Continuous Effort in Paving the Way for Solar Energy in Indonesia

press release

Jakarta, July 26, 2023 – The Indonesia Solar Summit 2023, hosted by the Ministry of Energy and Mineral Resources and co-hosted by think tank Institute for Essential Services Reform (IESR), affirms the commitment to accelerate solar deployment in the country.  Solar energy has made it significantly into Indonesia’s NZE pathway, projected at 61% of total electricity sources by 2060. A previous separate study by IESR placed solar energy as the backbone for a zero-emission energy system by 2050.

Minister of Energy and Mineral Resources, Arifin Tasrif, mentioned solar energy is a crucial strategy to achieve 23% of the renewable energy mix within the next two years before 2025. However, he also emphasized the significance of having access to technology and funding to successfully utilize solar energy and meet the renewable energy mix target. According to him, investment in solar energy will easily flow into Indonesia if there is a significant demand in the country. 

“There are two crucial factors that must be considered to accelerate the use of solar energy. The first is the availability of technology, which requires support from the industry. The second is the availability of international and domestic coverage that needs to be mobilized. The target for the renewable energy mix is 23% by 2025, but currently, it only stands at 12.5%, leaving only two years to achieve this goal. Additionally, the aim is to reduce greenhouse gas emissions by approximately 290 million tons in 2030, which has increased to 358 million tons. To achieve this, various efforts are being made, including de-dieselization programs and converting fossil-fueled motorized vehicles to electric motors, to absorb emissions,” said Arifin. 

The progress towards solar energy adoption in Indonesia remains slow. The actual installed capacity of solar PV in 2022 is 271.6 MW or far below the plan of 893.3 MW, based on data from the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE), MEMR. There are several factors that have hindered widespread adoption of solar energy, including complications with land ownership, lack of local experience and unattractive tariffs. Whereas, the latest technical potential is at 3,295 GWp, acceleration of solar deployment will be critical in achieving renewable energy and NZE targets. In the short term, 18 GW of solar energy is needed to attain a 23% renewable energy mix target by 2025, with an investment value of US$14.1 billion, based on BloombergNEF and IESR study. 

With the announcement of Just Energy Transition Partnership (JETP) last year at G20 Summit 2022 in Bali, Indonesia – a comprehensive investment and policy plan is currently drafted in consultation with relevant stakeholders, covering early coal retirements, just transition measures, and acceleration of renewable energy development. The US$20 billion partnership aims to peak Indonesia’s power sector emission by 2030, and solar energy has become a significant part of the planning due to its techno-economic advantage and high potential for greenhouse gases emission reduction. The first version of such a plan will be unveiled in August 2023.

Rachmat Kaimuddin, Deputy Minister for Infrastructure and Transport, Coordinating Ministry of Maritime and Investment Affairs revealed that to build solar energy industrialization, Indonesia needs to prepare the demand first. 

“Reflecting in this, we intervene in the country, for example through JETP, how we minimize dependence on fossil energy, can be in several forms such as reducing the output of coal-based power plants and creating new demand,” he explained. 

He also emphasized that Indonesia’s cooperation with Singapore for green electricity requires that solar modules and batteries must be produced in Indonesia, so that the demand that arises becomes a trigger for the PLTS industry in Indonesia to form. 

“We don’t want to only import in the future. We hope that a domestic industry will be formed while we are in the process of energy transition,” he said.

Antha Williams, who leads Bloomberg Philanthropies’ Environment Program stated that developing a homegrown solar industry is a key component to advancing Indonesia’s transition to clean, affordable, and reliable energy.

“By cultivating international partnerships to mobilize capital and scale domestic solar manufacturing capacity, Indonesia has the potential to realize its net-zero energy pathway goals through rapid deployment of clean energy projects. Bloomberg Philanthropies welcomes the opportunity to support Indonesia’s goal of becoming a leader in solar energy development.”

Fabby Tumiwa, the Executive Director of IESR, stated that over the last two years, a new market has emerged, utilizing solar PV not only for selling electricity but also for producing new value-added products, such as green hydrogen and ammonia. Based on IESR data, there are currently 10 green hydrogen and ammonia projects that have been initiated since last year, intending to use solar energy as their primary electricity source. These projects are currently in the study phase and are expected to be realized within the next 2-3 years. Fabby also pointed out that experiences from various countries, including some developing ones, demonstrate that constructing Gigawatt-scale solar power plants within a year is an achievable feat.

Fabby highlighted three essential supporting factors to encourage the development of solar PV, “Firstly, it requires political will and strong, active leadership from the government, along with the establishment of transparent and sustainable policies and regulations. Secondly, there is a need for the development of an integrated ecosystem, which involves defining quality standards and guarantees for solar modules, ensuring the availability of qualified and trained human resources. Lastly, it is crucial to foster the growth of an integrated and competitive solar PV manufacturing industry.”

Indonesia’s Chairmanship in ASEAN 2023 presents an opportunity to engage the public and raise awareness about the benefits of solar PV adoption. Public outreach campaigns, educational programs, and community-driven initiatives can inform people about the environmental advantages, economic benefits, and energy independence that come with solar PV usage. Building public support and understanding can facilitate smoother and more widespread adoption of solar PV technology. Besides that, Indonesia’s Chairmanship can set a precedent for solar PV adoption in ASEAN through policy alignment, regional cooperation, investment promotion and innovation. It is timely to promote and drive domestic solar industries and supply chains in parallel with fast deployment of solar projects. 

A Privilege That Should Not be One

That night, I was sleeping. A furry creature suddenly jumped onto the bed and landed on my feet. I almost screamed until it meowed slightly – when my eyes got used to the total darkness in the room, I finally managed to see the homeowner’s fat tabby cat. 

It was a night I spent in Kepayang, a village deep in Musi Banyuasin regency in South Sumatra. There was limited electricity in the village from a small diesel generator and it only came online from 6 PM to 10 at night to conserve fuel. And so everything went dark afterwards; several houses had their own generator but they also rarely used it past 10.

No power grids? Well, I reached the village by the river – on a small machine boat departing from Musi River in Palembang, the provincial capital city. It was a three-hour journey with a short stop at a floating PERTAMINA station along the way. Truthfully, I was scared, but it was the shortest route – land transport was even more grueling and longer. 

The villagers were wishing for better, cleaner, more affordable energy access – and while an extensive power grid was less likely to come into the village shortly, renewable energy available locally could provide them with the option. But they did not know where to start. 

I can go on with more stories (and I love telling them), but I will cut to the point: energy access, even a sustainable one, remains a big challenge in Indonesia. And when access becomes a luxury, having the option to choose an energy source is what, a utopia? 

*****

Among all the privileges I have and have had, gaining access to (relatively) good electricity access is one thing I took for granted. As it is one of the essential services, it should not be a privilege to some – but when I had the chance to understand Indonesia (somewhat in the whole sense of inequality) by coming to numerous remote villages across Indonesia, including Natuna islands (do you have any idea where that is?); a helicopter view or a number showing nearly universal electricity access simply does not cut it.

In 2019, IESR probed energy access quality in two provinces with the least electrification ratio in eastern Indonesia using the multi-tier framework (MTF) developed by The World Bank’s ESMAP. The findings corroborated our initial hypothesis: access does mean quality and Indonesia’s current access indicator, the electrification ratio (ER), is no longer sufficient to promote productive uses and development. Over 70% of households surveyed received only Tier 1 electricity access; they only have power for 4-hrs/day and it can only be used to power small devices such as lamps and radios.

Prior to the study, we had argued that the government’s LTSHE program (distribution of energy-saving lamps kit to remote, unelectrified communities) should not be claimed as electrification, but rather pre-electrification, due to its very limited use for daily and productive uses. It is also important to redefine energy access and to look at and measure access beyond connections. Our recommendations include optimizing the use of local renewable energy, as renewables have proven to be a democratic energy source, and renewable technologies, including solar energy that has entered Indonesia’s mainstream energy policy, are much cheaper than costly grid expansion and diesel generators.

The luxury of choosing your energy source 

A couple of weeks ago, I saw a commotion on Twitter over Apple iPhone’s newest feature: Clean Energy Charging. It is only available in the US and per its official explanation: “…your iPhone gets a forecast of the carbon emissions in your local energy grid and uses it to charge your iPhone during times of cleaner energy production.” Comparing how we choose clean energy in Indonesia and the US is definitely an apple vs. orange debate – so let’s take a close look into Indonesia’s journey towards energy democracy.

Indonesia has a rigid, vertically integrated power system with one state-owned company, PLN, having sole operational authority over power generation, transmission, and distribution (for us muggles, it is effectively a monopoly). Okay, technically there are independent power producers and private companies having a business license (“wilayah usaha” or “wilus”) – but most of us individual consumers get electricity from PLN (then for the sake of discussion, I will refer to consumers as PLN’s consumers). Our power generation is still dominated by fossil energy (and ~60% from coal), so it is not hard to deduce that the electricity we are using now is also fossil-based. 

It was 2013, the year when consumers could “legally” pick their own energy source – through rooftop solar PV installation. That year, PLN’s president director issued an internal regulation permitting parallel operation of consumer’s rooftop solar PV with PLN’s grid. The terms: net-metering, 1:1 export import tariff, minimum bill applied. No big launch, not even a proper socialization – but it was one hell of a milestone.

At the individual level, solar energy is the only feasible renewable energy source we can utilize to power our activities (I have one on my roof!). And with this in mind, IESR began the groundwork to mainstream solar energy in Indonesia’s energy landscape in 2016 – playing a significant part in the issuance of the  first ministerial regulation on rooftop solar PV, driving active involvement of diverse stakeholders in promoting solar energy, pushing for better regulations (the OG ministerial regulation had been revised twice and replaced once), and until now, battling a setback as the ministry attempts to “limit” rooftop solar PV penetration.

We believe that energy is an essential service (among five: sandang, pangan, papan, colokan, paketan), and we firmly support the notion that consumers have the right to choose their energy source – renewable, more sustainable ones capable of delivering high-quality energy access. It should not be a privilege or a luxury. Between 2019 – 2021, we asked people across Java-Bali if they were willing to shift to solar energy – and there is a market potential (early adopters and early followers) of 13% in Greater Jakarta, 19% in Surabaya, 9.6% in Central Java, and 23.3% in Bali. Businesses also have similar interests: 9.8% market potential in Central Java and 21.1% in Bali. They are no small numbers, yes? 

Now, are current policies, business practices, narratives, even our own personal perspectives and lifestyles – sufficient in supporting the rights for us consumers, society, to choose our own sustainable energy sources? 

I had a hard time summarizing this long writing – so I just want to say thank you for reading this in full and for supporting our work. You can help us even more by sharing this with others.

 

Till we meet again.

The Amend of the MEMR Regulation on Rooftop Solar PV Has the Potential to Undermine the Interest of the Residential Market

Jakarta, 6 January 2023 – The Ministry of Energy and Mineral Resources (MEMR) is revising the Minister of Energy and Mineral Resources Regulation No. 26/2021 concerning rooftop solar PV connected to the power supply grid owned by the holders of power supply business licence for the public interest (Izin Usaha Penyediaan Tenaga Listrik untuk Kepentingan Umum) or commonly referred to as IUPTLU. This change is intended to address the difficulties with installing rooftop solar PV that has occurred in the last year since the ministerial regulation was officially issued.

In the public hearing that was held on Friday, January 6 2023, the Ministry of Energy and Mineral Resources presented substance changes, including there is no limit to the maximum capacity of 100% installed capacity of a rooftop solar power plant, but based on system quota, electricity exports are abolished (no longer counted as bill deduction), capacity costs for industrial customers is nullified (no longer 5 hours), and the transition rules for existing customers are enforced within a certain time.

“Since it was promulgated in August 2021, MEMR Reg No. 26/2021 practically does not work because PLN refuses to implement it. As a result, the government’s target of 450 MWp of additional solar PV capacity in 2022 was not achieved. This revision seems to be a meeting point between the government’s interests and PLN and accommodates PLN’s interests in reducing the potential for electricity exports from solar PV users due to net-metering regulations considering the overcapacity conditions. But AESI regrets that this accommodation has the potential to reduce the economy and interest in residential rooftop solar PV, which has the potential to grow,” said Fabby Tumiwa, Chairman of the Indonesian Solar Energy Association (AESI) in Jakarta.

Since January 2022, 10-15% rooftop solar PV capacity restrictions have occurred in various regions in Indonesia for customers, both residential on the kilowatt scale to industrial customers with capacities on the megawatt scale. This capacity limitation discombobulated the provisions of MEMR Reg No. 26/2021 (maximum 100% installed electric power) and reduced potential customers’ interest to adopt rooftop solar.

In the proposed changes to the substance of the Ministerial Regulation, the capacity limit of up to 100% will not be reinstated but will be based on a quota system with first come, first serve. This change directly responds to capacity restrictions occurring in the field. However, the technical determination of system quotas needs to be clarified, especially concerning renewable energy development plans in the regions. In addition, the period for setting quotas per 5 years is too long due to the dynamics of electricity supply technology.

AESI supports the determination of quotas by taking into account the reliability of the IUPTLU electricity network but proposes that capacity quotas be determined every 2 years, with a review conducted every six months.

Eradicating net metering by eliminating the export of electricity to the PLN grid, which applies to all customer categories without exception, will have major impacts on the residential (household) market. The current economic level of rooftop solar PV is still influenced by net metering because the household load profile is mostly at night. The absence of exports will lessen the reduction in household electricity bills and extend the payback period for purchasing a rooftop solar system, making rooftop solar unattractive for household customers.

“A market survey conducted by the Institute for Essential Services Reform (IESR) in 7 provinces in Indonesia in 2019 – 2021 shows that the economy of solar PV is an important and determining factor for residential customers to use rooftop solar. The majority of respondents also want to get savings of at least 50% and clear and fast installation procedures,” added Marlistya Citraningrum, Manager of the IESR Sustainable Energy Access Program.

The National Strategic Project (PSN) for rooftop solar PV with a target of 3.6 GW in 2025 and achieving the 23% renewable energy target requires community participation. With just a 20% market share for R2 and R3 class customers (3,500 VA and above), there is a potential of 400,000 households throughout Indonesia – equivalent to 1.2 GWp of rooftop solar if each instals a minimum of 3 kWp.

The impact on residential rooftop PV will reduce the benefits of creating green jobs through small-scale solar PV installation businesses targeting the household market segment, which has started to grow since 2018. With the potential for adoption spread across various cities in Indonesia, the residential rooftop solar PV market also contributes to the opening of green jobs, for example, technicians and installers, and the growth of MSME rooftop solar PV installers. If the latest revision of the MEMR regulation is passed with the currently proposed clauses, the growth and opportunities of these green businesses will certainly be hampered. AESI and IESR recommend that net metering be implemented for residential customers with export-import calculations which can be discussed later.

In the public hearing, there were many questions raised by solar energy developers (developers), installers (EPC companies), local governments, and rooftop PV users.

AESI assesses that instead of supporting the renewable energy transition, the revision of this regulation will hinder the addition of rooftop PV. For this reason, AESI proposes that the export of electricity from residential customers is still permitted on condition that the installed capacity is 100% of the customer’s power. This provision is reviewed within 5 years or after the residential rooftop PV reaches a cumulative 5% of the total installed capacity of generators in the system. 

The Ministry of Energy and Mineral Resources has opened a channel for submitting input for this process until January 13, 2023.

India Targeting 200 GW of Renewable Energy in 2022: Is Indonesia Following? 

Jakarta, September 16, 2020 – Since the 2000s, the Indian government has shown its seriousness in developing renewable energy to meet domestic energy needs. Determined, the Indian government is ambitiously targeting the development of the renewable energy plant of 200 GW or 42 percent of total electricity generation by 2022.

The Indian government has been formulating an ecosystem to support the achievement of renewable energy targets in its policies and programs, such as the development of solar parks and solar cities. As a result, India began to show its position as a country that only had 10 MW of solar power plants in 2010, now reaching 88 GW in 2020.

Indian government’s achievement in accelerating renewable energy is something worthies that the Indonesian government should follow. To more understand the successful recipe of solar power plant development in India, the Institute for Essential Services Reform (IESR) conducted an online seminar entitled Bringing Indonesia to the Gigawatt Club: India Made It, and So Can We. This seminar brought together solar energy industry professionals from India to share their experiences and lessons learned. Kanika Chawla, Director of the Center for Energy Finance CEEW, India, and Kushagra Nardan, Co-Founder & President of SunSource Energy, India, were the speakers, meanwhile, as the responders were Harris Yahya as Director of Various New and Renewable Energy, Ministry of Energy and Mineral Resources, Cita Dewi, EVP of Renewable Energy at the State Electricity Company (PLN), Yohanes Bambang Sumaryo, Indonesian Solar Energy Association (Asosiasi Energi Solar Indonesia – AESI), and Fabby Tumiwa, Executive Director of IESR.

Kanika explained that one of the best practices of the Indian government is to establish a renewable energy market by profiling in detail its long-term targets. It has attracted many investors, both domestic and international, to participate because they can project their industries in the next five or ten years. Moreover, many investors are interested in involving, making price negotiations more competitive and cheaper.

“Solar and wind tariffs have seen an aggressive decline around the world but also in India more specifically, and more steeply, I would say it is very much based on the large market, the market design. If at first India was a price taker, now it is a price maker,” she said.

However, Kanika explains that along the way, the market identified various risks, such as the offtake risk (payment delays), curtailment risks where the grid unable to absorb the amount of energy produced, foreign currency exchange, land acquisition, and construction, and policies inconsistencies or changes in in-laws.

Kushagra added that the Indian government mitigated these risks by implementing clear and consistent policies, both in terms of the scale of utility to net metering. Responding to the conducive environment of renewable energy in India, his company has installed rooftop solar power plants in commercial buildings such as 10 MW in textile factories in northern India, floating solar in the oil company, and rooftop solar project at the Airport in New Delhi.

Furthermore, Kushagra also shared several steps that the Indian government has taken to realize the target of renewable energy development, for example, the existence of a specialized government body to achieve the National Solar Mission with Solar Energy Corporation Of India Limited (SECI) at the national level and various agencies at the state level.

Reviewing again, Fabby Tumiwa emphasized some important notes that deserve the attention of the Indonesian government to achieve the renewable energy mix target of 23 percent with 6.5 GW coming from solar power plants by 2025.

“Indonesia needs the support of legislation and regulations in implementing renewable energy targets into more concrete programs and projects. As in India, with its Renewable Purchase Obligation (RPO) stipulated in the Act, each state is required to set renewable energy targets as a priority to be achieved. Besides, the Indian government provides supporting funding through the National Clean Energy and Environmental Fund (NCEEF) and financial assistance to project developers and optimization of public funds. Also, they create various schemes for on-grid and off-grid solar. The bidding process has also become more competitive in the format of a large-scale reverse auction, which is effective and can attract low solar price bids,” he emphasized.

The procurement process in the form of a reverse auction that is well designed, carried out efficiently and transparently, and on a large scale is one of the supporting factors in driving the competitiveness of solar power generation and results in a much lower generation price compared to fossil energy. Also, Fabby explained that the role of state governments in India is essential in the acquisition of land for the solar park scheme. The Indian government is acting directly to provide the area and build complementary infrastructure. In Indonesia, the provision of land is often constrained by permits and inadequate location, which then causes land acquisition consuming a large portion of the capital expenditure for solar power plant development.

“Regulations related to renewable energy in the form of presidential regulations are being processed. No government body specifically deals with renewable energy. Of course, there is no RPO policy in Indonesia. I think this policy is good to emulate, ” he explained.

Concerning the funding and investment issues of solar power plants, the Indonesian government is also establishing communication with international organizations. Harris also sees the problem of land acquisition as an ongoing problem in Indonesia. He hopes that in the future, he can discuss with the ministries and organizations in Indonesia, so it will be easier for investors to develop their solar power plant business. Meanwhile, both Cita and Yumarno expressed their appreciation for India’s success in managing the various risks that exist and providing proper solutions for achieving its renewable energy targets. Cita said that PLN is open to conduct deeper discussions with India in adopting learning steps for Indonesia’s progress in the field of renewable energy.

Presentation materials

KC - India's energy transition IESR -15Sep20

Unduh

Kushagra Nandan- SunSource Energy

Unduh