Power Wheeling Will Open Renewable Energy Investment Opportunities in Indonesia

press release
Fabby Tumiwa, Direktur Eksekutif IESR
Fabby Tumiwa, Direktur Eksekutif IESR

Jakarta, May 20, 2024– The government is again pushing for the power wheeling scheme to be included in the Draft New and Renewable Energy Bill (RUU EBET). This scheme will fulfill New and Renewable Energy (NRE) supply Articles 29A and 47A in network utilization cooperation (open access). 

The power wheeling scheme is the joint use of the electricity network. In this scheme, power producers can distribute electricity directly to end users using transmission and distribution networks owned by license holders. 

The Institute for Essential Services Reform (IESR) supports the inclusion of power wheeling in the EBET Bill. IESR believes that the implementation of power wheeling will create opportunities for developing more comprehensive renewable energy sources and utilization to support the energy transition towards net-zero emission (NZE) set by the government.

The existence of power wheeling will impact the growing supply and demand for renewable energy, particularly industrial electrification solutions, thus stimulating increased investment. Power wheeling also enhances communities’ and businesses’ access to renewable energy.

Fabby Tumiwa, Executive Director of IESR, mentioned that the reliance on demand and the procurement process from the State Electricity Company (PLN) presents a rapid challenge to developing renewable energy in Indonesia. The fact that PLN is the sole off-taker (energy buyer/provider) leads to suboptimal development of renewable energy resources. Tumiwa suggested that implementing a power wheeling scheme would encourage the participation of other state-owned and private electricity producers in the development of renewable energy, consequently accelerating the increase of Indonesia’s renewable energy mix.

Fabby assessed that concerns considering power wheeling as a form of electricity privatization are inappropriate. The transmission network was not sold to the private sector and is still owned by PLN as a state-owned enterprise. Instead, this scheme can optimize the utilization of PLN’s transmission network assets to increase PLN’s revenue from network rental fees, which can be used to strengthen PLN’s investment in the network. 

IESR highlights several things that need to be considered when implementing power wheeling. First, this power wheeling scheme should be a mechanism that promotes renewable energy. Therefore, renewable power wheeling must be mentioned explicitly in the bill. Second, implementing power wheeling should not compromise the reliability of the electricity supply. Third, power wheeling must be regulated so as not to harm the network owner. Therefore, the tariff for using the shared electricity network (wheeling charge) must reflect the costs required to maintain and improve system reliability and ancillary services and cover investment costs for network reinforcement. Fourth, the government or regulator sets the tariff formula for using the shared electricity network, and fifth, to clarify the implementation, it is necessary to make more detailed derivative rules regarding power wheeling.

“The EBET Bill can require more detailed and technical power wheeling rules to be included in the implementing regulations of the law, in the form of Government Regulations (PP). Technical regulations and details will be regulated through ministerial regulations of ESDM,” Fabby explained.

Furthermore, Fabby revealed that implementing power wheeling can create a renewable energy market and positively impact industrial investment in Indonesia.

“The industry is currently focused on developing a sustainable approach. Many industry associations are advocating for this, including those participating in the RE100 initiative, which aims to transition to renewable energy by 2030. The power wheeling scheme will simplify the process for industries to access electricity from renewable sources, helping to reduce their carbon footprint, meet sustainability goals, and present a positive environmental image to customers. This is a positive step towards improving the investment climate in Indonesia,” added Fabby.

IESR hopes that the DPR and the government will consider broader national interests and benefits when establishing the power-wheeling clause in the New Energy Renewable Energy (EBET) Bill.

Kompas | Subsidies and Compensation in the Electricity Sector Tend to Increase

Reform of electricity market governance is considered to need to be seen more broadly, as part of efforts to reduce the state’s financial burden. The reason is that currently, through subsidies and compensation to PT Perusahaan Pendidikan Negara (Persero), electricity is still very dependent on the state budget. Reform is needed to get electricity prices that are correct and economically appropriate.

Read more on Kompas.

IETD 2023: Empowering the Acceleration of the Electricity Sector Transformation in Indonesia

Jakarta, September 13, 2023 – The Indonesia Clean Energy Forum (ICEF) and the Institute for Essential Services Reform (IESR), in collaboration with the Ministry of Energy and Mineral Resources (ESDM), are once again organizing the Indonesia Energy Transition Dialogue (IETD) 2023 from September 18th to 20th, 2023, with the theme “Empowering the Acceleration of the Transformation of the Electricity Sector in Indonesia.” Both ICEF and IESR agree that the energy transition in Indonesia is inevitable, considering Indonesia’s commitment to contribute globally to emissions reduction through the ratification of the Paris Agreement under Law No. 16/2016.

Fabby Tumiwa, Executive Director of ICEF and IESR, stated during the Media Briefing on “Preparing for Indonesia’s Energy Transition and Anticipating Its Implications, and the Launch of the Indonesia Energy Transition Dialogue (IETD) 2023″, that the theme of IETD 2023 focuses on the electricity sector, which is a strategic sector for transitioning towards renewable energy. He mentioned that the energy transition in the electricity sector is currently supported by technology availability, international funding potential such as the Just Energy Transition Partnership (JETP), and supportive policy frameworks such as Presidential Regulation No. 112/2022.

He emphasized that the energy transition is a complex process with significant implications, requiring multi-stakeholder dialogue to anticipate and mitigate its impact in Indonesia, one of which is through the organization of IETD 2023.

“The Indonesian government is currently reviewing comprehensive planning documents and investment policies from the Just Energy Transition Partnership (JETP), which include several agreed-upon targets, such as a peak electricity emission of 290 million tons of CO2 and a 34% renewable energy mix by 2030, as well as achieving net-zero carbon emissions (NZE) in the electricity sector by 2050. Therefore, we need to ensure that all these plans and targets are achieved through a fair process with the support of all stakeholders,” explained Fabby Tumiwa.

Gigih Udi Atmo, Director of Conservation at the Directorate General of Renewable Energy and Energy Conversion (EBTKE), Ministry of Energy and Mineral Resources (ESDM), highlighted one of the efforts in energy transition, which is the development of renewable energy. According to him, the integration of renewable energy requires an expanded grid network to accommodate renewable energy sources.

“Connectivity through grid expansion that links load centers with renewable energy sources will be crucial in the future. The most feasible step in the near term is the interconnection between Sumatra and Java to enable the evacuation of solar, hydro, and geothermal-based renewable energy from Sumatra to supply the demand in Java. This way, power exchange and energy balance between the two largest grids in Indonesia can be optimized,” stated Gigih.

Gigih added that to achieve the net-zero carbon emissions (NZE) target, international support can accelerate the closure of coal-fired power plants. The type of international support, such as grant financing or soft loans, will determine the process of early cessation of coal-fired power plant operations by utilizing affordable financing to accelerate the investment recovery, allowing coal-fired power plant assets to cease operations earlier without violating existing cooperation agreements.

Deon Arinaldo, Energy Transformation Program Manager at IESR, mentioned that the government’s energy transition plans and strategies need to be supported and critiqued to expedite the process and make it smoother with better strategies and programs. Moreover, decarbonizing the electricity sector will serve as a driver for decarbonization in other sectors.

“In the energy transition process, it is also crucial to provide space for all actors to contribute meaningfully to the development of renewable energy. This means not only large industries but also local governments, small and medium-sized businesses, and communities need to play a role. In this regard, the strategy for ensuring access to renewable energy also deserves attention and should be part of a just transition,” Deon explained.

During the Media Discussion Forum on Indonesia’s Energy Transition, IESR and ICEF also announced the launch of the 6th Indonesia Energy Transition Dialogue (IETD), which will be held from September 18th to 20th. This event serves as a vital platform for discussing, sharing ideas, and generating real solutions to support the energy transition in Indonesia. IETD 2023 will bring together stakeholders, including the government, private sector, academia, and the general public, to discuss the challenges and opportunities in transitioning to cleaner and more sustainable energy.