Power Wheeling Scheme Has Potential Create Renewable Energy Market

Fabby Tumiwa

Jakarta, February 28, 2023 – Executive Director of the Institute for Essential Services Reform (IESR), Fabby Tumiwa, highlighted the power-wheeling scheme contained in discussions on the New Energy and Renewable Energy Bill (RUU EBET). However, the scheme has been removed from the problem inventory list (DIM) preparation in the New and Renewable Energy Bill (RUU EBET). Power wheeling is a mechanism that allows private companies or independent power producers (IPP) to build power plants and sell electricity to household and industrial customers. Fabby explained power wheeling is needed to align with Indonesia’s efforts to increase renewable energy.

“The Government has set a target of achieving a 23% New Renewable Energy (EBT) mix in 2025, both for electricity and liquid fuels. Then, in 2021, President Jokowi set an NZE target of 2060 or earlier. This target is driving the energy transition to decarbonize the energy sector. As a consequence of this, renewable energy needs to be developed on a large scale,” explain Fabby Tumiwa in the webinar “New Energy and Renewable Energy for the Prosperity of All” organized by the Center of Economic and Law Studies (CELIOS), on Tuesday (28/2/ 2023).

Unfortunately, Fabby mentioned, the growth of renewable energy tends to be slow. This can be seen from the achievement of the new renewable energy (EBT) mix of around 14.11% in 2022. Fabby assesses that it is best when the combination of new and renewable energy in the electricity sector reaches 30%. Achievements in 2022, said Fabby, were only half of the 2025 target that the Government had set.

“Reflecting on these conditions, the gap with the primary renewable energy mix target of 23% in 2025 is widening. Strategic innovation is needed to encourage the implementation of renewable energy. Moreover, Indonesia’s massive renewable energy potential has not been utilized. On the other hand, the cost of generating electricity from renewable energy is very competitive. Eliminating incentives for fossil energy is enough to make renewable energy the cheapest option,” said Fabby.

Along with this, Fabby emphasized that the concept of power wheeling is familiar because previously the Government had regulated it based on the ESDM Ministerial Regulation (Permen) No 1/2015 and ESDM Ministerial Regulation (Permen) No 11/2021. Still, these regulations need to be implemented. Thus, Fabby stated that power wheeling has the potential to create a renewable energy market while maintaining industry/company investment in Indonesia. One of them is the industrial group that joined RE100.

“Power wheeling can encourage renewable energy because it provides incentives from the supply and demand side. However, power wheeling requires further adjustment. Regulatory regulations regulate tariffs for power-wheeling schemes in other countries, at least in their formulation. At the same time, the commercial aspect is taken care of by business-to-business between those who wish to use it and the transmission owner. Not only that, power wheeling needs to be included in the law because the implications of implementing the scheme will involve several ministries/agencies. For that, it’s not enough to get ministerial regulations,” stated Fabby.