Investor Presentaiton
REGULATION
MEMR Reg No.50/2017: Lower tariffs for renewables
After the issuance of MEMR Reg. No. 12/2017, the renewables tariffs were started to be capped at 85% of PLN generation cost (BPP). Under the
MEMR Reg. No. 50/2017, when local BPP is higher than national BPP, geothermal and WTE power plants will get tariffs at maximum 100% of
local BPP while the other renewables will be 85% of local BPP. Meanwhile, when local BPP is lower than national BPP, tariffs will be based on
business-to-business agreement. The Regulation 50 provides lower tariffs for renewables compared to previous regulations where the FIT
scheme was used. Issued by the end of 2017, the regulation has been seen as one of main factors that negatively impacts the bankability of
renewables projects in Indonesia.
Low tariff in Java-Bali grid
The low BPP makes renewables development
in Java-Bali unattractive. The slow renewables
development in these regions will likely cause
the country miss its renewables target, as 80%
of electricity demand in Indonesia is in
Java-Bali.
BOOT scheme for all renewables
MEMR Reg No. 10/2017 introduced BOOT scheme
for geothermal, large hydro, and biomass power
plants. MEMR Reg No. 50/2017 requires all types of
renewables to follow the BOOT scheme.
With the BOOT scheme, the power plant assets
cannot be used as collateral. The small IPPs then
face difficulties to get financing because they do
not have assets that can be used as collateral.
BPP does not reflect the true
cost of generation
It is unclear how PLN calculates the BPP. For
example, several power plants were funded by
grants, which reduce significantly the
generation cost of the power plant.
The coal price cap introduced in early 2018
(MEMR Decree 1395K/30/MEM/2018) will also
push down the BPP and put renewables at a
disadvantage.
IESR (Institute for Essential Services Reform) | www.iesr.or.id
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