RESPECTO A LA APLICACIÓN EN CULTIVO

Indonesia has experimented with price-based regulations to promote RE since the mid- 1990s. These have undergone various changes over the past two decades. Strictly speaking, these regulations did not start out as FITs, as they did not specify exact tariff schedules. They evolved over time into FITs that contain specific purchasing prices for the utility PLN, but were still subject to negotiations between IPPS and PLN. Moreover, they were initially mainly aimed at small and medium hydropower producers but have gradually evolved to encompass other technologies (geothermal, biomass, waste-to- energy (WTE) and solar). The remainder of this chapter charts out this regulatory evolution, using the term FITs as a shorthand as understood in the above context.

3.4.1Feed-in tariff regimes for small and medium power producers

In 1995, the Indonesian Government issued Ministerial Regulation (MR) No. 1895/1995 on the selling rate of electricity from small-scale power generating plants owned by private sector and cooperatives (see Appendix 3.2). The regulation did not state a specific price. Tariffs were based on PLN’s annually adjusted marginal production costs.

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Negotiations on the tariffs also allowed for a host of other negotiable items, such as allowances for energy price changes or capacity factor multipliers.

In 2002, a new pricing regulation was issued in the shape of Ministerial Decree 1122/2002 (known as PSK Tersebar or Ministerial Decree on Small-Scale Power Purchase Agreement). The new price regulation specifically targeted small-scale producers— cooperatives, private companies or government-owned companies—with a generation capacity of up to 1 MW. Again, no specific price was stated, but the tariff was formulated as a percentage of PLN’s BPP, grouped into voltage classes. Specifically, the electricity purchasing tariff was set at 60 per cent of PLN’s production cost if connected to the low voltage grid or 80 per cent if connected to the medium voltage grid. Technically, this did not constitute a premium price to incentivise RE developers, given that the cost of renewables exceeded PLN’s average production costs.

In 2006, the government followed up with an additional price regulation, MR No. 2/2006 on Medium Scale Power Generation Using Renewable Energy.22 _{The regulation has a}

similar design as the 2002 MR but was targeted at medium-scale power plants. The maximum allowable capacity of each power plant is 1–10 MW. A purchase contract for 10 years or longer can be negotiated, also allowing for periodic price adjustments. Price adjustments were based on PLN’s BPP, which are largely derived from costs incurred to fossil fuel power plants.

The government revised its RE pricing policy in 2009, when it issued MR No. 31/2009 on Small and Medium Scale Power Generation Utilizing Renewable Energy. This time, a specific purchasing price was stated in the regulation, 656 Rupiah/kWh. Under this regulation, PLN is obliged to purchase electricity from small and medium-scale private RE power plant developers such as cooperatives, community or business entities. Eligible power plants are those with a generation capacity of 1–10 MW. The price is regulated for medium, low voltage grid connections and the interconnection system and is determined by a regional f-factor.23

22 _{The regulation is supported by Governmental Regulation No. 03/2005 on Electricity Supply and}

Utilization and its amendmentGovernmental Regulation No. 26/2006.

23 _{For example, the base purchasing price of 656 IDR/kWh is multiplied by the f-factor if connected to a}

medium voltage grid, and 1004 IDR/kWh x f, if connected to low voltage grid. The f-value for the grid system is 1.0 in Java and Bali, 1.2 in Sumatra, 1.3 in Kalimantan/Sulawesi and 1.5 in Papua/Nusa Tenggara.

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Another new feature of the 2009 regulation is that PLN was given the authority to base the purchasing price on its own electricity cost estimates. These estimates also needed be reported to the Minister of MEMR. In addition, PLN was also obliged to provide standardised PPA contracts.

Although the tariff under MR No. 31/2009 was valid for all RE technologies—including hydropower, biomass, solar and wind—a consensus among the RE industry emerged that the price was only suitable for hydropower development. When policymakers decided on the new FIT, the MEMR and PLN took on board policy recommendations and cost estimates based on studies submitted by RE industry circles, under the wings of Masyarakat Energi Terbarukan Indonesia (METI, Renewable Energy Society) (Interview 1 and Interview 2). However, the studies came up mainly with cost estimates of private hydropower developers and did not include other RE fuel sources. The MEMR used these as the main inputs to design MR No. 31/2009, much to the complaints of non- hydropower developers (Interview 2).

As a result, since 2010 the regulation has increased the number of approvals for PPAs of small and medium hydropower projects (SMHPPs), reportedly by around 200 (Interview 3). News reports also confirm a massive increase in signed hydropower PPAs, as PLN announced plans to buy power from 130 MHP plants, most of them outside Java and set to start commercial operation in 2013.24

Predictably, non-hydro RE project developers were not happy with the revised 2009 FITs. Specifically, biomass developers immediately started to lobby for prices more suitable for the various existing technologies in the industry and presented proposals to PLN and the MEMR (Winarno 2011). They argued that biomass prices are especially cost effective when compared to diesel fuel costs and lobbied for prices in the range of 1,100–1,200 IDR/kWh (Interview 1). Industry representatives also suggested that PLN’s benchmark price for biomass was at least a base price of 900 IDR/kWh in 2010, based on PLN’s purchase of electricity supplied biomass plants operated by PT. Growth Sumatra Steel Industry Ltd., a project developer in Makassar, South Sulawesi estimates that prices in the range of 1200 IDR/kWh outside the Java–Bali grid would create rates

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of return in the range of 25 per cent, which is more than satisfactory for developers (Interview 4).

In February 2012, the MEMR issued MR No. 4/2012 on PLN Purchasing Price of Renewable Electricity from Small and Medium Size Producers (1–10 MW). The regulation confirms the tariffs set under MR No. 31/2009, but added FITs for biomass, biogas and municipal solid waste and sanitary waste. The tariffs are set in the range of 850–1080 IDR/kWh for medium voltage and 1198–1398 IDR/kWh for low voltage classes. As is the case with hydropower and other renewable fuel, these FITs are multiplied by the f-factor, which varies across regions.

A new stipulation is that if PLN decides to buy power in excess or equal to the prevailing production costs (BPP), it must seek permission from the Director General of Electricity of the MEMR. Moreover, PLN is obliged to report provincial BPP prices to the Director General of Electricity every three months.

However, another revision followed with the issuance of MEMR MR No. 19/2013, which specifically revised the FITs for electricity based on municipal waste conversion and landfill technology. When compared to the FITs under MR No. 4/2012, the FIT for municipal waste management (Zero Waste Technology) was increased by 38 per cent to 1450 IDR/kWh for medium voltage and by 29 per cent to 1798 IDR/kWh for low voltage. The FIT for sanitary waste technology-based power (Landfill Technology) was increased by 47 per cent to 1250 (medium voltage).

FITs for small and medium hydropower producers were revised again in 2014 via MR No. 12/2014 and again in 2015 via MR No. 19/2015. The revisions stipulated a two-phase tariff schedule in a 20-year PPA contract. PLN will purchase power from producers with different tariffs for years 1–8 and 9–20 (see Table 3.1). Comparing the hydropower FIT regulations, they increased substantially between 2009 and 2015 (see Table 3.1).

57 Table 3.1: Hydropower feed-in tariffs for small and medium power producers

Ministry of Energy and Mineral

Resources regulation

Fixed rate Years 1–8 Years 8–20

IDR Cents IDR Cents IDR Cents

MR No. 31/2009 Up to 10 MW 656 6.3 Up to 250 kW 1,004 9.6 MR No. 12/2014 Up to 10 MW 1,075 9.1 750 6.3 Up to 250 kW 1,270 10.7 770 6.5 MR No. 19/2015 Up to 10 MW 1,560 12.0 975 7.50 Up to 250 kW 14.40 1,170 9.0

Note: Average annual exchange rates for 2009: 10,380 IDR/USD; 2014: 11,862 IDR/USD; 2015: 13,000 IDR/USD.

Recognising the growing international competitiveness of solar PV, the MEMR issued MR No. 17/2013 to regulate FITs for solar PV power plant developers. The Ministry issued a capacity quota tender with 140 MWp of total capacity offered in 80 locations across the country. Each project was less than 10 MW. The FIT was a ceiling price in the range of 25–30 cents/kWh. If developers used local content of at least 40 per cent, then they receive a higher FIT of 30 cents/kWh. In addition, the regulation stipulates a reverse bidding mechanism, meaning that the lowest bid by developers wins (MEMR MR No. 17/2013; Interview 5).

However, in 2015, MEMR Regulation No. 17/2013 was overturned by the Supreme Court after local manufacturers argued that the regulation did not provide sufficient incentives for local content. As a result, the tender process was stopped. At the time the regulation became invalid, seven developers had won bids, amounting to a total of 15 MW in seven locations. Signed FIT were in the range of 18–25 cents/kWh. Only two plants have been approved to go ahead in 2016.

In 2016, the Ministry issued a new FIT regulation, MEMR MR No. 19/2016, regarding Power Purchase from Solar Photovoltaic Plants by PT PLN. FITs range from 14.5

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cents/kWh in Java to 23 cents/kWh in Papua. In contrast to the previous regulation on the purchase of solar power, these FITs are not based on a reverse bidding mechanism, meaning that the bids of developers are evaluated based on non-price factors such as administrative, financial and technical capacity.

The nationwide total quota for generable solar energy is 250 MWp, with Java having the largest quota capacity at 150 MWp, and Papua and West Papua having the smallest quota capacity at 2.5 MWp each. The quota capacity will be offered gradually by PLN through several tender projects, in which PLN will determine the maximum quota capacity that can be bid for by solar plant developers. For a project with of more than 100 MWp quota capacity, each solar plant developer can only bid for up to 20 MWp of the quota capacity. For a project between 10 MWp and 100 MWp quota capacity, each solar plant developer can propose a maximum 20 per cent of the quota capacity. There is no limit for projects under 10MWp.

Regarding local content, the new regulation requires solar plant developers to comply with the minimum local content requirements as stipulated by Ministry of Trade and Industry regulations.25

3.5

Project implementation of small and medium power producers under