{"id":3410,"date":"2018-09-27T05:14:41","date_gmt":"2018-09-27T05:14:41","guid":{"rendered":"http:\/\/www.purnomoyusgiantorocenter.org\/?p=3410"},"modified":"2020-11-16T04:57:04","modified_gmt":"2020-11-16T04:57:04","slug":"brief-notes-for-indonesias-feed-in-tariff-fit-implementation","status":"publish","type":"post","link":"https:\/\/www.purnomoyusgiantorocenter.org\/brief-notes-for-indonesias-feed-in-tariff-fit-implementation\/","title":{"rendered":"Brief Notes for Indonesia\u2019s Feed-in Tariff (FIT) Implementation"},"content":{"rendered":"

By : Massita Ayu Cindy<\/a><\/strong><\/span><\/p>\n

In March 2017, the Indonesian government authorized the General Planning for National Energy (RUEN) under the Presidential Regulation Number 22 of 2017. One of the most important aspects in the RUEN is the stipulation of the New and Renewable Energy (NRE) target of at least 23 percent (92,3 MTOE) in 2025 and continue to be at least 31.2 percent (315,7 MTOE) in 2050 of total primary energy use. In addition, the Ministry of Energy and Mineral Resources (MEMR) has also formulated a new regulation concerning the Utilization of Renewable Energy Resources for Electricity Supply under the MEMR Regulation No.12\/2017 in January 2017. Still, MEMR Regulation 12\/2017 has raised many protests from relevant parties, especially regarding the reference tariff, which stated that the ceiling price would be taken based on the local cost of generation (Biaya Pokok Penyediaan Pembangkitan<\/em>, BPP). In some regions especially in the urban area, the BPP is way lower than the Levelized Cost of Electricity (LCOE) of most types of renewable energy plants in Indonesia. As a result, seven months later after the publication of MEMR Regulation 12\/2017, the government introduced its revision under the MEMR Regulation 50\/2017. It seems that in 2017, the government manages to show their ambition in accelerating the NRE development, especially in the power generation sector.<\/span><\/p>\n

Unlike several years ago in which State-owned Electricity Utility (Perusahaan Listrik Negara, PLN) owned and operated almost all the nation power generations, in recent years about half of the new capacity were came from the private sector or Independent Power Producer (IPP) under a particular Power Purchase Agreement (PPA). The presence of the IPP as investors is essential to achieve the national energy target since it is almost impossible for PLN to do all the tasks alone. Thus, it is necessary to bring the proper investment climate to boost up the development of NRE in Indonesia. On the contrary, the latest Renewable Energy Country Attractiveness Index (RECAI) report from Ernst and Young in 2017 has shown very different result. Indonesia laid in the rank 38 of the top 40 most attractive countries in 2015 and 2016, while Indonesia is no longer classified as the top 40 in 2017[1]<\/a>. Furthermore, although there were 70 contracts which were signed by IPP \u2013 PLN in 2017, but only 17 projects have started the construction phase in 2018, while about 46 projects considered as failed and should be re-evaluated or even to be stopped by the government. The project failure itself probably caused by financial problems such as loan disapprovals and the unattractive Internal Rate of Return (IRR). Many believe that the tariff government proposed in Feed-in Tariff (FiT) was way lower than the LCOE which make it economically hard or even impossible for some projects, as well as the implementation of Build, Own, Operate, Transfer (BOOT) in most of the NRE sector except for waste to energy sector which has become another issue. Thus, it is understandable if government prioritize affordability rather than the high cost of green energy as it was delivered by the Minister of Energy and Mineral Resources[2]<\/a>, although it should not obstruct the development of renewable energy. It is necessary to formulate the optimum contract scheme so that both the government and investors could achieve their interests.<\/span><\/p>\n

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Figure 1. Economic Instrument for Renewable Energy<\/span><\/p>\n

Source : Renewable Global Status Report 2017, REN21.<\/span><\/p>\n

According to REN21, there are two most prominent forms of Feed-in policies for renewable power promotion in 2016; (1) feed-in tariffs (FITs) and (2) feed-in premiums (FIPs).[3]<\/a> The Feed in Tariff (FIT) is the most popular economic instrument scheme which is used in more than 50 countries around the world[4]<\/a> (see Figure 1). It is a policy that sets a guaranteed price for every kilowatt-hour of electricity produced by the power producer of renewable energy over a specified period. The payment could be based on varying aspects such as the technology type, resource quality, location and also capacity size. While the FIT provides the \u201cfix-price\u201d over some period of times, some countries such as Spain applys a different approach by giving a premium price which is higher than the electricity market price or called feed-in premiums (FIPs). Unlike the FIT, the FIP is highly dependent on the electricity market price as the payment price reference. The premium could be added in two ways, by \u201cconstant adder\u201d above the market price or \u201csliding adder\u201d within certain cap and floor price. Another economic instrument used in achieving the renewable energy target is through quota obligation and tender scheme. Quota obligation, or commonly named Tradeable Green Certificates (TGC) or Renewable Portfolio Standard (RPS), is the economic instrument which obligates producer, consumer or supplier to provide a certain amount of renewable energy capacity in a given year. For example, in California, suppliers have to provide 33 percent of renewable energy for their retail by 2020 and 50 percent by 2030.[5]<\/a> There are some options that could be selected to accommodate the quota obligation; 1) produce renewable energy; 2) buy renewable electricity; and 3) trade certificate. Conforming to the Renewable Global Status Report 2017, the tender scheme was one of the most rapidly expanding economic instrument for large scale of renewable energy project. Such as the project tender in general term, the lowest bidder is chosen to run the project. This allows the government to get the minimum price for the project. However, there are usually issues with cheap technologies and high insecurity of the industry due to the discontinued project.[6]<\/a><\/span><\/p>\n

In Indonesia, the Feed In tariff was introduced in July 2016 along with the new MEMR regulation No. 19\/2016 on power purchase of solar photovoltaic (PV) power generator. Subsequently in 2017, the Ministry of Energy and Mineral Resources applied the FIT to the new power purchase agreement (PPA) for of all kind of the renewable energy, except the municipal waste energy under the MEMR regulation No.12\/2017. The implementation of FIT itselfs did not guarantee the success of renewable energy development in the country. In fact, there is no economic instrument that proven to be the best instrument to support the development of renewable energy so far; with each has its advantages and disadvantages. For FIT implementation, the common problems are:<\/span><\/p>\n