The government of Indonesia is finalising new regulations so as to simplify renewable power pricing thereby attracting more investments. This new regulation is in line with the country’s aim to have 23 per cent of the country’s power requirement being met through renewables by 2025. The new rules would entail simpler pricing including a feed-in tariff system for certain renewable power plants. This would prevent price negotiations between power generators and the state-owned power company PT Perusahaan Listrik Negara (PLN), which is the sole power off-taker.
As part of the new regulation, the government will also offer more incentives and pay for pricing gap to attract participation. With solar power plants becoming more affordable, the country will focus on enhancing solar power uptake. In addition, hydropower projects will also be planned in the high potential North Kalimantan province.
The country has a potential to generate over 400 GW of renewable energy from sources like hydropower, solar and geothermal. However, the progress has been slow with only 2.5 per cent of the total potential utilised and renewables contributing only 9 per cent to Indonesia’s power mix as of July 2020. In fact, recent forecasts suggest that only 2.5 GW of new renewable energy capacity additions will occur by 2025 at the current pace of deployment. Meanwhile, roughly 10 GW (4 times the forecast) is required to reach the country’s energy mix goals.