Indonesia

Renewable Energy
Business Opportunities

Prepared for: Prepared by:

U.K. Foreign & Commonwealth Office Tetra Tech ES Inc.
British Embassy Jakarta 1320 N. Courthouse Road #600
Jalan Patra Kuningan Raya Blok L5-6 Arlington, VA 22201
Jakarta 12950 USA
Indonesia
Executive Summary
Indonesia matters: it is the 4th most-populous not being accessed at scale. And while large
country and according PwC will be the 4th largest hydropower and geothermal powerplants
economy in the world by 2050. That growth will contribute sizeable portions of the current
generate increased demand for energy, which electricity supply, the Indonesian government and
will create new opportunities for renewable the national state-owned electric utility (PLN) have
energy companies. been less successful in increasing the contribution
from other renewable sources such as small
Indonesia is blessed with an abundance and hydropower, biomass, biogas, waste-to-energy,
wide variety of renewable energy resources. The solar PV, wind, and marine energy. Altogether,
government has therefore set ambitious targets renewable energy resources supplied 12% of all
for renewable energy as a means to meet its electricity in 2018.
greenhouse gas emissions targets in the energy
sector and to increase national energy security. But things are starting to change. The country’s
The National Energy Policy (KEN) and Plan (RUEN) second-largest coal producer, PT Adaro Energy,
target that renewable energy resources provide has recently established a renewable energy
23% of all final energy consumption by 2025, and division as part of the company’s long-term
the draft National Electricity Plan (RUKN) targets plan to enter the clean energy business. Foreign
25% renewable electricity for the power sector governments, international development finance
by 2025. institutions, private equity investors, foreign
developers and equipment and service providers
The rest of the current policy environment, are all keen to help the Indonesian government
however, does not sufficiently incentivise private- and PLN to accelerate the market for all
sector investment, so significant amounts of renewable energy project types. In this vein, the
international and domestic funding available UK Government’s Renewable Energy Prosperity
to finance renewable energy infrastructure are Fund programme aims to help improve the policy

Estimated Market Value of Renewable Energy and Related Projects (USD millions)

Project Type 2020-2021 2022-2025 TOTAL Foreign Share

Utility Scale PV 252.0 423.5 675.5 429.0
Rooftop PV 28.4 65.4 93.8 50.4
Small Hydro 1,795.0 1,565.0 3,360.0 598.1
Medium/Large Hydro 2,702.5 6,825.0 9,527.5 4,316.0
Geothermal 2,293.6 18,535.5 20,829.1 13,721.4
Wind Power 57.0 1,394.0 1,451.0 870.6
Biomass 271.5 378.0 649.5 227.3
Biogas 50.0 150.0 200.0 60.0
Waste-to-Energy 270.0 1,224.0 1,494.0 806.8
Biodiesel Generators 62.5 103.1 165.6 112.5
Smart Grid Controls 20.0 132.5 152.5 152.5
Battery Energy Storage 65.0 215.5 280.5 280.0
TOTAL 7,867.5 31,011.5 38,879.0 21,624.6

ii Indonesia Renewable Energy Business Opportunities

environment for investment, provide more access The geothermal market is
to reliable and affordable energy, and embed estimated to be USD 21 billion.
good practice and innovation across Indonesia’s In 2018, Indonesia became the
renewable energy industry. world’s second largest geothermal
power producer, with a number
Developing Indonesia’s renewable energy sector of projects coming online and new concession
will create medium- to long-term opportunities areas awarded. Geothermal exploration is
for international businesses in an area where the characterized as highly risky and capital-intensive.
UK holds considerable expertise – UK businesses New geothermal concessions have been primarily
offer world-leading capability in the renewable awarded to national state-owned companies, but
energy sector and are well-placed to benefit many lack the capital and expertise to successfully
from the downstream opportunities created by develop the projects.
the programme’s policy, technical and market
assistance in Indonesia. To secure future high- The hydropower market is
value contracts, however, companies need to be estimated to be USD 12.9 billion,
on the ground developing their networks in the broken into two major segments:
short term. medium and large hydropower
(> 10 MW) at USD 9.5 billion
This report provides a high-level overview of and small hydropower (< 10 MW) at USD 3.4
energy market opportunities in Indonesia. A more- billion. With some exceptions, the government
detailed free report – available to UK firms upon allocates most medium and large hydropower
request – features live and pending commercial project development for PLN rather than
renewable energy projects as well as regulations, IPPs. These projects have the advantage of
pricing, contract terms, procurement methods, attracting international development financing.
key decision-makers, local-content requirements, Small hydropower projects, due to ownership
and potential partners for each type of renewable restrictions, are principally developed and
energy. The full report aims to empower UK financed domestically. Imported hydropower
firms with the knowledge they need to enter turbine-generators are typically used, regardless
Indonesia’s energy market, develop relationships of size. Foreign engineering and consulting
on the ground, and pursue projects before the services are used principally for medium and
market becomes mainstreamed. To request the large-scale projects.
full report, email [email protected]
with your contact information, job title, company The bioenergy market is
name, and renewable subsector(s) of interest. estimated to be USD 2.5 billion.
This is comprised of biomass at
USD 650 million, biogas at USD 200
Market Value for Grid Connected million, waste-to-energy at USD
Renewable Energy Projects 1.5 billion, and biodiesel generators at USD 166
In preparing this study, we estimated the total million. Biomass and biogas projects are largely
market for renewable energy to be USD 38.9 linked to operating forest and agro-processing
billion over the period 2020 to 2025, based on facilities where the primary use is for internal,
PLN’s Electricity Supply Business Plan (RUPTL) captive power. While there are no waste-to-energy
and current market conditions. We further broke projects currently operating in the country, the
down the size of the market for each renewable market is expected to accelerate with the issuance
energy type and segment, as well as determined of a Presidential regulation covering 12 of the
the potential share for foreign businesses. largest cities and a clearer procurement process.

Indonesia Renewable Energy Business Opportunities iii

Diesel generators using 100% biofuel (principally the lack of domestic capability and the prevalence
from palm oil) are now allowed to sell power to use of the technologies in more advance utility
PLN under long-term contracts. systems worldwide.

Indonesia’s first commercial, utility- Marine energy was a focal point of

scale wind farm began operating attention in 2016 and 2017, when
in 2017, and other projects are the Ministry of Energy and Mineral
currently under development. The Resources (MEMR) appeared
wind power market is estimated to to encourage the international
be USD 1.5 billion. As with solar PV, however, PLN community to help harness the resource,
is already experiencing difficulties in integrating principally tidal currents. Current government
higher percentages of wind power into its grid. policy, however, is less favorable, and PLN now
views marine energy as not yet commercially
The solar photovoltaics (PV) available for Indonesia.
market is estimated to reach USD
769.3 million, broken into two Renewable Energy Business
major segments: utility-scale at Opportunities
USD 675.5 million and rooftop The principal business opportunities are
at USD 93.8 million. Both segments are in the associated with Independent Power Producers
early stages of development as government (IPPs) that are privately developed and financed,
policies and PLN procurement practices are and sell power to PLN under a long-term (up to 30
just now taking effect. In addition to larger grid- years) Power Purchase Agreement (PPA) contract.
connected solar PV projects, the government and There are opportunities at each stage in the
PLN are promoting smaller systems (250 kW to IPP supply chain for both foreign and domestic
5 MW) on small island isolated grids currently companies; the value of those opportunities,
served exclusively by diesel generators. Foreign however, differs both by type and size of project.
developers are involved as developers of the The difference is a function of the Indonesian
larger utility-scale projects. Imports of solar PV energy industry’s capabilities, foreign investment
panels and inverters account for the majority of and ownership restrictions, and local content
the equipment opportunities in the market for requirements.
both utility-scale and rooftop solar PV segments.
For foreign businesses, the greatest (by value)
The market for smart grid opportunities are found in consulting and
solutions is expected to open engineering studies, major electro-mechanical
during the 2020 to 2025 period. equipment supply, and Engineering, Procurement
Currently, battery energy and Construction (EPC) management, especially
storage systems (BESS) and for projects with a capacity greater than 10
advanced micro-grids are currently in the pilot megawatts (MW). Because of the frequently
demonstration stage. Given MEMR’s emphasis on changing regulatory treatment and permitting of
improving grid operability and PLN’s recognition renewable energy IPPs over the past five years, as
of the value of smart transmission and well as the early implementation stages of current
distribution system control and BESS, we have regulations, the renewable energy IPP business
estimated these markets to be USD 153 million is considered risky particularly at the stages of
and USD 280.5 million, respectively. We expect project preparation up to signing a PPA contract.
this market to be captured largely by foreign Most foreign companies have established
equipment suppliers and system integrators given offices in Indonesia in order to conduct market

iv Indonesia Renewable Energy Business Opportunities

intelligence, establish a relationship with PLN and next decade. For UK renewable energy companies
assess potential Indonesian business partners. to be part of Indonesia’s growth story, they will
need to play by local rules.
With the exception of smart grid and BESS,
emerging technologies or those that are new to Indonesia is not a transactional market where
Indonesia are not likely to be introduced in the companies can setup meetings by email, fly in
2020-2025 timeframe. Offshore wind and marine and fly out. The only way to succeed in Indonesia
energy are not considered viable during the 2020- is to build strong personal relationships first,
2025 timeframe, though there may be a market before securing deals; an on-the-ground local
for feasibility studies for projects to be developed presence is essential. Patience, perseverance,
after 2025. and (a degree of) pushiness are required. But
for those renewable energy companies willing to
Conclusions make the long-term investment and commitment,
Indonesia’s renewable energy market is in its the opportunities in Indonesia over the coming
infancy but is expected to grow quickly over the decades are substantial.

Acronyms
ADS Automatic Dispatch System MEMR Ministry of Energy and Mineral
AGC Automatic Generation Control Resources/Kementerian Energi dan
Sumber Daya Mineral(ESDM)
AMI Advanced Metering Infrastructure
MW Megawatt
Bappenas National Development Planning
Agency/Ministry of Planning (Badan NTB West Nusa Tenggara (Nusa Tenggara
Perencanaan Pembangunan Nasional) Barat)

BESS Battery Energy Storage System NTT East Nusa Tenggara (Nusa Tenggara
Timor)
BOOT Build, own, operate and transfer
PLN Indonesia State Electricity Company
BPP Average Electricity Production Cost (Biaya (Perusahaan Listrik Negara)
Pokok Penyediaan)
PPA Power purchase agreement
DPT PLN’s Prequalification for Direct Selection
Process (Daftar Penyedia Terseleksi) PV Photovoltaic

DMO Domestic Market Obligation RE 100 Renewable Energy 100 (companies

committing to renewable energy use)
GHG Greenhouse gas
RPJMN National Medium Term Development
GW Gigawatt Plan (Rencana Pembangunan Jangka
IDR Indonesian Rupiah (currency) Menengah Nasional)
INDC Intended Nationally Determined RUEN National Energy Plan (Rencana Umum
Contribution Energy Nasional)
IPP Independent power producer/Penyedia RUKN National Electricity Plan (Rencana Umum
Listrik Swasta (PLS) Kelistrikan Nasional)
KEN National Energy Policy (Kebijakan Energi RUKD Regional Electricity Plan (Rencana Umum
Nasional) Kelistrikan Daerah)
kV Kilovolt RUPTL PLN’s Electricity Supply Business Plan
(Rencana Umum Penyediaan Tenaga
kWh Kilowatt hour Listrik)
LCOE Levelized Cost of Electricity SCADA Supervisory Control and Data Acquisition
LNG Liquified Natural Gas SDG Sustainable Development Goals
LTSHE Low Energy Solar-Power Lamps/Solar SOE State Owned Enterprise
Home System (Lampu tenaga surya
hemat energy) USD U.S. Dollar
NEC National Energy Council (Dewan Energi WKP Geothermal Working Area (Wilayah Kerja
Nasional) Pertambangan)

Indonesia Renewable Energy Business Opportunities v

Contents
Executive Summary ii
Acronyms v Table 1 - Planned Renewable Generating
Introduction 1 Capacity Additions, in
Energy Market Background 1 Megawatts (2019 – 2028) 5
Key Government Institutions 2 Table 2 - Summary of Regulatory Treatment
Other Key Stakeholders in the Power Sector 2 of Renewable Energy IPPs 6
Market Size Estimation 3
Indonesian Power Market 3
Renewable Energy Market Characteristics 5
Major government policies and programs 5
Cost and Technical Consideration 6
Financing 7
Ownership 7
Renewable Energy Market Value 7
Market Condition for Solar Photovoltaic (PV) Power Development 8
Market Condition for Wind Power Development 11
Market Condition for Hydropower Development 13
Market Condition for Geothermal Power Development 15
Market Condition for Bioenergy Power Development 17
Biomass Power 17
Biogas Power 18
Waste-to-Energy 19
Biofuel for Powerplants 20
Market Condition for Marine Energy Development 22
Market Condition for Smart Grids and Battery Storage Development 23
Smart Grid Systems 24
Battery Energy Storage Systems (BESS) 24

Figure 1 – Map of Indonesia and its Provinces 1

Figure 2 - Indonesia Renewable Energy Market Value by Technology, 2020-2025 (in USD millions) 7
Figure 3 – Utility-scale Solar PV Market by Supply Chain Segment (2020-2025) 9
Figure 4 – Rooftop Solar PV Market by Supply Chain Segment, 2020-2025 10
Figure 5 – Breakdown of the Wind Power Market by Supply Chain Segment, 2020-2025 12
Figure 6 – Breakdown of the Small Hydropower Market by Supply Chain Segment, 2020-2025 14
Figure 7 – Breakdown of the Medium and Large Hydropower Market by Supply Chain Segment,
2020-2025 14
Figure 8 - Breakdown of the Geothermal Power Market by Supply Chain Segment (2020-2025) 16
Figure 9 - Breakdown of the Biomass Power Marked by Supply Chain Segment, 2020-2025 18
Figure 10 - Breakdown of the Biogas Power Market by Supply Chain Segment, 2020-2025 19
Figure 11 - Breakdown of the Waste-to-Energy Market by Supply Chain Segment, 2020-2025 20
Figure 12 - Total Biodiesel Production and Distribution 2016-2018 (in 1000 liters) 21
Figure 13 – Market for Biofuel Power 2020 - 2025 (USD millions) 21

vi Indonesia Renewable Energy Business Opportunities

Introduction
Energy Market Background generation. This forced rate uniformity results in
Indonesia is the most populous and largest geographic cross-subsidies: the average electricity
economy in Southeast Asia, and could be the generation cost varies greatly across Indonesia,
fourth-largest economy in the world by 2050.1 with the lowest production costs found in the
At the same time, however, it has one of the Java-Bali system (less than USD 7 cents/kWh)
lowest electricity consumptions per capita in the and the highest costs in remote regions of East
region. Built on an archipelago, the electricity Indonesia and small islands (more than USD
system is non-uniform in terms of: 1) customer 21 cents/kWh) where diesel is the main fuel for
demand and expected load growth, 2) generation, electricity. The government’s policy of maintaining
transmission and distribution infrastructure, and affordable electricity prices is accompanied by its
3) electricity supply quality and reliability. Though policy for controlling the cost of fossil fuel prices,
Indonesia has reportedly achieved 98% access to specifically coal and natural gas. The national
electricity services, in much of the country outside utility (PLN) primary objective in adding new
of the cities and other densely populated areas, generation sources to its grid is to lower its overall
electricity demand is suppressed by the limited cost of production.
availability of electricity supply. This leaves both
unserved and underserved customers in many As has been the case in most countries, specific
rural areas. policies to incentivize the use of renewable energy
resources are critical to both the creation of
In order to provide for balanced and inclusive the market, as well as its growth and long-term
economic growth, Indonesia has a “uniform tariff” outlook for investors and the renewable energy
whereby all residential, commercial, institutional industry. These come in the form of policies
and industrial customer pay the same electricity related to pricing (e.g., power purchase prices,
retail tariff in each customer class regardless energy commodity prices), tax and other fiscal
of their location and the local cost of electricity incentives, investment and ownership limitations,

Figure 1 – Map of Indonesia and its Provinces

1
Power in Indonesia - Investment and Taxation Guide, 5th edition. Price Waterhouse Coopers, November 2017.

Indonesia Renewable Energy Business Opportunities 1

domestic content requirements, and business, electricity. The Ministry of Development Planning
land use, and environmental permits and license (BAPPENAS) is responsible for preparing the
requirements. In the case of Indonesia, frequent Medium-Term Development Plan (RPJMN)
changes in government regulations, coupled with including energy/electricity infrastructure to
poor implementation of tax and other incentives, support economic development. PLN is a vertically
have made Indonesia a relatively unattractive integrated monopoly electric utility serving
investment climate, especially in the context of all of Indonesia. PLN is directly responsible
the lack of a real market for energy and electricity for generation, transmission and distribution,
where prices reflect real costs. It should be noted however PLN subsidiaries as well as private
that higher-level policies such as greenhouse gas foreign and domestic companies are increasingly
emission mitigation from the energy sector and involved in generation as independent power
targets for renewable energy share of total energy producers (IPPs).
reflect government priorities, but in the case of
Indonesia, they have yet to directly influence the A domestic supply chain is a key component of
market and business opportunities for renewable lowering prices for renewable energy project
energy. PLN, the state-owned national utility, is development. The development of domestic
not incentivized to reach these government goals. inputs, however, should follow the growth in the
market rather than the current government policy
of imposing local-content requirements at the
earlier stages of market development. Successful
Indonesia may become utility-scale projects developed by experienced
international companies are needed to send
the world’s fourth-largest strong market signals, create manufacturing
economy by 2050. demand, and improve the quality of local services.
As the market grows, this creates opportunities
for joint ventures with foreign companies, value-
added manufacturing, and transfer of technology
Key Government Institutions to the local industry. While there are some
There are four main institutions that shape exceptions, the nascent status of the Indonesian
the renewable energy market in Indonesia. At renewable energy industry coupled with
the highest level is the National Energy Council domestic-content requirements essentially adds
that reports directly to the President. NEC is cost for inefficient project development, higher
responsible for developing the National Energy manufacturing costs, and lower performance.
Policy (KEN) which set a target for 23% of final Meanwhile, caps on foreign ownership restrict
energy consumption to come from new 2 and access to international equity sources and lower-
renewable energy resources. The Ministry of cost capital from international lenders.
Energy and Mineral Resources (MEMR) prepares
the national energy plan (RUEN) and National Other Key Stakeholders in the
Electricity Plan (RUKN) to implement the KEN. Power Sector
MEMR also issues regulations for electricity Private independent power producers (IPPs)
planning, pricing, business licenses and contract are taking on an increasing role in developing,
terms, and renewable energy-generated owning and operating powerplants with long-term

2
“New” energy resources include nuclear, clean coal and coal bed methane, and other non-renewable energy resources.

2 Indonesia Renewable Energy Business Opportunities

power purchase agreements (PPAs) with PLN. be added in the near-term (2020-2021) and mid-
Each project is set up as a Special Purpose Vehicle term (2022-2025). Actual project cost data and
and can include shareholdings of foreign and expected price declines were used to calculate
domestic investment companies and equipment the value of the market during each term. Using
suppliers. IPPs play a critical role in the renewable real project experience from Indonesia where
energy sector, as they often take risks that PLN available, we determined the value of project
is not willing to take, for example, in developing costs at each step along the supply chain for each
and operating unfamiliar technology such as wind clean energy technology. We also estimated the
and solar PV plants. IPP projects range from 800 share of foreign and Indonesian businesses in
MW coal projects to bioenergy, mini hydro and each segment.
solar PV projects with capacities of less than 10
MW. All IPP projects are now developed under a The assessment of the market and identification
Build Own Operate and Transfer (BOOT) scheme of business opportunities is based on current
whereby the generation assets are transferred to laws, regulations, programs, procurement
PLN at the end of the term of the PPA contract. plans and industry capabilities. Indonesia held
presidential elections in April 2019, and the
Equipment suppliers and service providers are new administration’s proposed reforms in the
a critical part of the supply chain whether for energy sector and electricity subsector, as well
PLN, IPPs or captive power users. Indonesia as its priorities relative to climate change and
relies on foreign suppliers for major powerplant renewable energy development, will be presented
components and for consulting and engineering in the next RPJMN, which will cover the period
services, particularly for larger-capacity 2020-2024.
powerplants.
Indonesian Power Market
Financing institutions that are active in the As of 2018, PLN had 56.5 gigawatts (GW) of
Indonesia power sector consist of multilateral power generating capacity on its system. This
development banks such as the Asian was comprised of 40.5 GW owned and operated
Development Bank and The World Bank/ by PLN (71.9%), 13.3 GW owned and operated
International Finance Corporation, bilateral by IPPs (23.6%) and 2.7 GW of leased diesel and
development finance institutions, private mobile powerplants (4.8%). PLN plans to double
international and domestic banks, and specialized its current capacity over the next ten years, and
foreign and domestic private equity funds. will increase its reliance on IPPs. Of the 56.3 GW
PLN expects to add, 16.2 GW will be owned and
Note that Indonesia is a relationship-based operated by PLN (29%) and 33.7 GW from IPPs
market; to secure future high-value contracts, UK (60%), while 6.2 GW are still unallocated.
firms need to be on the ground developing their
stakeholder networks in the medium term. Each year, PLN prepares and MEMR approves a
10-year Electricity Supply Business Plan (RUPTL).
Market Size Estimation In the 2019-2028 RUPTL, PLN provides a detailed
We calculated the size of the Indonesian plan including electricity demand growth, number
renewable energy market based on the planned of customers, village electrification, as well as the
and under-development generating capacity to planned expansion of generation, transmission

Indonesia Renewable Energy Business Opportunities 3

and distribution system over the 10-year period. well-developed and are core to PLN’s current
PLN has stated that in its long-term plan, coal- generation mix and future expansion plans.
fueled electricity would continue to constitute Together they supply 12% of all electricity
more than 50% of its supply. A governmental generation in 2018 and 75% of all planned
Domestic Market Obligation (DMO) requires renewable energy capacity to be added between
that a percentage of coal production be sold 2019 and 2028.
within Indonesia, while ceiling prices for
different qualities of coal are designed to relieve
PLN’s financial burden and shield it from price
fluctuations. It should be noted that under IPP
contracts in Indonesia, PLN assumes the fuel
supply responsibility and associated price risk.

Currently, gas-fired power stations account for

approximately 22.5% of total generation and
are expected to maintain a similar share over
the next 10 years. Indonesia’s has extensive gas
reserves and there is a global and Asian (including
Indonesian) glut of liquefied natural gas (LNG)
production to ensure stable prices at least in the
near term. Significant investment is still needed
in gas infrastructure, including for pipelines and
floating storage regasification units, in order to
expand gas utilization, particularly in eastern
Indonesia.

Oil, including high-speed diesel, marine fuel oil

12%
and industrial diesel oil, have been gradually
phased out of PLN’s fuel mix in favor of coal and
natural gas. Power generation from refined oil
products accounted for 6.9% of total generation in
2018. PLN plans to continue to phase oil down to
0.4% in 2028. The bulk of the oil use is for isolated
grids across the country.

of all electricity
Renewable energy resources for electricity
generation include: biomass, biogas, waste-to-
generation in 2018
energy, biofuel, geothermal, hydropower, wind,
solar PV, and marine energy. Of these, medium
and large hydropower and geothermal are

4 Indonesia Renewable Energy Business Opportunities

Renewable Energy Market Characteristics
Major government policies and supply mix by 2025 and 2) the electrification ratio
programs should reach 97.35% of all households by 2019.
Indonesia’s Nationally Determined Contribution Although the RUKN has not been finalized and
(NDC) outlines its transition to a low-carbon signed by the President, it serves as a reference
future; it has committed to an unconditional for PLN in preparing its annual RUPTL.
emissions reduction of 29% by 2030 compared to
the business-as-usual scenario, and up to a 41% Many of the smaller, distributed renewable energy
reduction with international assistance. Indonesia resource-based projects are listed as “scattered”
submitted its intended NDC in September 2015 in the RUPTL meaning that PLN has not yet
and its first NDC in November 2016. determined the size or location of the projects,
requiring further analysis of the grid’s capability
In March 2017, President Jokowi signed to absorb the power. While the government has
Presidential Regulation 22/2017 on the National moved to a competitive procurement approach,
Energy Plan (RUEN). The regulation states that many projects are still presented to PLN as
RUEN is a central government plan for managing unsolicited proposals and later offered for bidding
the national energy sector. It serves as an by registered IPPs.
implementation framework for the National
Energy Policy (KEN). The RUEN sets a target of 23% In 2017, MEMR issued new regulations that were
of Indonesia’s final energy use to come from new intended to encourage renewable energy IPPs
and renewable energy resources by 2025. in regions where they can contribute to lowering
PLN’s average electricity production cost. The
Electricity planning is the purview of MEMR new rules focus on two main issues: 1) setting
(through the RUKN), provincial energy offices the tariff for PLN’s purchase of electricity from
(through the RUKD), and PLN (through the RUPTL, renewable generators, and 2) tendering schemes
see Table 1). At this time, the draft RUKN (2015- for awarding renewable projects to IPPs.
2034), which has been submitted but not yet
ratified, sets two targets: 1) new and renewable The regulations set ceiling prices for the purchase
energy should constitute 25% of the electricity of renewable energy by reference to the average

Table 1 - Planned Renewable Generating Capacity Additions, in Megawatts (2019 – 2028)

Project Type 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 TOTAL
Geothermal 190 151 147 455 245 415 2,759 45 145 55 4,607
Large Hydro 154 326 755 0 182 1,484 3,047 129 466 1,467 8,010
Small Hydro 140 238 479 200 168 232 27 20 20 10 1534
Solar PV 63 78 219 129 160 4 250 0 2 2 907
Wind 0 0 30 360 260 50 150 0 0 5 855
Biomass/Biogas 12 139 60 357 50 103 19 5 15 35 795
Marine 0 0 7 0 0 0 0 0 0 0 7
TOTAL 559 932 1,697 1,501 1,065 2,288 6,252 199 648 1,574 16,715

Source: PLN RUPTL 2019-2028

Indonesia Renewable Energy Business Opportunities 5

cost of generation or electricity production (biaya after the term of the PPA contract. Table 2
pokok penyediaan or BPP) . BPP pricing is based
3
summarizes the regulatory treatment of various
on two principles: 1) renewable energy IPPs will renewable energy type IPPs.
not exceed the regional BPP in regions where the
BPP is less than the national BPP, and 2) where Cost and Technical Consideration
the regional BPP is greater than the national BPP, The levelized cost of electricity (LCOE) represents
renewable energy IPP’s will contribute to PLN’s the average revenue per unit of electricity
efforts to reduce the regional BPP. Based on the generated that would be required to recover
2018 BPP, power purchase prices range from the costs of building and operating a generating
the national average of US 7.86 cents/kWh in plant during an assumed financial life or term
Java, Bali and parts of Sumatra where coal-fired of a PPA. LCOE is often used to determine the
powerplants are located to as high as US 21.34 overall competitiveness of different generating
cents/kWh in small islands and isolated grids technologies. Key inputs to calculating LCOE
power by diesel generators. include capital costs, fuel costs, fixed and variable
operations and maintenance costs, financing
The regulations introduced two other conditions costs, energy production, and an assumed
into the IPP program: direct selection and BOOT. utilization rate for each plant type.
Direct selection allows PLN to select among
prequalified developers for the right to undertake Biomass powerplants are similar to fossil fuel
the project. BOOT provides for PLN to assume powerplants in that they have both capital
ownership and control of the generation assets costs and fuel costs. Biogas and waste-energy

Table 2 - Summary of Regulatory Treatment of Renewable Energy IPPs

Renewable Energy Appointment Areas where Areas where Investment

Resource Method Regional BPP < Regional BPP > Basis
National BPP National BPP
Direct selection Negotiated between Maximum 85% of BOOT
Solar based on capacity IPP and PLN regional BPP
Quota
Direct selection with Negotiated between Maximum 85% of
Wind capacity Quota IPP and PLN regional BPP
BOOT

Direct selection Negotiated between Maximum of 100%

Hydro IPP and PLN of regional BPP.
BOOT

Direct selection To be negotiated Maximum 85% of

Biomass between IPP and PLN regional BPP
BOOT

Direct selection To be negotiated Maximum 85% of

Biogas between IPP and PLN regional BPP
BOOT

Direct appointment To be negotiated Maximum 100% of

Waste-to-Energy* by municipality between IPP and PLN regional BPP
Not specified

Direct appointment To be negotiated Maximum 100% of BOOT

Geothermal where resources between IPP and PLN regional BPP
are proven
Direct selection To be negotiated Maximum 100% of
Ocean Energy between IPP and PLN regional BPP
BOOT

Biodiesel Direct selection To be negotiated To be negotiated BOOT

between IPP and PLN between IPP and
Powerplants PLN

* - Presidential Regulation 35 of 2018 set a higher price for 12 priority cities.

3
BPP consists of the amortized capital costs, fuel and non-fuel operating costs. It excludes associated transmission and
distribution costs including losses

6 Indonesia Renewable Energy Business Opportunities

projects also require fuel (or feedstock), which is generation output over a period of time to what
often captured in the financing structure where the unit is capable of generating at maximum
revenues are shared with the feedstock supplier. output. These two numbers can be significantly
The inputs to the levelized costs of electricity for different. The capacity of a powerplant may be de-
hydropower, solar PV, wind and marine projects rated over time, meaning that it will be considered
are concentrated in the project’s capital costs. to have a decreased maximum output due to
inefficiencies that develop during operations.
Based on a Central Bank of Indonesia regulation,
any transaction executed in Indonesia is to be Financing
denominated in local currency (Indonesia Rupiah, Domestic financing supply is available for
IDR). This is important for renewable energy (and renewable energy projects. Channeling the
other) projects that secure part of their financing funds and finding commercially feasible projects,
in foreign currency in order to obtain lower however, are challenging in Indonesia. The two
interest rates. All PPAs signed by PLN dictate most prevailing challenges are legal aspects of
payments in IDR. Power Purchase Agreements (PPA) and tariffs for
renewable power generation. International or off-
All power projects have an associated cost in shore financing is available for larger projects.
connecting to the grid. These costs include
transformers or substations to adjust the voltage Ownership
level, transmission lines, and any additional Based on Indonesia’s Negative List of Investment,
modifications to the grid to accommodate the power projects above 10 MW in generating
power. Of these, transmission line costs can vary capacity may have foreign ownership up to 95%.
considerably since they are a function of the Smaller renewable energy IPPs restrict foreign
distance between the powerplant and the grid ownership to 49%. Projects developed under the
interconnection point. PLN now requires that all Public Private Partnership regulations allow up to
renewable energy projects, regardless of their 100% foreign ownership.
size, conduct an interconnection study as part of
the feasibility study. Renewable Energy Market Value
Based on PLN’s planned capacity additions, the
Each powerplant or generating facility has market value of renewable energy business in
a “nameplate capacity” which indicates the the period 2020-2025 is estimated to be USD
maximum output that generator can produce 38.9 billion. Figure 2 shows the breakdown by
under specific conditions. “Capacity factor” is technology.
the ratio between a generation unit’s actual

Figure 2 - Indonesia Renewable Energy Market Value by Technology, 2020-2025 (in USD millions)
769

Geothermal

12,887 Solar PV
20,829 Hydropower

Wind

Bioenergy

2,509 Smart Grid & BESS

433 1,451
Indonesia Renewable Energy Business Opportunities 7
 Market Condition for
Solar Photovoltaic (PV)
Power Development

Worldwide, solar PV systems are the fastest- Utility-scale, ground-mounted

growing segment of the energy market for a systems
variety of applications ranging from small-scale Utility interconnected systems are the largest
direct use systems to large-scale powerplants segment of the relatively small solar PV market
injecting power into utility grids. While all such in Indonesia. The market outlook for utility-scale
applications are present in Indonesia, the solar PV solar PV projects (> 10 MW capacity) connected to
market has not kept pace with global trends. As the transmission network is based on the ceiling
of 2018, the total installed capacity from solar PV power purchase price allowed under current
systems operating in Indonesia was 25 MW, with regulations. There is large potential market for
45 MW under construction and 323 MW currently smaller solar PV systems (< 10 MW capacity)
in the planning stages. According to PLN’s RUPTL, where those systems are connected to grids
907 MW of solar PV generating capacity will be powered by diesel generators. Current regulations
added over the period 2019-2018. require PLN to determine a “capacity quota” for
solar PV and to issue competitive tenders to pre-
Indonesia straddles the equator, with the best qualified project developers.
solar radiation found in Eastern Indonesia, where
cloud cover and monsoon season effects are The PLN RUPTL, defines much of the solar PV
minimal and electrification is most sought. capacity to be added in the next 10 years as
“scattered”, meaning that the individual project
size and location have not yet been determined.
All projects during the 2020-2025 period will

8 Indonesia Renewable Energy Business Opportunities

Figure 3 – Utility-scale Solar PV Market by Supply Chain Segment (2020-2025)

Utility-scale Solar PV Market (USD Million) 275.3

2020-2021

2022-2025

163.8

67.8

40.3
29.6 29.6
17.6 21.2 17.6
12.6

Developer Consulting & Balance System Construction Equipment

Engineering

come through the “direct selection process” PLN customers, limiting the maximum capacity
(Daftar Penyedia Terseleksi, DPT) which requires of rooftop solar PV projects – as calculated by the
companies (or consortia of companies) to be PV inverter’s nameplate capacity – to 100% of the
pre-qualified in order to bid, as required for other customer’s building circuit capacity. Industrial
renewable power projects. customers installing a rooftop solar PV system
will be assessed a capacity fee and an emergency
We estimate the market for utility scale solar PV energy fee based on the quantity of energy they
to be USD 675.5 million, comprised of USD 252 use. Commercial and institutional customers
million during the 2020-2021 period, and USD are not required to pay a capacity fee or
423.5 million during the 2022-2025 period. It emergency fee.
should be noted that the government imposes
a 40% local-content requirement for solar The current market, which operates under a
panels (which are assembled from imported PLN net-metering program, is predominantly
components) that is a major impediment to residential served by local companies that sell
achieving the low cost of solar PV experienced and install the systems. With the new regulation
in other countries. As seen in Figure 3, the in place, all markets are expected to grow.
main business opportunities in utility-scale Commercial and industrial customers who were
solar PV supply market chain are in the sale of previously not allowed can now consume the
equipment and the balance of system including rooftop solar PV output during the day and
interconnection to the grid. should see more accelerated growth.

Rooftop Solar PV Projects With larger systems now allowed, this creates
In 2018, MEMR issued Regulation No. 49 of 2018 business opportunities for both domestic and
on installation of rooftop solar PV systems by foreign companies to enter the market. For solar

Indonesia Renewable Energy Business Opportunities 9

Figure 4 –Rooftop Solar PV Market by Supply Chain Segment, 2020-2025

Rooftop Solar PV (USD Million)

39.3
2020-2021

2022-2025

17

9.8
6.5 6.6
4.6
2.8 2.8 3.3
1.4

Developer Consulting & Balance System Construction Equipment

Engineering

PV rooftop project opportunities, these are either business-to-consumers (i.e., selling

directly to homeowners) or business-to-business (i.e., selling directly to commercial and
industrial facility owners). The main rooftop business opportunities are in panels and
inverters, construction (installation), and balance of system.

Off-Grid Solar PV Projects

An “off-grid” solar PV project is defined as the solar PV system and related components
including battery storage and, in the case of hybrid, diesel generator. In Indonesia,
there are essentially three different market segments characterized by programs
under which PV systems are deployed: 1) solar PV-diesel hybrid program to reduce
diesel fuel consumption; 2) government-funded off-grid renewable energy systems;
and 3) MEMR’s Solar-Powered Efficient Lamp program (LTSHE), which provides home
solar systems to un-electrified villages. Of these, only the hybrid market is commercial;
applications include mining operations where solar can be integrated with existing
diesel generation. We did not calculate the market value for PV hybrid systems.

A more-detailed free report – available to UK firms upon request – features live and pending commercial
solar photovoltaic (PV) power projects as well as regulations, pricing, PPA terms, procurement methods,
key decision-makers, local content requirements, and potential partners for each type of renewable energy.
The full report–aims to empower UK firms with the knowledge they need to enter the Indonesia energy market,
develop relationships on the ground, and pursue projects before the market becomes mainstreamed.
To request the full report, email [email protected] with your contact information, job title,
company name, and renewable subsector(s) of interest.

10 Indonesia Renewable Energy Business Opportunities

 Market Condition for
Wind Power
Development

Utility-scale wind powerplants during the period. Given the economics of

In 2017, Indonesia’s first utility-scale wind wind powerplants, where larger turbines sizes
powerplant was commissioned on 100 hectares in have lower costs per MW, and the considerable
South Sulawesi province. The 75 MW Sidrap wind logistics and site preparation costs, all viable
power project in Sindereng Rappang regency has wind powerplants will be connected to PLN’s high
opened the door for other wind power projects in voltage transmission system. With the exception
the province, as well as elsewhere in the country; of Java’s, all transmission lines are considered
a second 65 MW wind power project in Jeneponto, “backbone” lines connecting smaller grids. These
South Sulawesi, completed construction in transmission systems have difficulty integrating
December 2018 and is awaiting commissioning as variable wind powerplants as currently operated
of this writing. by PLN.

According to PLN, there is currently 70 MW of The market value of utility-scale wind power
wind power currently operating, 60 MW under projects is estimated to be USD 1,451 million,
construction and another 95 MW in the planning comprised of USD 57 million in 2020-2021
stages. Note that the wind power project and USD 1,394 million in 2022-2025. The main
developers are allowed to install up to 10% more business opportunities come in wind turbines,
capacity than what is stated in their PPA. tower construction, substations and transmission
The PLN RUPTL 2019-2028 shows a planned lines, and construction.
addition of 855 MW of wind power capacity

Indonesia Renewable Energy Business Opportunities 11

Figure 5 – Breakdown of the Wind Power Market by Supply Chain Segment, 2020-2025

Wind Power (USD Million)

627.3

2020-2021

2022-2025

306.7

139.4 139.4 139.4

41.8
5.7 12.5 25.7
1.7 5.7 5.7

Developer Consulting & Transmissions & Towers Construction Equipment

Engineering Balance System

Offshore Wind
Offshore wind energy has not been included in Indonesia’s renewable energy goals as its
application is not considered feasible at present. The only realistic sites for offshore wind,
where good wind resources align with large demand centers, are in West and East Java.

A more-detailed free report – available to UK firms upon request – features live and pending commercial
wind power projects as well as regulations, pricing, PPA terms, procurement methods, key decision-makers,
local content requirements, and potential partners for each type of renewable energy. The full report–aims to
empower UK firms with the knowledge they need to enter the Indonesia energy market, develop relationships
on the ground, and pursue projects before the market becomes mainstreamed.
To request the full report, email [email protected] with your contact information, job title,
company name, and renewable subsector(s) of interest.

12 Indonesia Renewable Energy Business Opportunities

 Market Condition for
Hydropower
Development

The hydropower market is the most mature of all Hydropower currently supplies 6.2% of
renewables in Indonesia; hydropower plants built all electricity in Indonesia, and 54% of all
during the Dutch colonial period are still operating renewable energy sources. PLN is the principal
today. The Master Plan Study for Hydropower decisionmaker for developing medium and large-
Development in Indonesia identified and screened scale hydropower plants; the government has
a total developable potential 26,321 MW of given PLN the first right of refusal to develop the
capacity, including operating projects and projects projects listed in the Master Plan Study. Since
under development. these projects typically take 5-7 years to develop,
it is important to learn what stage of development
According to PLN, there are 427 MW of small a project is currently at to determine what
hydropower capacity (<10 MW) currently business opportunities are available.
operating, 375 MW under construction, 180 MW
that have reached financial closure, 108 MW with Medium and large hydropower plants (>10 MW)
signed PPA, and 871 MW in planning stages. PLN’s may have foreign ownership up to 95%. As a
RUPTL calls for 1,534 MW of small hydropower result, these projects can attract foreign (offshore)
capacity to be added between 2019 and 2028. For financing. Small hydropower plants (<10 MW)
medium and large hydropower (>10 MW), there are typically developed by Indonesian sponsors.
are currently 4,048 MW operating, 2,439 MW There is considerable work to be done during the
under construction, 350 MW that have reached preliminary stages (pre-PPA) of any hydropower
financial closures, and 5,221 MW in planning project, but those costs are disproportionately
stages. The PLN RUPTL calls for a total of 8,010 higher for smaller projects (i.e., they have
MW of large hydropower to be added during the performed much of the same analysis in the
period 2019 to 2028. feasibility study as a larger project).

Indonesia Renewable Energy Business Opportunities 13

Figure 6 – Breakdown of the Small Hydropower Market by Supply Chain Segment, 2020-2025

Small Hydropower plants (≤10 MW) Market (USD Million)

1,131

2020-2021 986
2022-2025

301.6
262.9
201 175.3

35.9 31.3 71.8 62.6 53.8 47

Developer Consulting & System Civil Work Equipment Transmission

Engineering Balance

Figure 7 – Breakdown of the Medium and Large Hydropower Market by Supply Chain
Segment, 2020-2025

Medium-Large Hydropower Market (USD Million)

4,300
2020-2021

2022-2025

1,911
1,703

756.7
273 204.8
54 136.5 108.1 81

Developer Consulting & Civil Work Equipment Transmissions

Engineering

A more-detailed free report – available to UK firms upon request – features live and pending commercial
hydropower projects as well as regulations, pricing, PPA terms, procurement methods, key decision-makers,
local content requirements, and potential partners for each type of renewable energy. The full report–aims to
empower UK firms with the knowledge they need to enter the Indonesia energy market, develop relationships
on the ground, and pursue projects before the market becomes mainstreamed.
To request the full report, email [email protected] with your contact information, job title,
company name, and renewable subsector(s) of interest.

14 Indonesia Renewable Energy Business Opportunities

 Market Condition for
Geothermal Power
Development

About 40% of the world’s geothermal energy that are strategic for investment and can
reserves are located underground in Indonesia, contribute significantly to meet national energy
which is estimated to have the largest geothermal needs. At present, Indonesia’s geothermal
energy reserves of any nation. Most of this potential reaches 28.5 GW, which consists of total
potential, however, has not been utilized. This reserves of 17.5 GW and resources of 11 GW.
abundant resource is scattered along volcanic According to PLN, there are currently 2,115 MW
belt paths of the Ring of Fire that pass through of geothermal capacity operating at the end of
Sumatra, Java, Bali, Nusa Tenggara, North 2018, 460 MW under construction, 1,720 MW
Sulawesi and Maluku. having reached financial closure, and 2,227 MW
in the planning stage. The PLN RUPTL calls for the
Geothermal resources in Indonesia consist of addition of 4,607 MW of geothermal generating
volcanic and non-volcanic systems. Volcanic capacity during the period 2019 to 2028.
geothermal systems are spread along subduction Indonesia now ranks second behind the United
pathways and have high temperatures (> 225°C). States in in utilizing geothermal power. Based on
Many non-volcanic geothermal systems, which the latest data from the Geothermal Directorate,
have low (<125°C) to moderate (125-225°C) the Directorate General of New Energy,
temperatures, are spread on the islands of Renewable and Energy Conservation counts
Kalimantan and Sulawesi. 16 geothermal powerplants in 14 Geothermal
Working Areas (WKP).
It is estimated that there are over 330 potential
geothermal locations spread across Indonesia

Indonesia Renewable Energy Business Opportunities 15

Figure 8 - Breakdown of the Geothermal Power Market by Supply Chain Segment
(2020-2025)

Geothermal Power (USD Million)

2020-2021

2022-2025
41.9
Developer
338.2

83.7
Consulting
& Studies
675.5

284.6
Exploration
2,300

837
Well Drilling
6,765

795.2
Power Plant
6,427

184
Steam System
& Substations
1,488

67
Start-up &
Commissioning
541.2

A more-detailed free report – available to UK firms upon request – features live and pending commercial
geothermal power projects as well as regulations, pricing, PPA terms, procurement methods, key decision-
makers, local content requirements, and potential partners for each type of renewable energy. The full
report–aims to empower UK firms with the knowledge they need to enter the Indonesia energy market,
develop relationships on the ground, and pursue projects before the market becomes mainstreamed.
To request the full report, email [email protected] with your contact information,
job title, company name, and renewable subsector(s) of interest.

16 Indonesia Renewable Energy Business Opportunities

 Market Condition for
Bioenergy Power
Development

Biomass Power In terms of commercial biomass technology, the

Biomass resources or feedstocks for power principal is combustion for steam. Due to the size
production come from palm oil mill processing, of biomass boilers, the most economic size for a
sugar processing, rice processing residues and biomass steam power plant is 10 MW or larger.
wood waste from paper mills. The relatively Biomass gasification is possible at a much smaller
high cost of transporting biomass results in scale, even less than 1 MW, but the capital costs
these powerplants being located near the per MW are much higher as are the operation and
feedstock source. Agro-processing facilities maintenance costs. Other technologies such as
have traditionally used their biomass waste as pyrolysis are not commercial in Indonesia.
a fuel source for steam supply, captive power
or cogeneration. A palm oil mill’s main energy According to PLN, there are 181 MW of
need is super-saturated steam, which is supplied operating biomass and biogas generating
by burning palm fiber mixed with shells. Shells capacity connected to PLN’s grid, 25 MW under
are now a commodity in Asia so much of the construction, 10 MW having reached financial
waste is diverted to export markets. Empty fruit closure, 41 MW with signed PPA, and 460 MW
bunches are a waste product that are only now in the planning stage. The PLN RUPTL calls for
being considered as a biomass source for excess 795 MW of biomass, biogas and waste-to-energy
power production, or in some cases pelletized powerplants to be added during the period 2019
and exported. Due to the seasonal nature of to 2028.
sugar harvesting and processing, biomass-fired
cogeneration systems do not operate throughout Biomass power IPP projects must sell power
the year and are treated as “excess power” under the BPP scheme as dictated by MEMR
facilities by PLN. Regulation 50 of 2017, i.e., at 85% of the regional

Indonesia Renewable Energy Business Opportunities 17

Figure 9 - Breakdown of the Biomass Power Marked by Supply Chain Segment, 2020-2025

Biomass Power Market (USD Million) 264.6

2020-2021

2022-2025 190

64.3
46.2

13.6 18.9 18.9

13.6 8.1 13.3

Developer Consulting & Civil Work Equipment Transmissions

Engineering

BPP wherever the regional BPP exceeds the (POME) and cassava starch mill effluent. Of
national BPP. The power purchase price is these, POME is seen as the main feedstock for
negotiated wherever the regional BPP is equal commercial biogas production. An estimated 700
to or lower than the national BPP. palm oil mills are located primarily in Sumatra
and Kalimantan. The average palm oil mill can
Feedstock availability is a challenge in developing supply biogas to generate between 1 and 3 MW of
and financing biomass power projects. Banks power. While the electricity production potential is
look for a feedstock supply agreement equal to significant, POME biogas has not been developed
or longer than the tenor of the loan. In terms of for a variety of reasons. These include the location
powerplant operations, the project’s viability is of mills typically being far from the nearest
dependent on the availability and negotiated price PLN grid, insignificant internal electricity needs,
of the biomass feedstock. For this reason, many commercial energy production not being a core
projects are developed in which the feedstock business for palm oil companies, and low power
supplier takes a shareholding position. purchase prices for third-party biogas IPPs.

The feedstock agreement should have a cap on Biogas IPP projects must sell power under the
the annual escalation, since that cost cannot be BPP scheme as dictated by MEMR Regulation 50
passed through to PLN. Also of consideration, the of 2017, i.e., at 85% of the regional BPP wherever
BOOT requirement in current regulations means the regional BPP exceeds the national average
a powerplant is transferred to PLN at the end of BPP. The power purchase price is negotiated
the PPA term, though there may be no feedstock wherever the regional BPP is equal to or lower
to fuel it. than the national BPP. Like for biomass power
projects, biogas project viability depends upon
Biogas Power the availability of the wastewater supply from
Biogas in Indonesia principally comes from the the palm oil or cassava mill. Projects must
anaerobic digestion of palm oil mill effluent have an agreement with the mill to supply the

18 Indonesia Renewable Energy Business Opportunities

Figure 10 - Breakdown of the Biogas Power Market by Supply Chain Segment, 2020-2025

Biogas Power Market (USD Million)

60

2020-2021
45
2022-2025

20
15 15 15 15

5 5 5

Developer Consulting & Civil Works Equipment Transmission

Engineering

wastewater at a given flow rate to make the Presidential Regulation No. 35 of 2018 was
biogas powerplant viable. For this reason, many issued to accelerate the construction of waste-
projects are developed in which the mill owner based powerplants in 12 major cities, namely:
takes a shareholding position or signs a revenue DKI Jakarta, Tangerang, South Tangerang,
sharing agreement. Also like biomass IPPs, the Bandung, Bekasi, Semarang, Surakarta, Surabaya,
BOOT condition in current regulations requires Makassar, Manado, Palembang and Bali. PLN,
the powerplant be transferred to PLN at the end under assignment from the government, is
of the PPA term, though there may be no such developing the project in Bali while the others
similar guarantee for the wastewater supply. are being developed by the local governments
through tender or direct appointment to private-
Waste-to-Energy sector businesses. For all 12 cities, the local
Another potential source of biomass energy is government must prepare a pre-feasibility study
municipal solid waste. The quantity of city or that determines the waste characteristics, the
municipal wastes in Indonesia is comparable appropriate energy conversion technology,
with other big cities of the world. Most of these the project location and other factors that are
wastes originate in households in the form of used in the bidding and procurement process.
organic wastes from the kitchen, but an increasing Interested project developers would submit a full
portion comes from plastics and other inorganic feasibility study to determine the capacity of their
wastes. At present, municipal solid wastes are proposed plant and calculate the “tipping fee”4
either burned at each household or collected by needed to make the project economically feasible.
the municipalities to be dumped into a designated Presidential Regulation No. 35 of 2018 sets out
dumping ground or landfill. As of 2018, there a definitive single feed-in tariff for all waste to
were no commercially operating waste-to-energy energy projects depending on their capacity,
projects in Indonesia and no sanitary landfills. regardless of where the project is located or when
the project achieves commercial operation.
4
Tipping fee is the amount paid per ton of waste to the operator of the waste to energy facility.

Indonesia Renewable Energy Business Opportunities 19

Figure 11 - Breakdown of the Waste-to-Energy Market by Supply Chain Segment, 2020-2025

Waste-to-Energy Market (USD Million) 856.8

2020-2021

2022-2025

208.1
189

61.2 61.2 45.9 36.7

13.5 13.5 8.1

Developer Consulting & Civil Works Equipment Transmission

Engineering

The selected developer will have dual roles from palm oil and bioethanol from sugar cane
as a waste manager (entering into a waste (molasses) are commercially produced. Indonesia
management agreement with the local is among the 10 largest sugarcane producers
government) and a power generator (entering in the world. There is, however, no fuel grade
into a PPA with PLN). For the waste management ethanol production in Indonesia, although there
function, the developer will be entitled to receive are ethanol plants producing non-fuel ethanol for
a fee from the local government, calculated based the medical industry, cosmetics, other industrial
on the weight of the waste (in ton) managed by uses and export. Despite ethanol-blending
the developer. Presidential Regulation No. 35 of mandates of E5 and E10 by 2020 and E20 by 2025,
2018 also provides that the national budget can there is no implementation due to an absence of
be allocated to provide additional funding for the financial incentives covering both price disparity
payment of this waste management fee, capped and feedstock constraints.5
at a maximum amount of 500,000 IDR (around
USD 38.5) per ton of waste. Biofuel production and use in Indonesia is a
response to climate change, energy demand,
Biofuel for Powerplants and trade policy. Substitution of traditional
As an agricultural country, Indonesia is blessed petroleum fuels with biofuels is intended to
with abundant biofuels materials. Feedstocks that reduce GHG emissions in the transportation
can be used to produce biofuels include cassava, and energy sectors, provide energy security,
maize crops, sugarcane, sago, palm oil, Jatropha, buffer the domestic economy against global
waste cooking oil, etc. But since Indonesia is the oil price fluctuations, reduce foreign exchange
world’s largest Crude Palm Oil (CPO) producer – expenditures on imported fuel, and stimulate
43 million tons in 2018 – the national biofuel domestic demand in the face of trade barriers in
program is heavily focused on CPO and other Europe and the U.S. to Indonesian biodiesel-based
palm oil derivatives. Although there is research on palm oil. As of this writing, Indonesian biofuel
into a variety of “green fuels”, only biodiesel production was up 57% over the average of the

5
Indonesia Biofuels Annual 2018. U.S. Department of Agriculture, August 12, 2018.

20 Indonesia Renewable Energy Business Opportunities

previous two years, with much of the increase in MEMR Regulation 66 of 2018 made the
response to the government’s policy of mandatory replacement of B20 for High Speed Diesel (HSD)
biodiesel blending. mandatory for all kinds of powerplants. For
this purpose, the government will ask PLN to
MEMR Regulation 12 of 2015 established biofuel- soon convert its diesel-fueled powerplants into
blending targets for transportation, industry biodiesel-fueled powerplants. MEMR Regulation
and power generation sectors. The regulation 53 of 2018 added private biodiesel-fueled power
set out the B20 Policy, commonly known as the producers to the list of renewable energy IPPs
mandatory government program, to require that can sell power to PLN using the BPP scheme.
the mixed use of diesel fuel containing 20% of The IPP developer must demonstrate that the
biodiesel and 80% of petroleum diesel. It should powerplant has a sufficient supply of biofuel for
be noted that under current regulations, biofuels the sustained operation of the PPA. The purchase
used as alternative fuels must use be sourced shall be made through the mechanism of direct
domestically. This means that when mixing the selection at a price that is set based on agreement
diesel fuel with biodiesel, the business entities between the parties and a BOOT cooperation
must use domestically produced biofuel. mechanism.

Figure 12 - Total Biodiesel Production and Distribution 2016-2018 (in 1000 liters)

7,000,000
6,167,837
3,656,361 3,414,416 3,750,066
6,000,000
3,008,475 2,572,568 1,785,489
5,000,000
428,868 187,385
4,000,000
3,000,000 Production
2,000,000
Domestic use
1,000,000
Exports
0
2016 2017 2018

Figure 13 – Market for Biofuel Power 2020 - 2025 (USD millions)

187.50
Utility Connected

Off Grid

562.50

A more-detailed free report – available to UK firms upon request – features live and pending commercial
bioenergy power projects as well as regulations, pricing, PPA terms, procurement methods, key decision-
makers, local content requirements, and potential partners for each type of renewable energy. The full
report–aims to empower UK firms with the knowledge they need to enter the Indonesia energy market,
develop relationships on the ground, and pursue projects before the market becomes mainstreamed.
To request the full report, email [email protected] with your contact information,
job title, company name, and renewable subsector(s) of interest.

Indonesia Renewable Energy Business Opportunities 21

 Market Condition for
Marine Energy
Power Development

Marine energy potential in Indonesia involves absence, tidal and sea current potential has yet to
capturing the kinetic motion of the ocean through be commercially harnessed in Indonesia, although
waves and tidal flows and converting it to some preliminary studies have been performed in
electricity. Marine energy, and in particular tidal some areas.
energy, has the greatest potential because the
country’s geography includes narrow channels From PLN’s perspective, marine energy systems
and straights in between island archipelagos, remain in the stage of investigation. None of
amplifying currents and providing multiple the technologies converting marine energy into
locations of possibility to exploit the tides. electricity is proven commercially in Indonesia. In
Studies have been made to determine the energy the RUPTL 2019-2028, PLN has identified several
potentials of these straights and channels in marine energy sites and associated generating
Indonesia. MEMR prepared a roadmap on Marine capacities. Marine energy projects, if developed as
Energy Development in Indonesia for the period IPPs, must conform to the BPP pricing scheme in
of 2018-2025, aimed at realizing the potential MEMR Regulation No. 50 of 2017.
and promoting commercial development of the
resource. MEMR has calculated the developable Given the current condition of the marine energy
potential capacity from marine energy at 61 GW market, in which all efforts to develop pilots or
(61,000 MW) and has set a target for development demonstration projects have stalled, it is difficult
of 1 GW (1,000 MW) of powerplants based on to calculate the market size for the period of 2020-
ocean currents by 2019, but until now there are 2025. As noted below, PLN has identified three 10
no operating commercial projects. MW marine projects in Flores and NTB. It has also
planned 7 MW of marine power in 2021 in the
Programs and development plans for marine most recent RUPTL, though the location of that
energy are needed for companies to conduct project is not mentioned. PLN considers marine
offshore surveys, perform environmental impact current energy as most-promising, but it too is
studies, install electro-mechanical components, viewed as pre-commercial.
and provide system integration testing. In their

A more-detailed free report – available to UK firms upon request – features live and pending commercial
marine energy power projects as well as regulations, pricing, PPA terms, procurement methods, key decision-
makers, local content requirements, and potential partners for each type of renewable energy. The full
report–aims to empower UK firms with the knowledge they need to enter the Indonesia energy market,
develop relationships on the ground, and pursue projects before the market becomes mainstreamed.
To request the full report, email [email protected] with your contact information,
job title, company name, and renewable subsector(s) of interest.

22 Indonesia Renewable Energy Business Opportunities

 Market Condition for
Smart Grids and Battery Storage
Development

PLN operates transmission systems in Java-Bali, generation, extends its distribution lines and adds
Sumatra, Sulawesi, Kalimantan, and small systems consumer transformers to serve new customers.
connecting isolated grids in NTB and NTT. During On small island systems, isolated grids are
the period 2019 to 2028, PLN plans to add a eventually connected using 70 kV transmission
remarkable 57,293 kilometers of high voltage lines. Over the past few years, PLN has begun to
transmission lines, 124,341 substations, 472,792 add larger generators using coal and multi-fuel
medium and low voltage lines, and 506,522 land-based and barge-mounted generators.
transformers.
As the cost of solar and other small-scale
PLN operates approximately 600 isolated renewable energy powerplants and battery
grids across the Indonesian archipelago. The energy storage systems (BESS) for utility
development of these grids follows a similar applications become more economical, PLN is
pattern. Initially, PLN installs diesel generators to reorienting its distribution system planning and
serve load centers. As demand grows, PLN adds investment to incorporate these options.

Figure 14 – Smart Grid and BESS Market 2020 - 2025 (USD millions)

53 75

15
Distribution Grid Control

Transmission BESS

Distribution BESS

Transmission Grid Control

138

Indonesia Renewable Energy Business Opportunities 23

Smart Grid Systems components is difficult to estimate at this time
In order to improve power quality and facilitate given that all projects implemented by PLN have
the integration of variable solar PV and wind served as demonstrations. Once the results
power projects, PLN will need to invest in grid of these demonstrations are known, and PLN
control systems that replace their current manual includes smart grid systems in its procurement
dispatch operations with Automatic Generation program, then the market size will become easier
Control/Automatic Dispatch System (AGC/ADS) in to estimate.
both their transmission and distribution systems.
The control systems are a basic element of smart Battery Energy Storage Systems
grids, which use information and communication (BESS)
technology coupled with automation to enable Batteries are just one of several energy storage
efficient electricity regulation, offer higher options. There are solid state batteries, flow
reliability electricity supply, facilitate higher batteries, flywheels, compressed air storage and
penetration of renewable energy, reduce non- pumped hydro storage. Pumped hydro is being
technical losses and enable customers to become pursued by PLN for grid support and peaking
electricity producers as well as consumers. PLN purposes. There are no known applications of
has developed a “Smart Grid Roadmap” to guides flywheels or compressed air energy storage for
its implementation of these new technologies. utility applications in Indonesia.

PLN currently uses SCADA for communications BESS are mainly used for shifting electricity
and Energy Management Systems in the Java-Bali availability to when its needed or highly valued,
control center. PLN has also included AGC/ADS and for providing ancillary grid services to help
systems in its transmission grid codes, but until regulate power quality, maintain system reliability,
now has not implemented the systems. PLN is and prevent system faults.
installing AGC/ADS in the Java-Bali control center
to accommodate large-scale wind and solar PV In December 2018, PLN issued an invitation for
projects, and possibly in South Sulawesi control prequalifying for supplying utility-scale, lithium-ion
center where new wind power projects have BESS. The compensation structure in Indonesia’s
created challenges for PLN in dispatching its rooftop solar PV policy (MEMR Regulation No.
other generators. 49 of 2018) discourages exporting power to PLN
but may result in storage investment so that the
PLN has received a number of unsolicited electricity produced during the day can be used
proposals, principally from technology vendors, in the evening when the solar PV system is not
promising to increase revenues and reduce producing. Furthermore, PLN imposes a demand
service costs by more-accurately recording charge that requires a minimum payment based
customer usage and communicating it to its data on 40 hours at the customer’s building circuit
analytics and processing center. An Advanced capacity. As storage costs decline, customers will
Metering Infrastructure (AMI) pilot program has evaluate the costs and benefits of disconnecting
been initiated in the Surya Cipta Sarana Industrial from PLN and become fully self-generating.
Estate in Karawang, West Java, as a cooperation
between MEMR and the Japanese New Energy PLN’s principal means of increasing electricity
and Industrial Technology Development access is to extend the medium voltage
Organization. PLN is also piloting AMI in Batam distribution network. The cost of line extension,
and Bali. Plans for AMI include the Jakarta region. when weighed against the low load coming from
The market for smart grid solutions and new connected villages, serves as a disincentive to

24 Indonesia Renewable Energy Business Opportunities

PLN to provide universal electricity access. Battery
storage is part of MEMR’s off-grid electrification
program for both solar home systems as well
as village electrification. Other off-grid systems
include micro-hydropower, biomass and biogas.

A more-detailed free report – available to UK firms upon request – features live and pending commercial
smart grids and battery storage projects as well as regulations, pricing, PPA terms, procurement methods,
key decision-makers, local content requirements, and potential partners for each type of renewable energy.
The full report–aims to empower UK firms with the knowledge they need to enter the Indonesia energy market,
develop relationships on the ground, and pursue projects before the market becomes mainstreamed.
To request the full report, email [email protected] with your contact information,
job title, company name, and renewable subsector(s) of interest.

Indonesia Renewable Energy Business Opportunities 25