Indonesia FiT: Implementation and Improvement Challenges

Fabby Tumiwa Institute for Essential Services Reform Renewable Energy Policy and Regulation: Workshop on FiT Policy ADB, Manila, 20-21 June 2011

Indonesia Electricity Market at Glance

Vertically integrated state-owned utility (PLN)

PLN has a monopoly power, control >98% of electricity market 38 million consumers (Social, Public, Residential, Business and Industrial)

Electricity tariff is highly regulated by the government

PLNs electricity production cost is varies among the region/provinces Cross subsidy scheme (among consumers, among region) PLN recovers about 60-65% of the cost from regulated electricity tariff, and the remaining comes from government subsidy

New Electricity Law in 2009 promotes new industry structure, encourage local government, and private sector to invest, and theoretically ending PLNs monopoly

National Electrification Ratio

NAD 90,85% Sumut 79,05% Riau 58,66%

Kepri 44,45% Kalteng 57,07% Kalbar 58,34% Sumsel 56,39% Babel 68,73% Jakarta 100% Kaltim 65,25% Gorontalo 46,79% Sulut 65,84% Malut 63,84% Papua Barat 41,87% Sulbar 60,85%

Sumbar 71,13% Jambi 75,71% Bengkulu 61,11% Lampung 61,25%

Sulteng 56,04% Sultra 47,11%

Kalsel 70,53%

Maluku 72,62% Bali 70,87% Sulsel 65,93% Papua 31,61%

Banten 67,29% Jabar 69,04%

Jateng 70,42%

DIY 75,70%

Jatim 65,54%

NTB 31,20%

NTT 29,10%

15% 6% 6% 47% Coal Natural Gas 26% Hydro Geothermal Diesel Oil

ENERGY MIX FOR ELECTRICITY GENERATION (2010)

88% electricity generation come from fossil fuel (coal, natural gas, and diesel oil), the remaining from geothermal and hydro. Total energy generated was 172 TWh in 2010

Additional Capacity Expansion Plan (2010 2010)

9.000 8.000 7.000

M W

8.643

Total : 55,484 MW

Additional capacity is 55,484 MW from 2010 to 2019)

PLN: 31.958 MW IPP 23.525MW

6.248
6.000 5.000

6.607 6.565 5.490 5.596 4.586 4.985

4.156
4.000 3.000 2.000 1.000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Average: 5,500 MW/year

2.608

PLTU
Source: RUPTL 2010-2019

PLTP

PLTGU

PLTG

PLTD
5

PLTA

PLTU: Coal PP PLTPL Geothermal PP PLTG: Natural Gas PP PLTD: Diesel PP PLTA: Hydro (large/Mini Hydro)

Basic Feed in Tariff for RE

MEMR Regulation No. 31/2009

Applied for any RE power plant up to 10 MW and excess power On-grid connectivity Mandatory for PLN to purchase using a standard PPA contract (developed by PLN) Fixed tariff, with two variables of differentiation: grid connectivity and location PLN can purchase another electricity from small, medium RE plant and excess power with different tariff based on PLNs estimation cost, with the approval of tariff come from the minister

Cont

Differentiation tariff rate based on grid connection and geographical location, determined by a multiplayer F- factor
Connected to low-voltage grid: Rp. 1004 ($0.118)/kWh x F Connected to mediumvoltage grid: Rp. 656 ($0.077)/kWh x F
F=1 for Java & Bali F = 1.1 for Sumatra & Sulawesi F = 1.2 for Kalimantan, NTB and NTT F = 1.3 for Maluku and Papua

Formula is developed based on evolvement of purchasing tariff for micro/mini-hydro The differentiations are based on the electricity production cost

Various electricity production cost (2008)

Jawa, Madura & Bali (Jakarta)

Maluku

Papua

LV MV HV

East Kalimantan

North Sumatra (Aceh)

250

500

750

1000

1250

1500

1750

2000

2250

2500

2750

3000

3250

FiT for Geothermal

Government objective is to develop geothermal power capacity up to 6000 MW by 2020. MEMR Regulation No. 02/2011
Fixed rate: up to $ 0.097/kwh Connected to the high voltage-grid Mandatory for PLN to purchase Standardized PPA for all projects

Fiscal incentive for geothermal developer : VAT exemption for geothermal equipments

Challenges for implementing Basic Renewables FiT

Application of FiT: suitable for mini and small hydro, but not for others technology and size for hydro (such solar PV, biomass/biogas, wind, etc).
Applicability for the feed-stock based technology, such as biomass, is questionable By default it creates a cap (up to 800 MW) for mini and small hydro-power No review mechanism currently in place

Supporting Infrastructure: limit of grid availability to reach potential projects site

No grid priority determined No FiT support for off-grid application

Cont

Market development: unclear how the market for RE can be developed, and innovation is promoted
Participation of individual and small investors are questionable Technology innovation is questionable

Financing: subsidized by PLN & government

No specific funding available for FiT PLN blends cost of purchasing RE into its production cost calculation, that will determine the level of subsidy from government

Public/consumer benefits
Excessive return on investment for mini-hydro investment (> 20%). No direct link to the quality of services (improving reliability)

Move from Bad FiT to Good FiT

Linking FiT with the broad national policy objective (e.g. renewable energy target 25/25) Develop/improve policy and regulatory capacity of the policy maker and energy regulator institution Develop FiT based on the key policy success elements: Payment based on RE generation Differentiating the tariff prices to account for different technologies, project sizes, locations, and resource intensities Guaranteed grid access (investment for grid expansion) Eligibility for all users and RE developers A reliable purchase obligation Financing supports Ensuring high degree of transparency and accountability, ensure public benefits.

THANK YOU
fabby@iesr.or.id www.iesr-indonesia.org