Indonesia issues regulation on accelerating development of renewable energy for power, seeking end of coal-fired power plants by 2050
On 13 September 2022, Indonesia issued Presidential Regulation No. 112 of 2022 on the Acceleration of Renewable Energy Development for Power Supply (“Regulation 112”). Set out below is a brief overview of the main initiatives of Regulation 112.
Energy transition and the early retirement of coal-fired power plants
Regulation 112 requires the Ministry of Energy and Mineral Resources to accelerate the termination of existing coal-fired power plants operated by State-run electricity company, Perusahaan Listrik Negara (“PLN”) and independent power producers by 2050. The construction of new coal plants is also prohibited, with those that have already obtained permission to operate and those integrated with the natural resources processing industry exempted.
Pricing regime and incentives
With regard to renewable energy projects, Regulation 112 introduces a new ceiling tariff that varies depending on the type of renewable energy power plant involved and its size and location.
Regulation 112 also sets out incentives and compensation for renewable energy initiatives, including geothermal development support and land and building tax facilities. The regulation provides that the Indonesia Government can now provide financial support for renewable projects through blended finance sourced from, among others, the State budget. There is specific geothermal energy support set out in the regulation which is fitting given Indonesia’s status as the country with the most active volcanoes in the world.
Tendering schemes for the procurement of renewable energy projects
Regulation 112 sets the procurement and electricity purchase price mechanisms for renewable power plant projects, which is intended to encourage investment in geothermal power, hydro power and solar power. PLN is empowered to implement direct appointment and direct selection procurement processes.
