Caracterización electroquímica

The role of public utilities in developing countries has mainly been scrutinised within the context of liberalisation reforms of domestic power sectors (Besant-Jones 2006; Jamasb 2006). Pricing reforms, typically focusing on the reduction of energy subsidies, are essential elements of liberalisation efforts (World Bank 2005). Policy synergies between reforms in the electricity and RE sectors in Indonesia have been less of a subject, but generally focus on the efficiency-enhancing effects of abolishing subsidies (Dubash 2002). In many emerging economies, political obstacles to liberalisation result in slow and incoherent implementation of electricity reforms, heightening uncertainty in the investment climate within which RE developers operate (Besant-Jones 2006; Jamasb 2006). Within that context, energy utilities might resist the adoption of innovative low- carbon technologies, as they have already invested in fossil fuel–based generation and are ‘locked in’ to certain energy systems (IPCC 2011, p. 872). Several aspects are particularly relevant for the discussion of the Indonesian case.

Governance and political economy factors in the electricity sector frequently prevent effective cost pass-through mechanisms. A study covering economies in Asia-Pacific Economic Cooperation points to the fact that the energy sectors of many developing countries are dominated by VIMs (World Bank 2011c). Typically, this means that investment carried out by utilities to expand generation capacities is centrally planned, with the VIM monopolising nearly all aspects of the power sector. Notably, the existence of policies that mandate fixed subsidy and tariff levels distort domestic energy prices (Beaton & Lontoh 2010; World Bank 2007). Distorted prices also financially constrain

utilities in their ability to invest properly in expanding generation capacities, including RE technologies (World Bank 2011c).

Asymmetric information problems frequently encountered in state-dominated electricity sectors can undermine regulatory effectiveness and the long-term investment certainty needed for renewable policy instruments to work (Estache & Wren-Lewis 2009). Asymmetric information problems usually arise in situations characterised by PA features. PA theory is a useful framework to analyse conflicts of interest and coordination problems associated with delegated decision-making. In a typical PA situation, a principal authorises an agent to take decisions on their behalf. In situations where there is complete and perfect information, the interests (preferences) of the principal and agent coincide, as the former can perfectly observe the latter’s choices and decisions. Hence, the principal will not have problems in making sure that the agent acts in their interest. PA theory investigates situations in which the conditions of perfect information do not apply. In PA situations, incentives and objectives differ between the principal and the agent (Gravelle & Rees 1992). Within the context of the Indonesian power sector, asymmetric information problems arise due to the lack of transparency on PLN’s electricity supply costs, which serve as a benchmark for negotiating PPAs and determining the size of the subsidy to PLN.

Many RE policy instruments, notably FITs and RPSs, require long-term contracts that provide assurance of long-term price guarantees (IPCC 2011, pp. 896–900). Moreover, legislators need to be able to calculate adequate FIT levels and adjust them in a transparent manner (Mendoncana, Jacobs & Sovacol 2009, pp. 20–27). Typically, this requires a tariff setting in which an autonomous regulatory agency can independently monitor and review information on production costs and set electricity price levels (Besant-Jones 2006, p. 38). However, in many emerging economies with VIM structures, these policy and regulatory functions are not clearly divided, frequently leading to either regulatory capture or prolonged conflicts of interest between various government agencies (Laffont 2005; Estache & Wren-Lewis 2009). This can result in a lack of credible mechanisms on the government side to determine tariff levels and for state utilities to commit to long-term contracts with IPPs. Moreover, frequently electricity tariffs are mandated by the government which prevent the utility from passing on price increases directly on to consumers. Under such conditions, FITs might be less effective in

increasing RE supply than anticipated (Mendoncana, Jacobs & Sovacol 2009; REN21 2011; IPCC 2011).

Public utilities in transition and developing economies frequently face a ‘soft budget constraint’ (SBC) environment. SBC arise when an organisation is operating inefficiently and is constantly relying on bailouts or subsidies from outside organisations to cover its deficits. In extreme cases, typical consequences of a SBC environment are rationing of power supply and frequent power outages. While SBCs are mostly associated with SOEs or government agencies, they can also be found in private and non-profit entities (Kornai, Maskin & Roland 2003).

Energy subsidy arrangements between governments and utilities are important policy factors affecting energy outcomes, including investment in renewables. Despite assurances of financial support from the government, utilities frequently face governments who are reluctant to commit the full subsidy payment, because they find themselves under budgetary pressures and public scrutiny (World Bank 2011c). Typically, governments in developing countries are reluctant to use PSO58 _{payments, or}

other forms of explicit subsidy mechanism, because they fear that any automatic subsidy mechanism will provide incentives to the utility to be inefficient and simply pass on costs to the government (World Bank 2011). This reluctance to credibly commit resources shows that there are diverging interests and objectives between the government and the utility. Thus, utilities are being pressured to carry as much of the financial burden as possible, which affects their willingness to invest in low-carbon technologies.