The Government of Indonesia (“GoI”) has just issued the much-anticipated Presidential Regulation No. 112 of 2022 on the Acceleration of Renewable Energy Development for Electricity Supply (“PR 112/2022”). Although it has not completely met the expectations of businesses, certain provisions of PR 112/2022 clearly show the constant and serious efforts made by the GoI to accelerate and encourage the use of renewable energy, such as (i) introducing the Highest Benchmark Price (Harga Patokan Tertinggi) as the basis for fixing the electricity purchase price, (ii) mandating early termination of existing Power Purchase Agreements (“PPA”) associated with coal-fired power generation, and (iii) being more lenient with renewable energy licensing.
A. Electricity Purchase Price
Despite considerable demands from the market that the GoI adopt the Feed-in Tariff scheme, the GoI eventually decided to set the electricity purchase price based on either (i) the Highest Benchmark Price, or (ii) the negotiated price (harga kesepakatan), with or without regard to the location factor. Details on the Highest Benchmark Price in various regions can be found in Annexes 1 and 2.
1. Highest Benchmark Price (Harga Patokan Tertinggi)
Instead of relying on PLN’s power generation costs (Biaya Pokok Pembangkitan – “BPP”) as the basis for setting the purchase price of electricity from renewable energy sources, businesses are now required to apply the Highest Benchmark Price.
Principally, the Highest Benchmark Price scheme is similar to the previously applied BPP scheme in that it serves as a point of reference for setting the electricity purchase price. However, please note that although the Highest Benchmark Price is set in the USD currency, PR 112/2022 requires that all payments be made in Rupiah (IDR) according to the Jakarta Interbank Spot Dollar Rate (JISDOR).
The Ministry of Energy and Mineral Resources (“MEMR”) in coordination with the Ministry of Finance (“MOF”) and the Ministry of State-Owned Enterprises (“MSOE”) will evaluate the Highest Benchmark Price by taking into account the average contract price under the prevailing PPAs to which PLN is a party. The Highest Benchmark Price is the upper limit on the negotiated price for all renewable energy and its expansion and excess power.
Any electricity purchase price that is determined by reference to the Highest Benchmark Price is deemed to be automatically approved by the MEMR, and therefore no separate approval from the MEMR is needed. Furthermore, with the exception of geothermal power, PR 112/2022 affirms that there will be no escalation of the electricity purchase price during the term of the PPA.
2. Negotiated Price (Harga Kesepakatan)
The negotiated price is set to apply only to (i) hydropower generated by a peaker, (ii) biofuel, and (iii) ocean power.
Under this price-setting scheme, the electricity purchase price should be negotiated and agreed upon between the Independent Power Producers (IPPs) and PLN. Unlike the Highest Benchmark Price, the negotiated price is subject to the prior approval of the MEMR.
Notwithstanding the Electricity Purchase Price schemes described above, it is important to note that a different calculation scheme is used to fix the Power Grid Facility Price (Harga Fasilitas Jaringan Tenaga Listrik). The Power Grid Facility Price is determined based on the agreement between the parties at the maximum price of 30% of the Electricity Purchase Price (or 60% in the case of solar or wind power using batteries or other electricity storage). Otherwise, approval from the MEMR is required.
B. Procurement
There is no significant difference between PR 112/2022 and the previous regulation concerning the procurement process of renewable projects. The procurement is carried out through either direct appointment or direct selection, subject to certain conditions set under PR 112/2022.
1. Direct Appointment (Penunjukan Langsung)
The direct appointment method may be adopted if the following criteria are met:
- Hydropower Generation Utilizing Reservoirs or Multipurpose Development Irrigation Channels.
- Geothermal power generation from the holder of a geothermal-related business license or joint operation contract.
- Expansion projects of renewable energy other than ocean energy and biofuel.
- Excess power of geothermal, hydro, biomass, and biogas power generation.
2. Direct Selection (Pemilihan Langsung)
The direct selection method is carried out by using the lowest price bidding system based on the Highest Benchmark Price. If there is only one eligible participant after a direct selection and a re-direct selection, the method will be changed to the direct appointment method.
C. Status of Coal-Fired Power Generation
To accelerate the implementation of renewable energy, PR 112/2022 (i) mandates the GoI to accelerate the termination of existing coal-fired power generation; (ii) prohibits new development of coal-fired power generation, unless it meets certain criteria, including, for example, the project has been set out in the existing Electricity Supply Business Plan (Rencana Usaha Penyediaan Tenaga Listrik – RUPTL).
According to PR 112/2022, any early termination of PPAs requires written approval from the MOF and the MSOE respectively.
D. Notable Transitional Provisions
If, before the issuance of PR 112/2022, an IPP has (i) completed the procurement process and (ii) submitted the proposed negotiated purchase price to the MEMR but the proposed negotiated price has not been approved, the electricity purchase price will be determined based on the proposed negotiated price provided that such proposed purchase price is equal to or lower than the price set by PR 112/2022. Otherwise, the proposed negotiated purchase price must be approved by the MEMR.
Any ongoing procurement of renewable energy projects will be subject to the provisions of PR 112/2022.
Investors in the field of renewable energy seem to have mixed responses to the issuance of this presidential regulation. To some extent, we could see the effort of the GoI to strike a balance between the interests of investors and those of PLN, although we suppose some provisions may need further clarification to be implemented effectively. It is interesting to see how the GoI is responding to the market feedback, particularly pending the enactment of the renewable energy bill.
If you have further inquiries about this newsletter, please reach out to us at info@wplaws.com or any of our lawyers.
Annex 1
Renewable Energy Purchase Price Based on PR 112/2002
1. Electricity Purchase Price from Hydropower Generation Utilizing Water Streams/Waterfalls
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.23 x F)* | 7.02 |
| 2. | >1 MW to 3 MW | (10.92 x F)* | 6.82 |
| 3. | >3 MW to 5 MW | (9.65 x F)* | 6.03 |
| 4. | >5 MW to 20 MW | (9.09 x F)* | 5.68 |
| 5. | >20 MW to 50 MW | (8.86 x F)* | 5.54 |
| 6. | >50 MW to 100 MW | (7.81 x F)* | 4.88 |
| 7. | >100 MW | (6.74 x F)* | 4.21 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
2. Electricity Purchase Price from Hydropower Generation Utilizing Reservoirs or Multipurpose Development Irrigation Channel Owned by the State.
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.23 x 0.8 x F)* | 7.02 x 0.8 |
| 2. | >1 MW to 3 MW | (10.92 x 0.8 x F)* | 6.82 x 0.8 |
| 3. | >3 MW to 5 MW | (9.65 x 0.8 x F)* | 6.03 x 0.8 |
| 4. | >5 MW to 20 MW | (9.09 x 0.8 x F)* | 5.68 x 0.8 |
| 5. | >20 MW to 50 MW | (8.86 x 0.8 x F)* | 5.54 x 0.8 |
| 6. | >50 MW to 100 MW | (7.81 x 0,8 x F)* | 4.88 x 0.8 |
| 7. | >100 MW | (6.74 x 0.8 x F)* | 4.21 x 0.8 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
3. Electricity Purchase Price from Hydropower Generation Expansion
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.23 x 0.7 x F)* | 7.02 x 0.7 |
| 2. | >1 MW to 3 MW | (10.92 x 0.7 x F)* | 6.82 x 0.7 |
| 3. | >3 MW to 5 MW | (9.65 x 0.7 x F)* | 6.03 x 0.7 |
| 4. | >5 MW to 20 MW | (9.09 x 0.7 x F)* | 5,68 x 0,7 |
| 5. | >20 MW to 50 MW | (8.86 x 0.7 x F)* | 5.54 x 0.7 |
| 6. | >50 MW to 100 MW | (7.81 x 0.7 x F)* | 4.88 x 0.7 |
| 7. | >100 MW | (6.74 x 0.7 x F)* | 4.21 x 0.7 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
4. Electricity Purchase Price from the Excess Power of Hydropower Generation
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|---|---|---|
| 1. | All Capacity | 5.80 x 0.7 |
5. Electricity Purchase Price from Solar Power Generation (Excluding Battery Facilities or Other Power Storage Facilities)
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.47 x F)* | 6.88 |
| 2. | >1 MW to 3 MW | (9.94 x F)* | 5.97 |
| 3. | >3 MW to 5 MW | (8.77 x F) * | 5.26 |
| 4. | >5 MW to 10 MW | (8.26 x F)* | 4.96 |
| 5. | >10 MW to 20 MW | (7.94 x F)* | 4.76 |
| 6. | >20 MW | (6.95 x F)* | 4.17 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
6. Electricity Purchase Price from Photovoltaic Solar Power Generation Expansion (Excluding Battery Facilities or Other Power Storage Facilities)
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.47 x 0.8 x F)* | 6.88 x 0.8 |
| 2. | >1 MW to 3 MW | (9.94 x 0.8 x F) * | 5.97 x 0.8 |
| 3. | >3 MW to 5 MW | (8.77 x 0.8 x F)* | 5.26 x 0.8 |
| 4. | >5 MW to 10 MW | (8.26 x 0.8 x F)* | 4.96 x 0.8 |
| 5. | >10 MW to 20 MW | (7.94 x 0.8 x F)* | 4.76 x 0.8 |
| 6. | >20 MW | (6.95 x 0.8 x F)* | 4.17 x 0.8 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
7. Electricity Purchase Price from Photovoltaic Solar Power Generation which the Project Land is Provided by the Government (Excluding Battery Facilities or Other Power Storage Facilities)
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.47 x 0.95 x F)* | 6.88 x 0.95 |
| 2. | >1 MW to 3 MW | (9.94 x 0.95 x F) * | 5.97 x 0.95 |
| 3. | >3 MW to 5 MW | (8.77 x 0.95 x F) * | 5.26 x 0.95 |
| 4. | >5 MW to 10 MW | (8.26 x 0.95 x F)* | 4.96 x 0.95 |
| 5. | >10 MW to 20 MW | (7.94 x 0.95 x F)* | 4.76 x 0.95 |
| 6. | >20 MW | (6.95 x 0.95 x F)* | 4.17 x 0.95 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
8. Electricity Purchase Price from Wind Power Generation (Excluding Battery Facilities or Other Power Storage Facilities)
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | to 5 MW | (11.22 x F)* | 6.73 |
| 2. | >5 MW to 20 MW | (10.26 x F) * | 6.15 |
| 3. | >20 MW | (9.54 x F)* | 5.73 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
9. Electricity Purchase Price from Wind Power Generation Expansion (Excluding Battery Facilities or Other Power Storage Facilities)
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | to 5 MW | (11.22 x 0.7 x F)* | 6.73 x 0.7 |
| 2. | >5 MW to 20 MW | (10.26 x 0.7 x F) * | 6.15 x 0.7 |
| 3. | >20 MW | (9.54 x 0.7 x F)* | 5.73 x 0.7 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
10. Electricity Purchase Price from Biomass Power Generation
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.55 x F)* | 9.24 |
| 2. | >1 MW to 3 MW | (10.73 x F)* | 8.59 |
| 3. | >3 MW to 5 MW | (10.20 x F)* | 8.16 |
| 4. | >5 MW to 10 MW | (9.86 x F)* | 7.89 |
| 5. | >10 MW | (9.29 x F)* | 7.43 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
11. Electricity Purchase Price from Biomass Power Generation Expansion
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (11.55 x 0.8 x F)* | 9.24 x 0.8 |
| 2. | >1 MW to 3 MW | (10.73 x 0.8 x F)* | 8.59 x 0.8 |
| 3. | >3 MW to 5 MW | (10.20 x 0.8 x F)* | 8.16 x 0.8 |
| 4. | >5 MW to 10 MW | (9.86 x 0.8 x F)* | 7.89 x 0.8 |
| 5. | >10 MW | (9.29 x 0.8 x F)* | 7.43 x 0.8 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
12. Electricity Purchase Price from Biogas Power Generation
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (10.18 x F)* | 6.11 |
| 2. | >1 MW to 3 MW | (9.81 x F)* | 5.89 |
| 3. | >3 MW to 5 MW | (8.99 x F)* | 5.39 |
| 4. | >5 MW to 10 MW | (8.51 x F)* | 5.10 |
| 5. | >10 MW | (7.44 x F)* | 4.46 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
13. Electricity Purchase Price from Biogas Power Generation Expansion
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 1 MW | (10.18 x 0.8 x F)* | 6.11 x 0.8 |
| 2. | >1 MW to 3 MW | (9.81 x 0.8 x F)* | 5.89 x 0.8 |
| 3. | >3 MW to 5 MW | (8.99 x 0.8 x F)* | 5.39 x 0.8 |
| 4. | >5 MW to 10 MW | (8.51 x 0.8 x F)* | 5.10 x 0.8 |
| 5. | >10 MW | (7.44 x 0.8 x F)* | 4.46 x 0.8 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
14. Electricity Purchase Price from the Excess Power of Biomass Power Generation and Biogas Power Generation
| No | Type of Power Generation | Highest Benchmark Price (cent USD/kWh) |
| 1. | PLTBm (biomass) | 9.29 |
| 2. | PLTBg (biogas) | 7.44 |
15. Electricity Purchase Price from Geothermal Power Generation which Entirely Built by Business Entities and Entirely or Partially Built by the Central Government or Regional Governments, Including those from Grants
a. Electricity Purchase Price
| No. | Capacity | Highest Benchmark Price (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 10 MW | (9.76 x F)* | 8.30 |
| 2. | >10 MW to 50 MW | (9,41 x F)* | 8.00 |
| 3. | >50 MW to 100 MW | (8,64 x F)* | 7.35 |
| 4. | >100 MW | (7,65 x F)* | 6.50 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
b. The Purchase Price of Geothermal Steam Equivalent to Electricity (Tenaga Uap Panas Bumi Setara Listrik)
| No. | Capacity | The Purchase Price of Steam Equivalent to Electricity (cent USD/kWh) |
|
|---|---|---|---|
| Year 1 to 10 | Year 11 to 30 | ||
| 1. | up to 10 MW | (6.60 x F)* | 5.60 |
| 2. | >10 MW to 50 MW | (6.25 x F)* | 5.31 |
| 3. | >50 MW to 100 MW | (5.48 x F)* | 4.65 |
| 4. | >100 MW | (4.48 x F)* | 3.81 |
Remarks:
* The highest benchmark price is the price multiplies with F factor.
16. Electricity Purchase Price from Solar Photovoltaik, Hydro, Wind, Biomass, and Biogas which Entirely Built by the Central Government or Regional Governments, including those from Grants
| No | Type of Power Generation | Highest Benchmark Price (cent USD/kWh) |
| 1. | Hydro | 3.76 |
| 2. | Solar | 5.63 |
| 3. | Wind | 5.63 |
| 4. | Biomass | 9.29 |
| 5. | Biogas | 7.44 |
Annex 2
Number of Location Factor (F)
| No. | Area | Entire Capacity |
|---|---|---|
| 1. | Java, Madura, Bali | 1.00 |
| – Small Island | 1.10 | |
| 2. | Sumatra | 1.10 |
| – Riau Islands | 1.20 | |
| – Mentawai | 1.20 | |
| – Bangka Belitung | 1.10 | |
| – Small Island | 1.15 | |
| 3. | Kalimantan | 1.10 |
| – Small Island | 1.15 | |
| 4. | Sulawesi | 1.10 |
| Small Island | 1.15 | |
| 5. | Nusa Tenggara | 1.20 |
| – Small Island | 1.25 | |
| 6. | North Maluku | 1.25 |
| – Small Island | 1.30 | |
| 7. | Maluku | 1.25 |
| – Small Island | 1.30 | |
| 8. | West Papua | 1.50 |
| 9. | Papua | 1.50 |