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Quo Vadis renewable energy in Indonesia?
PLN is considering the revival of nuclear power plants in remote regions, should renewable energy fail to meet the desired target.
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This photo taken on June 7, 2017 shows workers at the world's largest floating solar power plant in a lake in Huainan, in China's central Anhui province. The floating solar farm, which can generate 40 megawatts of electricity, was connected to the city's power grid in May 2017. (AFP/STR)
T
he existing policy landscape in Indonesia may be impacting on renewable energy (RE) investment, thus challenging the ability to meet stated national targets. We have recently witnessed the uncertainty of policies, including the new RE-based electricity price caps that reduce revenue to offset higher capital expenditure (capex) promoted through Energy and Mineral Resources Ministry Regulation No. 12/2017.
Industry Ministry Decrees No. 4 and 5/2017 on requirements for local content for solar PV modules in Indonesia also set forth further challenges as a result of higher prices for domestically produced components compared to imported products. This results in a higher cost of solar PV-derived electricity, compared to the cost of electricity generated from fossil fuels.
Many RE observers and investors perceive the recent policies as “testing the water,” while others regard them as detrimental. In addition, simultaneous developments of other energy-related policies further complicate renewable energy deployment nation-wide.
The energy ministry recently planned an increase in the revised state budget for electricity subsidies by US$127.64 million (The Jakarta Post, June 23). According to the “World Energy Outlook” report by the International Energy Agency, the current energy subsidies for electricity and oil in Indonesia amount to $15.3 billion, ranking seventh among countries with energy subsidies in 2015 after China and India.
