Jakarta, July 10, 2024 – The Institute for Essential Services Reform (IESR) believes that regulating the power wheeling scheme in the New and Renewable Energy Bill (EBET Bill) will accelerate the development and adoption of renewable energy in Indonesia. This will ultimately contribute to achieving the renewable energy mix target and reaching net zero emissions (NZE) or becoming carbon neutral by 2060 or earlier.
In addition, IESR views that policymakers should support the power wheeling rules for renewable energy in the EBET Bill because it can improve the reliability of electricity supply, operational cost efficiency, encourage the expansion of electricity networks, cooperation between business areas, and enable more comprehensive application of renewable energy technology to support decarbonization of the industrial and transportation sectors, as well as reduce the burden on PLN to buy electricity from developers.
Fabby Tumiwa, Executive Director of IESR, said that the power wheeling scheme, or the joint use of electricity networks, has been regulated in the Electricity Law in the past but has not been implemented. The speaker emphasized that power wheeling is essential given Indonesia’s current electricity market structure, which is regulated as vertically integrated or operated by a single company under government supervision.
“In this case, PLN, as the holder of an integrated business area, has the right to build and operate the transmission system, while other business actors do not. Therefore, the electricity network should be accessible to other parties to distribute electricity from the generator to the user, providing revenue for PLN through network rental fees,” Fabby said.
IESR also assesses that implementing the power wheeling scheme for renewable energy efficiently reduces the cost of developing transmission and distribution infrastructure and reliability costs by optimizing existing infrastructure rather than building new networks.
“However, to achieve the goal of NZE 2060 or earlier, the shared network should be limited only to renewable energy generation so that it becomes renewable power wheeling. With this, it can open access for developers and consumers to energy sources that have not been able to be utilized because the development of renewable energy is very dependent on PLN, which buys and distributes electricity according to the increase in demand,” said Fabby.
According to Fabby, the regulation of renewable power wheeling must be carried out strictly to maintain reliability and security of supply for consumers and not harm network owners and system operators. The regulation concerns the calculation of wheeling charges, which must include the cost components of system losses, reliability costs, ancillary services, contingency costs, and the development of power transmission and distribution systems.
“For this reason, the government needs to develop clear guidelines on calculating wheeling tariffs not to harm network owners and system operators,” added Fabby.
Deon Arinaldo, Program Manager of Energy Transformation, IESR, said power wheeling can attract investment in Indonesia, especially from multinational companies that target 100 percent renewable energy by 2030. The certainty of access to renewable energy electricity will help these companies meet decarbonization targets and implement decarbonization strategies through electrification of their supply chains. On the other hand, increased demand for renewable energy will drive the expansion of the electricity grid. Deon proposes that the government prepare rules that encourage the development and strengthening of the electricity network more optimally through network planning oriented towards the absorption of renewable energy.
“The power wheeling will open up demand for renewable energy from customers, especially industrial groups, thus attracting the development of renewable energy projects and integration into the PLN network. So far, many renewable energy potentials cannot be developed because they have to wait for the electricity purchased by PLN. Power wheeling allows industrial consumers to purchase renewable energy electricity to support low-carbon or green industrial processes,” Deon explained.
IESR encourages the House of Representatives and the government to establish a power wheeling scheme for renewable energy in the EBET Bill and develop detailed and transparent implementation rules so that this scheme can effectively encourage the development of renewable energy, optimize its benefits for the advancement of sustainable industries in Indonesia and meet customer needs for renewable energy, and attract investment.
