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Indonesia to mend contract scheme to boost green energy projects
The introduction of a feed-in-tariff pricing scheme is expected to ensure investment certainty for renewable energy projects.
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Environmentally friendly: The Dieng geothermal power plant in Central Java is one of the main sources of renewable energy in Indonesia. The government plans to introduce a feed-in-tariff pricing scheme to boost investment in the green energy sector. (Tempo/Aris Andrianto)
R
enewable energy players are warmly welcoming two proposed changes in a regulation heralded as game changers for the green energy sector.
Such players cheered when a government official announced the proposed changes in a discussion in Jakarta on Wednesday, which include the introduction of a feed-in-tariff (FIT) pricing policy and the decompulsorization of the build-own-operate-transfer (BOOT) contract scheme.
The former guarantees fixed electricity rates for small renewable power plants and thus it ensures certainty of financial returns. The second proposal eliminates a scheme deemed harmful for the bankability of a renewable project.
“There will be a FIT scheme. It assures steady prices,” said the Energy and Mineral Resources Ministry's electrification director general, Rida Mulyana, at the discussion, “Second: BOOT schemes will no longer be compulsory.”
Rida, who heads the drafting of the regulation, served as the ministry’s renewables director general when work on it began early last year. The new regulation is to be implemented by June this year, he said.
Low rates and bankability issues are among the top hurdles faced by renewable players in Indonesia, a country falling behind its green energy commitments. Existing regulations stipulate that Indonesia should have reached a 17.5 percent renewable energy mix by 2019, yet the country only hit 12.36 percent that year.
Read also: Indonesia likely to miss renewable energy target – again
