Indonesia is on course to become a major solar power exporter. In 2021, the government rolled out two important regulations, showcasing strong incentives for investment in renewable energy. Its neighboring country, Singapore, signed two agreements on the same day to import solar energy from Indonesia. A recent finding by the Australian National University reveals that, by 2050, Indonesia’s Solar PV could reach 190,000 TWh, far larger than the nation’s total demand.
Long-awaited Boost by the Government in the Renewable Energy Sector
So far in 2021, the Indonesian government has issued two important regulations, the energy ministry’s Regulation No. 26/2021, addressing the use of rooftop solar power systems, and the Electricity Procurement Plan (RUPTL) for 2021-2030. The two regulations are expected to support the aim of a 23 percent share of renewable energy in the country’s energy mix by 2025.
Energy ministry Regulation No. 26 amended the previous 2018 solar rooftop regulation with one notable point. Independent power producers (IPPs) that signed power purchase agreements (PPAs) with the state-owned power company PLN will now be able to export 100 percent (instead of 65 percent) of the electricity generated by rooftop solar panels. While the regulation is still under debate, it would undeniably improve the investment appeal in solar rooftop systems.
Moreover, the RUPTL 2021-2030, released by PLN, sets a target for renewable energy to account for 51.6 percent of the national energy mix by 2030, a significant increase from the 30 percent target set out in the RUPTL released in 2019. PLN plans to build 40.6 GW-worth of new power plants through 2030, 20.9 GW of which would be from renewable resources. Hydropower would account for around half of the new renewable energy resources, solar for 4.7 GW, and geothermal for 3.35 GW.
PLN’s plan aligns with the government’s zero-carbon pledge by 2060. The coal-dominated power sector is one of the largest contributors to Indonesia’s carbon emissions. Indonesia’s long dependence on coal power plants has been more precarious lately as China, a major investor in Indonesian coal power plants, pledged to halt investment in coal power abroad.
The largest economy in the region, Indonesia has been lagging in renewable energy production. Slowed drafting of supportive regulations, coupled with the nature of the business requiring high initial costs and low return on investment, made investment in renewable energy unattractive. On average, the Indonesian installed capacity of renewable energy has only grown by 4 percent since 2012, compared to more than 10 percent in Malaysia, Singapore, Vietnam and Thailand.
Several further steps need to be taken to achieve the government’s ambitious goals, including the finalization of the renewable energy laws and presidential regulations on the mechanism for renewable energy pricing and procurement. Additionally, an optimum energy transition roadmap is required to strike a balance between environmental conservation and sufficient energy supply.
Major Cross-Border Solar Power Projects
Multiple promising solar power projects were recently announced by the government, including exporting deals with Singapore and Southeast Asia’s largest floating solar power project with United Arab Emirates. The projects, as interpreted by experts, are signals of an export-intensive strategy in which local and international companies seek to export green energy from Indonesia to its neighbors.
Two Joint Development Agreements (JDAs) were signed on October 25, 2021 by Singaporean companies for the import of solar energy from Indonesia. One was signed by Singapore’s Sembcorp Industries, which announced that the joint development plan would include the development of a large-scale integrated solar and energy storage in Indonesia’s Batam, Bintan, and Karimun (BBK) region. Another JDA, signed by PacificLight Power (PLP) – a Singaporean-based power retail company, and a consortium of Indonesian power companies, was for a 100MW pilot solar export project from Indonesia to Singapore. The JDAs were signed after Singaporean Minister for Trade and Industry announced Singapore’s plan to import around 30 percent of its electricity from low-carbon sources by 2035.
Previously, Indonesia began work on a 145 MW floating solar power project, the largest in Southeast Asia, on August 3, 2021, after a financing agreement between PLN and Masdar of United Arab Emirates. The project is scheduled to begin commercial operation in November 2022. A similar plan will also be developed in eight other reservoirs in Java and Sumatra.
Vast Potential in Indonesia’s Solar Energy Sector
A recent study published by the 100% Renewable Energy team at the Australian National University (ANU) outlined Indonesia’s potential in solar energy far larger than any other energy sources combined, and much higher than needed nationally.
The research team forecasts that Indonesia could harvest 10 billion solar panels by 2050. The panels could be distributed across the archipelago, from rooftops, abandoned coal mine sites and agriculture sites, to floating on the country’s inland sea, lakes, and reservoirs.
The Indonesian Ministry of Energy and Mineral Resources reported a total of 154 MW of installed solar panels as of 2020. That is far below Vietnam (16,500 MW) and even less than Singapore (377 MW). However, the new improvements in regulations and the influx of solar projects could significantly change the Indonesian current standing.
Indonesia has tremendous opportunities to become a major exporter of solar power. The latest regulations signify the government’s focus on the sector, which helps boost solar investment interest. The newly signed projects with Singapore also prove Indonesia’s prospect in selling its vast solar power potential to neighboring countries.