Draft Presidential Regulation to Speed up New Renewable Energy

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 263.Pers/04/SJI/2020

Date: 28 July 2020

Draft Presidential Regulation to Speed up New Renewable Energy

The government is drafting a presidential regulation on the price of electricity from New, Renewable Energy (NRE). This is a breakthrough in the government's policy which is intended to develop investor trust via a competitive pricing scheme.

Director General of New, Renewable Energy and Energy Conservation (NREEC) of Ministry of Energy and Mineral Resources, F.X. Sutijastoto, believes the draft presidential regulation is fully supported by NRE business players. Their support is shown with the synergistic communications developed during the drafting process.

"We've drafted the regulation with business players. So, we communicate with them and make a benchmark against existing projects. I hope the regulation will facilitate funding for these businesses," Sutijastoto said in a virtual press conference in Jakarta on Tuesday (28/7).

When asked about the regulation's completion target, the Director General said that the Ministry of EMR has continued to build communication with the relevant ministries to speed up completion. "It's being discussed with other relevant ministries. I hope it will be complete before year's end," said Sutijastoto.

Sutijastoto thinks that Ministerial Regulations alone are not enough to stimulate the making of new NRE contracts. "To build a competitive level, NRE prices need to be set in a presidential regulation. Therefore, this presidential regulation is crucial," he added.

Indonesia's non-optimum NRE market is a challenge in itself. The economies of scale are often considered non-competitive as shown by high NRE purchase price. "Currently, there are only solar panel factories. These factories have a small capacity, maximum 100 Mega Watt (MW). Add that with imported raw material, and we get a quite high price," he explained.

Sutijastoto then compared the solar electricity price in Indonesia at USD 1 per Watt peak with the price in China which is as low as USD 0.20-0.30 per Watt peak with a capacity of 500 MW to 1,000 MW. "I hope the presidential regulation will boost our NRE market," he added.

According to Sutijastoto, the NRE regulation will answer current challenges by giving positive net benefits. The massive use of NRE will create new economic value and provide many benefits, such as producing clean energy, creating affordable electricity price, and improving national and regional investment.

Additionally, NRE development will promote the growth of domestic industries and economy, encourage the birth of new entrepreneurs, as well as improve national energy security and economy. "We have a large number of energy sources so we should be able to get out of the trade balance trap," elaborated Sutijastoto.

Another urgency of the draft presidential regulation is that there is no contract/Power Purchase Agreement (PPA) for IPPs whose procurement process is subject to the provisions set out in EMR Ministerial Regulation Number 50 of 2017 on Utilization of Renewable Energy Sources for Electricity Generation.

In terms of technical issues, Director of Various Energy Harris referred to the pricing mechanism to be set in the draft presidential regulation. "So, there will only be three prices, namely Feed in Tariff, Highest Benchmark Price (HPT), and agreed price," said Harris.

The government hopes the new regulation will be supported by the relevant stakeholders, because the support will be needed to synchronize future policy instruments. "Take what happens at hydropower as example; the water levies at central and regional levels are quite high, even up to Rp250 per kWh. This is just an example of what we're trying to improve," Sutijastoto said. (IY)

Head of Bureau of Communication, Public Information Services, and Cooperation

Agung Pribadi (08112213555)

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