Who will lead the solar revolution in Indonesia? Can we truly rely on the government to finally be the driving force of the solar industry?
Based on the proposed solar programme and new regulations released in June, it’s safe to say the answer is probably yes.
But what is the reality of the situation in Indonesia? Is enough being done to ensure renewable future of the country?
The Indonesian government’s solar programme was announced over a year ago with 5GW of solar to be installed by 2019.
The plan hinged on the use of attractive Power Purchase Agreements (PPAs) and Feed in Tariffs (FIT), allowing the government to lure local and foreign developers to invest in large scale solar farms.
In July, the government took the next step of publishing Regulation 19 or the ‘Solar Regulation’, outlining the process of registration for developers and the steps involved in applying for PPAs.
Read our article on the new government regulations here.
So far, though, things have been slow. The solar programme is yet to launch and there’s no sign of solar farms being constructed.
Not only that, no timeframe has been given for future projects, leaving Indonesian and international developers awaiting news.
Here’s some of the reasons for the delay:
- A cabinet reshuffle inside the government.
- Introduction of new ministers.
- Budget cuts for renewables.
- First time solar PPA frameworks have been drafted.
- Difficulty in getting PPA templates accepted by everyone.
Recent rumours suggest the solar programme will be launched soon, but it’s believed the current FITs will be reduced.
While this is encouraging, the new FITs may not be attractive enough to ensure a solar boom over night — even developers admit they can work these current numbers.
Interestingly, as this has been playing out, there’s been movement in the industrial sector.
Perusahaan Listrik Negara (PLN) has been creating its own ‘solar programme’, one where developers can propose PPAs with lower FITs than PLN’s existing power generation cost.
As a result, many developers have turned their attention to PLN instead of waiting for the Ministry of Energy.
For now, the developers have only signed a Memorandum of Understanding (MOU), but it’s expected the first PPA will be signed in the next few months.
This poses the question? Can the private, commercial and industrial sectors work together and collectively drive the solar industry in Indonesia?
The answer is, they must.
Most local and global companies in Indonesia have set targets to reduce CO2 emissions in the foreseeable future. To do this they need to have access to renewable energy sources.
Solar is of course the simplest and “sexiest” source of renewable energy. At the moment, we can’t just construct mini-hydro plants and wind turbines wherever we want. Placing solar on your rooftop is currently the most viable solution we have.
On top of reducing CO2 emissions, companies are eager to invest in long-term savings to reduce their electricity bill.
As a result, we’re seeing more corporations in Indonesia showing interest in going solar. Some want to purchase installations, others want to sign a long-term PPA.
Of course, there’s a few hurdles. Complicating all this is low electricity rates, expensive financing and unclear regulations.
But, the industry is working hard to rectify this, and there’s plans to introduce new business models which offer PPAs and solar leasing to both commercial and industrial sectors.
So, is the future bright for Indonesia?
Yes, I think so.
It won’t be long until the government’s solar programme begins. PLN will also be signing B2B PPAs with developers shortly, too.
Add in the enormous potential the private sector has in becoming a significant player, and I believe Indonesia’s solar revolution is right on track.
Contained Energy, for example, has just completed the largest commercial solar PV rooftop installation in Indonesia — in East Java.
We’re also currently negotiating EPC and PPA contracts with numerous international corporations who are committed to using renewable energy sources for their factories and commercial properties.
Moving forward, then, we’re confident Contained Energy is well positioned to assist both the government and industrial sector in achieving a brighter future for Indonesia.
Until next time,
Director of Business Development
Contained Energy Indonesia