Indonesia in the geopolitical landscape is often called ‘underestimated’, but in the past few years it is back on the map. In the year 2022, when Indonesia was holding the G20 presidency, news coverage on Indonesia increased significantly – including on its energy transition priority.
Located in the equatorial area, Indonesia is blessed with year-round sun rays. Naturally, renewable energy source with the highest potential is solar energy; the Institute for Essential Services Reform (IESR) estimates the technical potential based on land availability scenarios range from 3,397 GWp to 19,835 GWp. However, the high potential does not correspond to solar installations – by the end of 2023, cumulative installations only reached 573.6 MW, not even in the gigawatt order.
Surprisingly (or not?), harnessing the power of the sun in Indonesia is a daunting task, less on the techno-economic side but more on the incoherent enabling ecosystem, including policy and regulatory frameworks. In the past 5 years, annual renewable energy targets were never achieved and it is likely that the 23% target by 2025 will be abandoned – lowered to 17-19%. During that same period, there were only three notable utility-scale solar PV projects inaugurated across the country: West Nusa Tenggara (3 x 7 MW), Likupang (21 MW), and Cirata Floating Solar (192 MWp).
Like any other power plants, utility-scale solar PV development in Indonesia must go through centralized planning based on national electricity plan (“RUKN”) and the Indonesian utility (PLN) 10-year business plan (“RUPTL”). Historically, number of big solar PV plants Indonesia in the plan was low, until the latest RUPTL (2021-2030) incorporates large number of utility scale solar PV plants, a total of 4.7 GW until 2030. The number is a combination of solar PV plants built by PLN and independent power producers (IPPs) – both land-based and floating, de-dieselization program (replacing diesel power plants with solar and storage), and rooftop solar PV. There have been two market soundings held by PLN’s subsidiary (Hijaunesia project) following the RUPTL, with plan to develop large scale solar in Sumatera and Java-Bali system, however, the information was very limited and by invitations only. Based on our analysis, floating solar is more attractive for investors due to several reasons, even before the Cirata Floating Solar was inaugurated in November 2023. In the series of event for Indonesia’s G20 Presidency, ACWA Power signed an MoU with PLN to develop floating solar of 110 MWac combined capacity in Saguling Dam (West Java) and Singkarak Lake (West Sumatera).
Rooftop solar PV in Indonesia is of entirely different history. Until 2018, its growth was practically invisible – while there was a legal basis for on-grid installation (based on PLN’s director decree issued in 2013), the public’s information access and awareness on said regulation was limited. In the period of 2016-2018, a group of solar advocates coordinated by IESR and Indonesian Solar Association (AESI) worked collaboratively to promote mainstream rooftop solar PV use in Indonesia. This work contributed to the issuance of Indonesia’s first ministerial regulation for on-grid rooftop solar PV, MEMR Reg. No. 49/2018. Since then, and along with its two revisions in 2019, Indonesia recorded a relatively decent installation growth – from only 608 users in 2018 to ~4,800 by end of 2021. While the greatest number of users are from the residential sector, the dominant portion of cumulative capacity addition came from industrial sector installing in megawatt sizes.
A bleak streak occurred in the beginning of 2022, right after the latest regulation on rooftop solar PV was issued (MEMR Reg. 26/2021). On paper, it is much better than the previous one: a net metering tariff of 1:1 – compared to previous 0.65:1, no operational certificate or SLO for installation under 500 kW, and a mandatory formation of helpdesk – however, this regulation never came to practice because of internal PLN letter limiting rooftop solar PV installation to ~15% (of installed electricity power) only. In public, they often cite overcapacity of coal power plants in Java – Bali system and the needs to protect grid stability. After recording year-on-year user growth of more than 25% annually since 2018 (number of installation), it was declining in 2022.
Seeing this solar conundrum, in early 2023 the government was set to revise MEMR Reg. 26/2021 to find middle ground between government renewable energy target, PLN concerns, and consumer’s rights to clean energy; with the first public hearing held in January. Arguably, it was a compromise: no installation limit but follows system quota (to be defined and determined), no power export allowed (no more net metering), and a more regular application period (twice a year). The no-limit policy is great, with questions on how the system quota will be determined and the procedure to get in line. No power export policy is probably acceptable for industrial users – as many of them prefer certainty over capacity installed and most of the power generated will be used for their operations. But the removal of net metering will affect residential solar greatly, as their peak demand is mostly at night.
With the revision going in circles, fortunately, in 2023 we observed increase in installation numbers and capacity – by December, there was almost 8,500 rooftop solar PV users in Indonesia. A small number still, considering 86 million PLN customers across the nation.
After being approved by the president – a bit unprecedented that a ministerial regulation needs that approval, citing concerns over state budget to compensate possibility of rising electricity generation cost due to large volume of solar penetration to PLN’s grid; the new regulation (MEMR Reg. no. 2/2014) was finally issued on 20th February.
Then, what to expect in 2024?
We have yet to see any green signals of large-scale solar development in Indonesia, updates from the Hijaunesia market sounding are much anticipated particularly after the completion of Cirata floating solar (which by they way, took almost 7 years since the MoU between Indonesia and UAE was signed). There was no new RUPTL for the past 2 years, hopefully there will be more solar projects in the pipeline – considering JETP’s investment plan as well. And with new regulation on rooftop solar issued, we have yet to see comprehensive responses from solar companies and users – there have been several questions about how it will be implemented. We certainly expect more growth. There is a significant market potential in Indonesia, from residential, businesses, to industrial users.
While official election result will not be published until sometime in March, will the new leader bring more ‘light’ to this story?
– by Marlistya Citraningrum, Senior Analyst, Institute for Essential Services Reform (IESR)
