Prospects for new and renewable energy in Indonesia

Indonesia's hopes and aspirations to participate in global commitments to overcome the impacts of climate change caused by rising temperatures through the use of clean and environmentally friendly energy have further pushed the Government to focus on efforts to encourage investment in new and renewable energy projects.

This is also fostered by the awareness that Indonesia has great potential in terms of new and renewable energy resources that have not yet been managed and utilized optimally.

Electricity Infrastructure Acceleration Law

The Electricity Infrastructure Acceleration Law mandates that the implementation of electricity infrastructure acceleration prioritize the use of new and renewable energy. The Government and/or Regional Governments can provide support in the form of fiscal incentives, the ease of licensing and non-licensing, determining the purchase price of electricity, and/or the provision of subsidies.

Purchase price as a crucial issue

Amidst the eagerness to implement a cleaner energy, investors are waiting for the execution of a Presidential Regulation stipulating a new benchmark for the purchase price of electricity generated through power plants utilizing new and renewable sources. The purchase price is deemed a crucial issue, as it is predicted to attract more investors in this field.

New and Renewable Energy draft bill expected to provide a regulatory umbrella

Other than that, the New and Renewable Energy draft bill has been listed as prioritized discussion in the House of Representatives until 2024, and is undergoing a harmonization step. This bill provides the regulatory umbrella to support the successful implementation of national energy policies, so that Indonesia can achieve the target of 23 percent of renewable energy mix by 2025. This bill is expected to provide more definitive legal framework on this particular topic.

Under the applicable laws and regulations, the purchase of electricity by PLN (Persero) as the extended hand of the Government is carried out through two mechanisms, namely the direct selection or direct appointment. Investors must go through qualification, submission of required documents and an evaluation stage in both mechanisms.