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ncertainty over regulations and an unattractive pricing scheme have triggered investors to pull out from the Sumba Iconic Island (SII) project, once touted as the country’s leading renewable energy initiative.

Dutch donor group HiVos, supported by the Energy and Mineral Resources Ministry, launched the SII project in 2010 with a goal of increasing the electrification ratio in Sumba, East Nusa Tenggara. The targeted ratio is 95 percent in 2020, a steep increase from the 24.5 percent recorded in 2010, and all of the power will be derived from renewable energy sources.

The SII implementation team initially planned to develop renewable power plants with a combined capacity of 50 megawatts (MW) in the 2016-2020 period. Public and private investments for the planned power plants were estimated to reach US$210.6 million and $189.9 million, respectively.

As a result, the electrification ratio in Sumba reached 42.67 percent in 2017 and there were renewable facilities with a capacity of 6.76 MW, accounting for 12.7 percent of the island’s power generation mix.

However, the generation of renewable energy might be stagnant going forward as many investors were either no longer interested or had found difficulties in realizing their investments in the project, three people involved in the program told The Jakarta Post recently.

“Looking at the current situation in Sumba, it would be unlikely for us to meet the 2020 target,” said Fabby Tumiwa, a member of the SII implementation team.

Investors began to take issue with the project in January 2017, when the Energy and Mineral Resources Ministry introduced a new policy to cap electricity prices from certain renewable plants at 85 percent of a region’s electricity supply cost (BPP) when the cost exceeded the national average.

In March 2017, the ministry announced the BPPs for all regions. The one for Sumba dropped from around Rp 2,400 (17 US cents) to Rp 1,887 per kilowatt hour (kWh), thereby reducing the profits of SII investors.

Subsequently, state-owned energy giant Pertamina canceled a plan to develop a 1-MW wind power plant in Sumba, while local firm PT Prima Gasifikasi Indonesia aborted its program of building biomass power plants with capacities of between 5 MW and 10 MW.

A consortium of HiVos and France-based EREN Renewable Energy also lost its financier, the Millennium Challenge Account-Indonesia (MCA-I), which initially agreed to finance 65 percent of its project comprising a 10.1-MW solar plant, 10-MW wind plant and 15-MW battery storage facility.

“We were really fooled by the regulatory changes,” said another officer of the SII implementation team, wishing to remain anonymous.

At present, EREN is committed to building the solar plant, but it has found difficulties in securing funds for its project.

Three other companies remain committed to investing in the SII project, namely state-owned electronics maker PT Len Industri, private equity firm PT Arya Watala Capital and renewable energy firm PT Hywind Energy Solution with their respective projects of a 10-MW solar plant, 2-MW hybrid solar facility and 3-MW wind power mill.

The companies were previously required to first include their projects in the electricity procurement business plan (RUPTL) of state electricity firm PLN before starting construction.

Their projects, however, were only listed as potential projects in PLN’s latest RUPTL for the 2018-2027 period, not in the fixed list of programs set to finish within the next decade.

When asked last month about the decision, PLN corporate planning director Syofvi Felienty Roekman said, “I don’t remember.”

In what could further deter investors, PLN’s business plan also includes the development of two gas engine power plants in Sumba, each with a capacity of 20 MW and 10 MW, scheduled for completion between 2020 and 2022.

The two gas engine projects, along with existing power plants that produce around 53 MW in Sumba, would be more than enough to meet the island’s electricity demand without the need to develop other renewable facilities.

Meanwhile, Energy and Mineral Resources Minister Ignasius Jonan said last month that he would never revise his renewable energy policies, claiming that “there are still many investors willing to develop renewable power plants under prevailing regulations.”