Reed Smith Client Alerts

In this alert, we review the progress that has been made in the Indonesian renewable energy sector so far in 2020 and look forward to what we expect to see in the sector for the remainder of the year.

Two key themes have dominated the first half of the year, namely, the continued lack of progress towards the nation’s 23 per cent renewable energy goal and the impact of the COVID-19 pandemic on the renewable energy sector.

Authors: Matthew Gorman Gerald Licnachan Bree Miechel Kohe Hasan Zi Han Shiah

Introduction

In the third iteration of its annual report published in December 2019, Indonesia’s Institute for Essential Services Reform (IESR) did not pull any punches when it observed that:

“The findings in this report should be used as a wake-up call for President Joko Widodo, that he needs to consolidate his best efforts to reach the RUEN [Rencana Umum Energi Nasional (National Energy Masterplan)] target in 2025. To stay on track, not less than 35GW of renewable energy capacity have to be added by 2025, translating into $70 to 90 billion investments in the sector.”1

The same report also noted that:

“The renewable generation mix has been stagnant since 2011, ranging around 11% to 13% of electricity mix with hydropower and geothermal the main contributors to the mix.”

The key findings of the report included that:

  • of 75 renewable energy power purchase agreements (PPAs) inked between 2017 and 2018, 27 were still to reach financial close; and
  • the bankability of PPAs due to the negative impact of Ministry of Energy and Mineral Resources (MEMR) Regulation 10/2017 on the basic provisions of power purchase agreements and MEMR Regulation 50/2017 on the tariff framework applicable to renewable energy projects (MEMR Reg 50/17) remained a significant impediment to renewable energy projects in 2019.