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Government regulations stumbling block for renewable energy projects
Indonesia is struggling to strike a balance between supplying cheap energy and committing to more sustainable and renewable energy sources.
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Roof of the future: Solar panel modules are showcased at the Renewable Energy and Energy Conservation Conference and Exhibition at the Jakarta Convention Center, Jakarta. Solar panels require little maintenance and can last for more than 25 years. (The Jakarta Post/-)
T
his week, solar energy stakeholders in Indonesia have taken various government ministries to task over four regulations they say disincentivize clean energy development. One of them, Energy and Mineral Resources Ministry Regulation No. 50/2017, makes it difficult for renewable energy to enter the market, according to experts.
The debate over this regulation highlights tension between the desire for cheap energy and the need to increase the share of energy produced from renewable sources in Indonesia.
The electricity market is dominated by PLN, the single buyer of electricity in the country and the largest owner of fossil fuel assets. “PLN is not only dealing with renewables, it is also [pressured] by the government to deal with electricity, to make electricity as cheap as possible,” said Fabby Tumiwa, executive director of the Institute for Essential Services Reform (IESR), a Jakarta-based sustainability think tank.
Regulation No.50/2017 caps what PLN is allowed to pay independent power producers to purchase renewable energy, pegging the price to the local cost of electricity production.
Under this regulation, electricity produced from hydropower and geothermal power has to be as cheap as locally produced electricity, while electricity from other sources, including solar and wind, has to be even cheaper at 85 percent of the local average cost, before the government will buy it.
As it stands, that is nearly impossible in many regions. The average national cost of electricity production last year was 8 US cents per kilowatt hour (kWh). Meanwhile, the cost of purchasing solar before the 2017 regulation was 25-30 US cents per kWh, according to James Guild, a PhD candidate at the S. Rajaratnam School of International Studies in Singapore.
“That means in places like Java, which have lots of cheap coal-fired power, solar will struggle to be competitive,” said Guild, “Regulation 50/2017 will make it extremely difficult for PLN to add solar or wind power at utility scale anytime soon. Meanwhile coal remains very cheap, as Indonesia has abundant reserves.”
