The Indonesian Ministry of Energy and Mineral Resources (MEMR), in its National Energy Plan released in 2016, introduced the plan to meet the renewable energy target (RET) of 23 per cent by 2025. To reach the target, it requires around US$33 billion of investment to build mainly new hydroelectric and geothermal power plants. However, in the past five years, the realisation figures are not promising. By 2025, energy demand projection indicates that Indonesia will require electricity around 85 GW per annum, where 20 GW should come from renewable resources. With the current level of 10 GW of renewable energy (Figure 1) and slowing economic growth post COVID-19 pandemic, meeting the target of 23 per cent may not be feasible.
Figure 1. Renewable energy – Potential sources and realisation
Notes: Panas Bumi (Geothermal), Surya (Solar Panel), Angin (Wind Turbine), Air (Hydroelectric), Arus Laut (Ocean wave).
Thus far, the Government of Indonesia or private companies have undertaken many projects to increase the capacity of renewable energy. This includes the finalisation of Feed-in-Tariff (FiT) scheme from renewable energy. FiT is an energy scheme that paid for excess electricity generated from renewable sources such as from PV system, geothermal, or mini hydroelectric. The scheme is attractive for investors and customers as it gives long-term benefits of low electricity costs and increase the capacity of renewable energy. FiT has been proven effective in many countries, especially in the process of energy transition to increase renewable energy.
In Indonesia, there are some issues in the implementation of FiT:
- Lack of government incentives in the initial step: This creates a market failure that comes from the discrepancy between the average production costs from renewable energy and from fossil fuels.
- Institutional issues in obtaining a permit, especially from local governments. This creates many additional costs for renewable energy investors.
- Complex contract structure in the Power Purchasing Agreement with the state-owned electricity company (SEC) or PLN.
WHAT WE OFFER
- Our experts have the experience in Regulatory Settings of Feed-in-Tariff (FiT). This includes setting the Government incentive to support market competition in the interest of customers. The objective is to create a lower production cost of electricity from renewable energy compared to conventional energy sources.
- We have the capability to develop a roadmap of renewable energy policy to meet the Indonesia’s target of 29 per cent reduction of carbon emission by 2030.
- We have the technical expertise to develop simulation under the scenario of post COVID-19 pandemic, which requires adjustments in Indonesia’s macro-economic indicators.
- Our experts can develop financial viabilities of renewable energy installation benefit from the perspective of investors and customers.