in an attempt to entice more investors to contribute to the sector.
The government has set a goal to supply 23 percent of the national energy mix from renewable sources to wean off fossil fuels. However, development has been slow as current feed-in tariffs are often much higher than the production costs of state-owned electricity company PLN, the only off-taker in the country.
To counter this problem, the government plans to compose specific feed-in tariffs according to demand and available potential energy in a particular region.
Government-sanctioned National Energy Board (DEN) member Tumiran said the feed-in tariffs would depend entirely on the region’s renewable energy potential and demand. However, the prices can only reach a maximum of 85 percent of the average electricity supply cost in the respective region.
Tumiran surmised this would likely increase investor appetite for the renewable energy sector in the country, as it would help create lower investment scenarios.
“The prices will accommodate each region but only reach 85 percent of the local electricity supply costs, not national costs. National electricity supply costs hover around Rp 980 [7 US cents] per kilowatt hour [kWh],” he said at a press conference following the 20th DEN meeting on Monday.
The feed-in tariff policy obliges energy suppliers to purchase electricity produced from renewable energy at fixed costs. At present, the only off-taker available is PLN.
Although Indonesia has an estimated 300 gigawatt (GW) in potential renewable energy resources, efforts to develop these sources have been slow. The govermment data shows that as of October last year, 8.8 GW of electricity and 2.1 million tons of oil equivalent (Mtoe) had been procured from new and renewable energy sources.
Meanwhile, Institute for Essential Services Reform (IESR) executive director Fabby Tumiwa remained doubtful that the scheme would whet investors’ appetites for the renewable energy sector.
“This may still be appealing for some places outside of Java if the price can cover any investment costs and margins, but the electricity capacity that can be absorbed will be extremely small,” he said, adding that the new feed-in-tariffs might only benefit investors with access to funding from abroad.
