A controversial regulation issued by the Energy and Mineral Resources Ministry causes eco-friendly solar panels to lose their competitive edge and perpetuates public dependence on the gas-guzzling and coal-burning state-owned utility company in powering their homes.

Yohanes Bambang Sumaryo installed an on-grid photovoltaic (PV) system with a peak capacity of 1,000 watts on his roof five years ago. Figuring that he could save money by selling surplus electricity to PLN, he upgraded to a 6,000-watt system, which cost him about Rp 120 million (US$ 8,370).

The chair of the Indonesia Rooftop Photovoltaic Users Association (PPLSA) knew it was a pricey investment, but he believed it would be worth it. He was saving Rp 800,000 to Rp 1 million in monthly electricity bills at the time, so it would take him at least 10 years to recoup the money he had put in the renewable energy market.

But a turn of events dashed his carefully calculated hopes last November, when the Energy and Mineral Resources Ministry issued Ministerial Regulation No. 49/2018.

The regulation stipulates that the tariff for exporting electricity to the PLN grid is 65 percent of the tariff for importing from the grid. This means that households pay Rp 1,500 for each kilowatt per hour (kWh) they import from PLN, while they sell the electricity they generate from solar panels to the state-owned electricity company for Rp 950 per kWh.

The regulation is intended to boost the use of solar energy among PLN customers as part of the company’s aim to achieve a 23 percent renewable energy contribution by 2025. The national energy target for rooftop solar panels is 1,000 megawatt in installed capacity by 2020.

But the new rule makes the solar panel business unattractive, with investors taking longer to recoup their investments.

Bambang now saves only Rp 600,000 a month and says that the regulation has prompted many users to disconnect their PV systems from the PLN grid and stop selling their solar-generated electricity to the company altogether.

Roof of future: Solar panel modules are showcased at the Renewable Energy and Energy Conservation Conference and Exhibition at the Jakarta Convention Center. Solar panels require little maintenance and can last for more than 25 years. (JP)

Off-grid savings

Rooftop solar systems are a popular option for homeowners seeking a renewable energy source and lower electricity bills, and off-grid solar power system can save on electricity bills, too.

A 3,000-watt off-grid PV system with a relatively small battery can save up to 30 percent, explains Fabby Tumiwa, executive director of the Institute for Essential Services Reform (IESR), an energy think tank.

The PV system uses a battery as backup for storing surplus electricity, which allows users to power their houses on cloudy or rainy days, and even during blackouts.

The off-grid system is more expensive than the on-grid one, because homeowners have to install a battery storage unit.

“The cost of the battery depends on the size,” says Fabby. Off-grid users usually opt for either lead-acid or lithium batteries. Lead-acid batteries are cheaper but have a shorter lifespan, while lithium batteries are more expensive but last longer.

With an off-grid solar power system, homeowners can still power their house with electricity they import from PLN. If they want to use solar power around the clock, the cost of the batteries could become very high. “It could be as expensive as the solar panels, or even more,” says Fabby.

Moreover, off-grid users should keep an eye on battery performance and maintenance, which also means additional costs, along with replacement batteries.

On-grid feasibility

An on-grid system is connected to the PLN grid and requires no battery, which makes it cheaper in terms of initial investment than the off-grid system.

Users can export (sell) any excess energy that on-grid systems generate to PLN. And when the solar panels aren’t producing energy, they can import power from PLN. The financial gains are not cash savings, but saving on future bills.

Solar panels do not normally require much maintenance, only occasional cleaning of dust or dirt and last around 25 years under a typical warranty.

Today, 1,000-watt rooftop solar systems cost around Rp 15 million ($1,000) in big cities and can be financed through bank loans. Some small banks offer credit for residential installations, including BPR Syariah Lantabur Tebuireng in East Java and the Koperasi Amoqhasiddhi credit union in Bali.

Clean and sustainable: A man checks solar panels that power a naval base in Riau Islands. (JP/Dhoni Setiawan)

Is it worth investing?

The cost of solar power systems and how much money they can save are among the most important factors to consider among potential users, says a joint survey from IESR and German development agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).

Its findings also underline that the potential market for residential rooftop solar panels in Greater Jakarta is roughly 13 percent, and homeowners prefer eight years or less to recoup their investment.

However, the new energy regulation imposes a longer payback period. A 1,000-watt on-grid system that costs Rp 15 million saves around Rp 1.25 million a year, which means a payback period of 12 years, says IESR’s Fabby.

The regulation has sparked criticism from the outset, with critics arguing that its export-import tariff ratio discourages potential users from installing solar panels.

“The ministry’s regulation hampers the growth of residential solar panels, especially because of the longer payback [period],” Fabby says.

PLN previously regulated the solar power tariff under a 1:1 scheme, which meant that on-grid users could sell their energy to the utility company and recoup their solar panel investment more quickly.

The cost of installing solar panels has continued to fall as the technology has advanced in recent years. If the market expands and demand grows, the cost would go down even further, says Greenpeace Indonesia country director Leonard Simanjuntak.

To cut installation costs faster, market expansion also needs to be accelerated, says Leonard. But this was less likely to happen anytime soon, he adds, since the issuance of the ministerial regulation led to higher costs and a longer payback period.

“The ministerial regulation doesn’t offer a breakthrough in supporting the growth of rooftop solar panels in Indonesia,” he says.

The ministry intends to keep the regulation in place for at least a year before assessing its enforcement.