Indonesia Introduces New Solar Power Regime
The Indonesian government recently issued Minister of Energy and Mineral Resources Regulation No. 19 of 2016 on Purchase of Power by PLN from Solar Photovoltaic. The authors of this article discuss the regulation and the high expectation that there will be significant levels of new investment in solar photovoltaic projects in Indonesia.
In 2013, the Indonesian government first introduced a solar power regulatory regime, which required the government to publish solar power quota allocations for various parts of Indonesia, with interest developers then submitting competing bids to supply the solar power to the State utility, PLN, at the lowest tariff (with the maximum tariff which could be bid being subject to a cap of US$0.25 per kWh (where no locally sourced equipment was used) and US$0.30 per kWh (where a prescribed minimum amount of local content was used). However, the Indonesian Supreme Court struck down this 2013
framework as being inconsistent with prevailing regulations, primarily on the basis that any regulatory framework put forward by the government should oblige the interested developers to use a certain amount of local content for their projects (and not give the developers the option to opt-out of local content requirements).
The Indonesian government has now filled the regulatory void left by that Supreme Court decision through the issuance of Minister of Energy and Mineral Resources Regulation No. 19 of 2016 on Purchase of Power by PLN from Solar Photovoltaic (“Reg. 19”).
The major changes introduced under Reg. 19 which differ from its 2013 predecessor are:
- a requirement that every solar power development must utilize a prescribed minimum of local content in its good and services;
- the selection of solar power plant developers is no longer done through a competitive tender process, but instead through a prequalification and first-come, first-served system administered by the Ministry of Energy and Mineral Resources ("MEMR"); and
- the introduction of new fixed feed-in-tariffs which vary depending on the location of the projects, and can be adjusted by the MEMR in each capacity quota offering.