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Promising Opportunities for Indonesia's Renewable Energy

If you could imagine how Indonesia becomes one of the world’s leaders in renewable, you wouldn’t be wrong since the country has an abundant supply of renewable energy with several challenges that need to be solved immediately. With the opening of its first-ever wind farm in South Sulawesi, I would expose several producers of renewable energy in Indonesia and promising opportunities that could be grasped by foreigners to expand their business.

Source: Wind Power

Indonesia's Renewable Energy Producers

According to PwC, 13 operational renewable energy projects are part of the 75 sales and purchase agreements signed from 2017 to 2018 with a total capacity of 68.25 MW. Out of the 13 projects, 11 projects were signed in 2017, while 2 projects were signed in 2018. The 13 projects are as follows, with the latter projects were signed in 2018:

1. Pakkat PLTA (Hydropower Plant) with a capacity of 18 MW

2. Nengar PLTM (Micro-hydro Power Plant) (excess power) with 1 MW capacity

3. Tanjung Tirta PLTM with 8 MW capacity

4. Kincang I PLTM with 0.35 MW capacity

5. Motra Puding Mas PLTBg (Biogas Power Plant) (Excess Power) with 2 MW capacity

6. Tempilang PLTBm (Biomass Power Plant) with 6 MW capacity

7. Sengkol PLTS (Solar Power Plant) with 5.5 MW capacity

8. Selong PLTS with 5 MW capacity

9. Pringgabaya PLTS with 5 MW capacity

10. Kunci Putih PLTM with 0.9 MW capacity

11. Likupang PLTS with 15 MW capacity

12. Sawit Manunggal PLTBg (Excess Power) with 1 MW capacity

13. Sita PLTM with 1 MW capacity

In November 2017, PLN, state electricity company, signed power purchase agreements (PPAs) with nine independent power producers (IPPs) who will build power plants based on renewable resources in various capacities totalling 640.45 MW. The largest of these projects is a hydropower plant in Poso, Central Sulawesi, which will have a capacity of 515 MW and cost US$ 831 Million to build. The project will be an expansion of the existing 195-MW power plant owned by Kalla Group’s Poso Energy. The second-largest plant located in Rantau Dedap, South Sumatra will produce geothermal energy with a capacity of 86 MW. The remaining seven, which are micro-hydropower plants with an accumulated capacity of 39.65 MW, will be located in Java, Sumatra, Sulawesi and West Nusa Tenggara.

On the other hand, the 75 MW Sidrap Wind Farm project in the Sidrap, South Sulawesi is Indonesia’s first utility-scale wind farm and began providing power to the Southern Sulawesi PLN grid in March 2018. This project is located on a group of windy ridges along with a supportive local community that welcomed the project. It has been billed as the largest of its kind in Southeast Asia.

The Sidrap project is owned in partnership with AC Energy Holding (an Ayala Corporation subsidiary), a consortium of four companies with an investment of US$150 Million, with bank finance by the U.S. Overseas Private Investment Corporation. Numerous jobs in both project development and construction have been created with the majority being filled by the local citizens from the region. PLN will source electricity from the wind farm and distribute it to customers. The project would be part of a network of power plants that could provide an additional 750 MW of electricity for 1.1 Million households in South Sulawesi, Southeast Sulawesi and West Sulawesi.

Other than that, a total of 64,620 solar panels are neatly arranged in Wineru Village, Likupang Timur District, North Sulawesi Province. Thousands of solar panels are stretched over fields covering 29 hectares. The presence of a sun-catching device has been used by Vena Energy, Singapore-based renewable focuses on developing solar and wind power plants, as a new source of electrical energy since September 2019. The provider is also a private electricity producer for the Tolo Wind Power Plant (PLTB) in Jeneponto with a capacity of 72 MW and 3 Solar Power Plant in Lombok, West Nusa Tenggara with a capacity of 7 MWp each. With the total installed capacity in Likupang, this project is the largest solar power plant in Indonesia to date and provide invaluable support for the electricity system for North Sulawesi-Gorontalo with average daily distributed electricity reaching 15 MW.

Source: Mina News

Likupang solar power plant has been built since the late 2017 Power Purchase Agreement (PPA) and takes around 1.5 years with a total investment cost of US$ 29.2 Million. During the peak of construction activities, the project has been able to absorb up to 900 local workers. Meanwhile, when operating, 80% of the workers are the surrounding community.

During operation, the plant is able to electrify up to 15,000 households and reduce the greenhouse gas effect by 20.01 Kilotons.

Furthermore, PLN is looking to begin construction of the $129 Million Cirata floating solar power plant in West Java next year with support from Abu Dhabi-based renewables firm Masdar. The companies will kick off development of the 145 MW Cirata floating solar photovoltaic (PV) power plant after the power purchase agreement with Masdar has been signed. This project is expected to begin construction by early 2021. When it is fully operated, Cirata will be Indonesia’s largest solar power plant, taking over the title from the 15 MW Likupang plant in North Sulawesi.

Future Opportunities

The government is currently working on another wind farm in Jeneponto, also in South Sulawesi and plans to construct more in East Kalimantan and West Java. President Jokowi emphasized that Indonesia needed to invest more in other clean energy sources, like geothermal energy, water, wind and sunlight since the current sources are only capable of generating 2,000 MW, less than 10% of the targeted 35,000 MW.

The government is aiming for renewables to contribute 23% of power production by 2025, yet regulatory headwinds are setting the country back from achieving its goal. The regulation stipulates that Indonesia should have reached a 17.5% renewable power mix by 2019, yet the country only hit 12.36% that year. Among the frequently complained headwinds is Ministerial Regulation No. 50/2017 that introduced the build, own, operate, transfer (BOOT) scheme.

To catch up with Indonesia's green energy commitments, the government issued a regulation that scraps the unpopular BOOT scheme and erased a feed-in-tariff pricing policy, which is widely considered to be a very effective means of boosting green energy growth. The new regulation also enables Indonesia's sole off-taker, state-owned PLN, to sign power purchase agreements without conducting a bid under certain conditions. These few changes were meant to get stalled renewable projects going before a more powerful presidential regulation on renewable electricity pricing put new projects on the table. The presidential regulation is expected to be issued this year.

As a result, out of 75 renewable energy projects signed between 2017 and 2018 in Indonesia, 27 remain without financial close and five have been terminated as of October 2019, according to Institute for Essential Services Reform (IESR), Jakarta-based energy think tank. The new regulation also authorizes the energy minister to order state-owned power firm PLN to buy electricity from hydropower plants attached to government-built reservoirs from state-funded waste-to-energy power plants and from state-funded renewable energy power plants. The guarantees assume such government-backed projects operate in the best public interest. Hydropower and waste-to-power plants, for instance, serve a secondary role of providing irrigation and waste management systems, respectively.

With the commitment to achieve targeted green energy, Indonesia is a potential market for investors who want to invest in renewable energy. If you want to set up a new business in Indonesia, make sure you consider renewable energy as it could be one of the promising sectors to go ahead.

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