Indonesia issues new quota for rooftop solar system development
2024-07-04 17:57

In June 2024, Indonesian authorities issued a quota for the development of rooftop solar systems by the state electricity utility PLN for the period 2024-2028, aiming to add 5.75GW of installed PV capacity to the country.

Indonesian think tank IESR said the total rooftop solar PV quota for 11 power systems between 2024 and 2028 is 5,746MW, which can be categorized as 901MW in 2024, 1,004MW in 2025, 1,065MW in 2026, 1,183MW in 2027 and 1,593MW in 2028.

IESR added that even with the release of the new quota, it is still not in line with the National Strategic Plan target set in 2021 to reach 3.6GW of rooftop solar capacity by 2025.

As of May 2024, Indonesia's installed rooftop solar capacity was only 0.192 MWp, according to research firm Rystad Energy.

Are the goals achievable?

Indonesia previously set renewable energy targets, hoping that by 2025, the country's share of renewable power generation in the energy mix will reach 23%.

According to Mada Ayu Habsari, general chairman of the Indonesian Solar Energy Association (ISEA), the size of the rooftop PV quota provides a "positive signal" for the Indonesian solar industry, providing certainty for domestic developers and making it easier for them to develop business plans. The size of the rooftop PV quota provides a "positive signal" for Indonesia's solar industry, providing certainty for domestic developers and making it easier for them to develop business plans.

IESR executive director Fabby Tumiwa said quotas could play a role in Indonesia's target of 23 percent of the country's national energy mix by 2025, although renewable power plants would need an additional 10GW of generating capacity.

Rystad Energy renewable energy and power analyst Nevi Cahya Winofa said Indonesia has the potential to meet the rooftop solar installation quota as the main driver will be in the commercial and industrial (C&I) sector.

She said, "This growth is due to the 3-5 percent rate of return (IRR) for C&I projects, as well as higher self-use rates and efforts to meet decarbonization targets."

However, Winofa added that to ensure continued growth in rooftop solar, the IRR would have to increase to 15 percent, which would need to be augmented by the introduction of additional financial incentives.

"Obstacles" to major development: tariffs, 60% localization

Indonesia's development of rooftop solar power to increase installed capacity still needs to address several challenges.Winofa said that low retail electricity prices and weak financial incentives have led to the current slow development of rooftop PV in Indonesia.

"Currently, Indonesia's industrial and commercial and residential electricity prices are $0.068/KWh and $0.1/KWh, respectively, which is relatively low compared to Southeast Asia's rooftop PV leaders, such as Vietnam, whose industrial and commercial electricity prices are $0.1 per KWh and residential electricity prices are $0.12 per KWh. " Winofa said.

Lower retail electricity prices reduce the incentive to install rooftop PV systems for significant electricity bill savings. The Indonesian government recently canceled the net metering program for solar rooftops in MEMR Reg. 2/2024.

This decision is expected to "seriously undermine the economic viability of rooftop solar PV systems, especially residential solar PV systems," according to Winofa.

In addition, solar developers can only build solar PV plants if they meet a 60% localization requirement. This stringent requirement and reliance on imports has hindered the implementation of PV in Indonesia.

Winofa added: "The immaturity and scalability of domestic production is limited compared to imports, resulting in higher costs."

Last year, Indonesia's state-owned utility PLN and UAE's state-owned renewable energy developer Masdar jointly launched the Cirata floating solar PV plant with an installed capacity of 145MWac (192MWp) in Indonesia's West Java province.

The project's power purchase agreement is also facing extensions due to the need for exemptions from relaxed localization requirements, according to Winofa.

Excessive construction of coal-fired power plants and over-forecasting of demand have also slowed down renewable energy access to the grid. As a result, PLN will have to wait two to three years to absorb the excess capacity.

Indonesia's potential to increase installed solar capacity.

Despite the challenges, Indonesia still has the potential to increase installed solar capacity.

According to Rystad Energy's analysis, the cost of large-scale ground-mounted solar projects in Indonesia has declined from about $2.6/MW in 2013 to $0.8/MW in 2024, a price that is in the range of the total global cost of solar ($0.5 to $1.8/MW).

Finally, the Indonesian government released a draft Comprehensive Investment and Policy Plan last year, which estimates that Indonesia has the potential to install 3.3TW of installed solar capacity, the most of any renewable energy source, based on the amount of sunlight the country receives, and offshore wind has the second highest potential at 94.2GW.


Tags:PV , renewable energy