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Is Indonesia Reaching a Tipping Point for Renewable Energy?

The year 2021 could be remembered as a watershed moment in Indonesia’s renewable energy (RE) development. The government has released two major regulations so far this year: the Energy Ministry’s Regulation No. 26/2021 regulating rooftop solar power systems as well as Electricity Procurement Plan (RUPTL) for 2021-2030.

These 2 documents are expected to help renewable energy rise to 23% of the country’s energy mix by 2025. Customers will be permitted to export 100% produced by the rooftop solar panels to state-managed power provider PLN under the new legislation for solar rooftop systems. In addition, the RUPTL 2021-2030 strategy sets a lofty goal for renewable energy to account for more than 51% of national energy mix by close of the decade. These documents, taken together, give reason to believe that Indonesia will soon be able to overcome the barriers to renewable energy development that have hampered it for so long.

Due to regulatory uncertainty and an unappealing investment climate, renewable energy growth in Indonesia has slowed in recent years. Since 2012, Indonesia’s renewable energy operational capacity has expanded at a rate of only 4% per year. Malaysia, India, Singapore, Thailand, and Vietnam, all of which have had average yearly growth of over 10% during the same time span, are far behind. In 2018, 46 out of the 70 independent power producers (IPPs) who signed PPAs with PLN were unsuccessful to attain their financial closing requirements. Furthermore, just 13 new renewable energy PPAs were signed between 2018 and 2020. The delayed pace in the design of renewable energy legislation, which has yet to be finished, aggravated the situation. Against this backdrop, the government’s choices to change solar rooftop laws and dramatically increase Indonesia’s RE targets could be critical turning points in the country’s future RE development.

PLN introduced the revised RUPTL 2021-2030 on September 27. As previously stated, it established a 51.6 percent renewable energy target for 2030, a major increase over the 30 percent target set in the previous version of the RUPTL, which was issued in 2019. In the long run, PLN aimed to phase out coal power facilities entirely by 2056, gradually replacing them with battery-centered renewable energy. Hydropower (25.6%), solar power (11.5%), and geothermal power will account for the majority of the total (8.3%). Due to technological improvements and dropping battery technology costs, dramatic RE gains are expected to begin in 2028.

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