Indonesia’s Newfound Hope for Rooftop Solar Utilization (?)

The Indonesian Ministry of Energy and Mineral Resources (“MEMR”) has established target for solar energy utilization, aiming for 6,500 MW by 2025 and 45,000 MW by 2050. Despite these goals, they are still considered relatively modest compared to Indonesias vast solar potential, estimated at 207,900 MW. The total installed solar energy capacity in 2023 was recorded at 573.8 MW (Rooftop & Non-Rooftop), with the majority coming from the Cirata Floating solar project with a capacity of 145 MW (ac) or 192 MW (p) and Rooftop Solar (“RTS”) with capacity 141.14 MWp.

In February 2024, MEMR has published MEMR Regulation Number 2 of 2024 on Rooftop Solar-Power Plants Connected to Electrical Power Networks Of Holders Of Business Licenses For The Provision Of Electrical Power For Public Interests (“Reg 2/2024”). This new regulation supersedes the MEMR Regulation Number 26 of 2021 on Rooftop Solar-Power Plants Connected to Electrical Power Networks Of Holders Of Business Licenses For The Provision Of Electrical Power For Public Interests (“Reg 26/2021”). RTS enthusiasts have long awaited this new regulation, due to Reg 26/2021 implementation had been delayed for over a year. Reg 2/2024 is anticipated to invigorate the solar energy sector and encourage the installation of RTS systems, aiming for 3,600 MW by 2025.

One of the major changes in the new regulation is RTS users will no longer being eligible to benefit from exporting excess solar energy (Net Metering) to PT Perusahaan Listrik Negara (“PLN”), the state-owned electricity provider. This change has sparked debate as it may affect residential and small businesses users negatively. These users might see the new regulation less beneficial compared to the previous regulations which obligates PLN to buy exported energy from RTS to PLN grid in the mount of 65% exported energy (stipulated in Reg 49/2018) and 100% exported energy (stipulated in Reg 26/2021). However, MEMR justifies this change by highlighting PLN’s oversupply issue, particularly in Java Island.

Reg 2/2024 will introduce a limitation based on quotas for RTS installations. PLN will determine yearly quotas, which may be segmented by clustering system which means PLN will consider the capacity based on electric power system in the PLN customer service units. Moreover, this regulation will also control on when the applications for installing RTS to PLN, which will be submitted once a year either in January or July. This provision will establish a novel licensing framework operating on a first-come, first-served basis and probably commercial and industrial sectors may dominate these quotas. This regulation also specifies that in the absence of detailed regulations regarding the environmental attributes of RTS usage, then these attributes will belong to the government. While there is no specific definition of which government institution will claim these benefits, it is probable that PLN will benefit from them. In addition, this regulation also introduces provisions regarding fines, which were not previously regulated. If RTS customer operates the RTS before obtaining approval from PLN, PLN will impose a fine calculated based on the total inverter capacity multiplied by 240 hours multiplied by the electricity tariff.

On the positive side, the new regulation will revoke the 5 hours capacity charge provision for PLN industrial customer as one of the government incentives to support RTS. The new regulation will adopt some kind of positive fictional decision which can be found at Indonesian state administration law. This method is expected to expedite the PLN approval process which impacting if PLN does not give an approval or rejection letter to applicant within the certain period of time, the application is considered approved. This regulation will not directly affect the existing RTS consumer because they will still follow the existing regulation on the Net Metering benefits and will be updated after 10 years of RTS operation.

However, the Reg 2/2024 is expected to become a new hope for RTS energy in Indonesia and stimulates the industry, although there are contrasting views from RTS players and users. With government commitment and healthy competition among RTS players, the government still optimist to achieve its New Renewable Energy mix by 2025.