The administration of President Joko Widodo has set new growth targets for the use of new and renewable energy (“NRE”), e.g. nuclear, solar, water, biomass. It aims to have NRE make up at least 23% of Indonesia’s total energy consumption by 2025 and 31% by 2050. These targets are set out under Indonesia’s National Energy Policy (Kebijakan Energi Nasional) and National Energy General Plan (Rencana Umum Energi Nasional), as stipulated respectively in Government Regulation No. 79 of 2014 regarding National Energy Policy and Presidential Regulation No. 22 of 2017 on National Energy General Plan (“PR 22”).
To help reach these targets, the Government is projecting the development of 6,500 MW of solar power by 2025 and 45,000 MW by 2050, or approximately 22% of Indonesia's 207,898 MW solar power potential, by endorsing the mandatory use of solar panels covering a minimum of 30% and 25% of the rooftops of government buildings and houses/apartments, respectively. PR 22 also states that the government aims to facilitate the development of a sustainable solar power industry.
As of this writing, the general requirements for the construction, installation and operation of rooftop photovoltaic power plants (“Rooftop Solar PV”) by household, commercial and industrial customers of PLN, the Indonesian government-owned power company, are regulated under Minister of Energy and Mineral Resources (“MEMR”) Regulation No. 49 of 2018 on the Utilization of Rooftop Solar Power Generation System by Customers of PT Perusahaan Listrik Negara (Persero) (“PLN”), as amended by MEMR Regulation No. 13 of 2019 (“MEMR 13”) and MEMR Regulation No. 16 of 2019 (“MEMR 16”) (together, “MEMR 49 as amended”).
Below are some of the key provisions under MEMR 49 as amended:
Application, Installation and Licensing Requirements
To build and install a Rooftop Solar PV, a PLN customer must submit an application to PLN through the head of the relevant PLN Area/Distribution Unit, accompanied by the required administrative requirements such as PLN Customer Identification Number (Nomor Identitas Konsumen PT PLN) and a request to change their payment mechanism from prepaid to post-paid (if at the time of the submission the applicant is a PLN prepaid customer).
The applicant must also provide technical information such as (i) the installed capacity of the planned Rooftop Solar PV, (ii) specifications of the equipment to be installed and (iii) a single line diagram of the planned Rooftop Solar PV. PLN will commence the evaluation and verification process before issuing its approval or rejection within 15 business days of receipt of a complete application.
PLN customers must also obtain an operational license (izin operasi) from the MEMR and an Operation Worthiness Certificate (Sertifikat Laik Operasi or “SLO”) from an accredited Electricity Engineering Inspection Agency (Lembaga Inspeksi Teknik Tenaga Listrik or “LIT”).
MEMR Regulation No. 12 of 2019 regarding Captive Power Plant Capacity (“MEMR 12”) states that an operational license and SLO are required for the use of any type of captive power plant with a capacity of more than 500 kVA. Therefore, an operational license and SLA are not required for any small-scale Rooftop Solar PV of less than 500 kVA, but a report must be submitted to the MEMR.
Note that a Rooftop Solar PV may only be constructed and installed by a construction service company that holds an Electricity Supporting Services Business License (Izin Usaha Jasa Penunjang Tenaga Listrik).
Net Metering Scheme for Rooftop Solar PV
In general, the electricity tariff for NRE power plants is regulated under MEMR Regulation No. 50 of 2017 regarding the Utilization of Renewable Energy for Power Supply, as lastly amended by MEMR Regulation No. 4 of 2020 (“MEMR 50 as amended”).
MEMR 50 as amended states that any tariff for electricity generated by an NRE power plant will be benchmarked against the applicable Electricity Generation Basic Cost (Biaya Pokok Penyediaan Pembangkitan or “BPP“) in the area where the electricity is generated. As of this writing, the applicable BPP still refers to MEMR Decree No. 55 K/20/MEM/2019 regarding the PLN Electricity Generation Basic Cost for 2018 (March 29, 2019) (“MEMR Decree 55“). MEMR Decree 55 sets the national BPP at Rp1,119/kWh, or US$0.076 cents/kWh, while local BPPs range from Rp984/kWh (US$0.066 cents/kWh) to Rp 3,041/kWh (US$0,20cents/kWh).
MEMR 50 as amended stipulates that the calculation of the electricity tariff for solar power is as follows: (i) if the local BPP is greater than the national BPP from the previous year, the tariff shall be set at a maximum 85% of the local BPP; or (ii) if the local BPP is equal to or lower than the national BPP from the previous year, PLN and the relevant Independent Power Producer can determine the tariff based on a mutual agreement.
Notwithstanding the above, as of its issuance, MEMR 49 as amended has established a net metering scheme for PLN household, commercial and industrial customers that have Rooftop Solar PVs exporting excess power to PLN’s grid. This scheme was adopted based on the idea that Rooftop Solar PV users cannot actually sell their excess electricity to PLN, but instead this excess will be used to offset the Rooftop Solar PV users’ electricity usage from PLN’s grid based on the net metering scheme.
Under the net metering scheme, electricity exported by Rooftop Solar PV users to PLN will be calculated at 65% of the applicable PLN tariff on a monthly basis, using the following formula:
Customer Electricity Bill (kWh) = Total energy imported from the PLN grid to consumer per month (“kWh Import”) - 65% of total energy exported by the consumer to the PLN grid per month (“kWh Export”)
If the kWh Export value is greater than the kWh Import value from the preceding month, this excess will be used as credit against the Rooftop Solar PV users’ electricity bill for the subsequent month(s), up to a maximum of three months.
Electricity Charge for Rooftop Solar PV
The use of on-grid Rooftop Solar PVs by PLN industrial customers is subject to an additional electricity charge. On its issuance in 2018, MEMR 49 as amended required PLN industrial customers with on-grid Rooftop Solar PVs to pay a capacity charge and emergency energy charge (i.e. the price of electricity payable to PLN by a power plant customer when its power plant uses PLN’s electricity in an emergency situation).
At the time, it was generally accepted that the payment of the capacity charge was subject to the following formula provided under MEMR Regulation No. 1 of 2017 on Parallel Operation of Power Plants with PLN's Electricity Network (“MEMR 1”):
capacity charge = total Net Dependable Capacity of the plant × 40 hours × applicable electricity tariff
However, with the issuance of MEMR 16 in October 2019, PLN industrial customers with on-grid Rooftop Solar PVs are no longer required to pay an emergency energy charge. They are now only subject to the following capacity charge:
Capacity charge = total capacity of inverter (kW) x 5 hours x applicable electricity tariff
The above emergency energy and capacity charges are not applicable to PLN industrial customers with off-grid Rooftop Solar PVs or any PLN household or commercial customers that have a Rooftop Solar PV.
- MEMR 49 as amended imposes a capacity restriction under which Rooftop Solar PV users can only install up to 100% of their grid-installed capacity. This implies that Rooftop Solar PV users are not allowed to produce more electricity than their current capacity, decreasing the chance of exporting energy to PLN’s grid.
- MEMR 49 as amended requires Rooftop Solar PV users to comply with local content requirements in building the Rooftop Solar PV.
- A Rooftop Solar PV may be installed by non-PLN customers for captive use in accordance with prevailing regulations, provided that they submit a building and installation report to the Directorate General of New and Renewable Energy and Energy Conservation.
The Government has made key improvements aimed at accelerating development of the Rooftop Solar PV industry. Lowering the capacity charge from 40 to 5 hours and eliminating the emergency energy charge for industrial customers, and removing the requirement to obtain an operational license and SLO for captive power plants with a capacity of up to 500 kVA are signals of the Government’s attempt to support the solar power plant industry.
However, as various reports have suggested, MEMR 49 as amended is still seen as failing to address one of the stumbling blocks in developing the Rooftop Solar PV industry, which is the pricing issue in calculating the export multiplier for Rooftop Solar PV users’ excess electricity to PLN (i.e. 65% multiplier). Many investors feel the multiplier is too low, acting as a disincentive to their intention to green their businesses.
For more information, please contact:
Syahdan Z. Aziz, Partner
Ahmad Charlie Rivai Malessy, Associate
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