Indonesia’s Latest Policy on Rooftop Solar
After more than six months of back and forth between various stakeholders, on 20 August 2021, the Minister of Energy and Mineral Resources (“MEMR”) (with the endorsement of the President of Indonesia) issued Minister Regulation Number 26 of 2021 regarding Rooftop Solar Generation Connected to Power Grids Operated by Public Electricity Supply Operators (IUPTLU operators) (“MEMR Reg 26/2021”).
MEMR Reg 26/2021: (i) replaces MEMR Regulation Number 49 of 2018 (as lastly amended by MEMR Regulation Number 16 of 2019) (“MEMR Reg 49/2018”) regarding Utilisation of Rooftop Solar Generation Systems by Customers of PT Perusahaan Listrik Negara (Persero) (“PLN”); and (ii) disapplies the utilisation of rooftop solar systems by Rooftop Solar Operators (as defined below) from the application of MEMR Regulation Number 1 of 2017 regarding Parallel Operations between Certain Power Generation Providers and PLN’s Power Grid.
MEMR Reg 26/2021 was issued by the Government of Indonesia (“GOI”) to attract more homeowners and building owners in Indonesia to install rooftop solar systems on their homes and buildings (referred to here as “Rooftop Solar Operators”). To achieve this purpose, through MEMR Reg 26/2021, the GOI introduced the following features that were either a revision to the features previously provided for in MEMR Reg 49/2018 or are new features that were not previously provided for under MEMR Reg 49/2018:
in addition to regulating the export of electricity produced by Rooftop Solar Operators to PLN, the GOI now expressly regulates the export of electricity produced by Rooftop Solar Operators to other electricity supply operators who PSHP LAW World Trade Center 5, 11th Floor, Jl. Jend. Sudirman Kav. 29-31 Jakarta 12920, Indonesia p +62 21 522 9705-06 w www.pshp.law supply electricity to the public within an electricity business area (e.g. developers of industrial parks that generate and supply their own power within the industrial park) (referred to here as “Other Public Power Suppliers”).
the coefficient percentage for calculating the amount of electricity exported by rooftop solar operators to PLN or Other Public Power Suppliers has been increased from 65% to 100%.
the period for a Rooftop Solar Operator to offset any surplus of electricity supplied to PLN (or Other Public Power Suppliers) against monthly invoices rendered by PLN (or Other Public Power Suppliers) to the Rooftop Solar Operator is now based on a six-monthly period rather than a three-monthly period.
the period for PLN (or Other Public Power Suppliers) to approve or reject a proposal by a Rooftop Solar Operator to install a rooftop solar system (including to connect the system to the existing grid) is now five business days, as compared to the previous 15 business days.
the introduction of an application-based platform to simplify applications and submission of reports relating to the production and distribution of electricity from rooftop solar installations to the grid operated by PLN (or Other Public Power Suppliers);
the possibility for a Rooftop Solar Operator and PLN (or Other Public Power Suppliers) to enter into a carbon trade under a cap-and-trade program that will be introduced by the GOI; and
the establishment of a customer centre within the Directorate General of New, Renewable Energy and Energy Conservation (“EBTKE Directorate”) to formally handle complaints raised by Rooftop Solar Operators, PLN and/or Other Public Power Suppliers with respect to their dealings between one another.
Indonesia has vast potential for the development of up to 400 GW of renewable energy, out of which half of that capacity, approximately 200 GW could potentially be developed as solar energy. Currently, Indonesia has developed up to 170 MW of solar projects, a miniscule percentage of the 200 GW potential that is forecasted by the GOI1. To further demonstrate how far behind Indonesia is when it comes to developing solar energy projects, based on IRENA’s 2020 Solar Energy Data, the installed capacity for solar energy in Vietnam is approximately 16,504 MW, in Thailand approximately 2,983 MW and in Malaysia approximately 1,493 MW.
The GOI in various public forums has clearly set out its stance that it is committed to doing its part within the global arena to achieve energy transformation, in which green economy, green technology and green products will take its place within the Indonesian economy so that Indonesia can compete within the global market.
In light of the above, the GOI, through the MEMR is aiming to achieve 3,600 MW installed capacity for rooftop solar by 2025 and the issuance of MEMR Reg 26/2021 is hoped to attract more homeowners and building owners in Indonesia to install rooftop solar systems within their premises so as to achieve the GOI’s target.
KEY FEATURES OF REG 26/2021
We set out below a summary of the key features provided for in MEMR Reg 26/2021.
GOI now regulates the export of electricity produced by rooftop solar operators to Other IUPTLU Operators (in addition to the export of electricity to PLN) MEMR Reg 49/2018 had previously only regulated the export and import of electricity between Rooftop Solar Operators (i.e., homeowners and building owners who had installed rooftop solar systems on their homes or buildings) and PLN. In addition to the export and import of electricity between Rooftop Solar Operators and PLN, MEMR Reg 26/2021 now also regulates the export and import of electricity between Rooftop Solar Operators and Other Public Power Suppliers. As an example, the export and import of electricity between an industrial plant that has installed its own solar rooftop installation and the industrial park developer that generates and supplies power within its own industrial park is now regulated under MEMR Reg 26/2021. MEMR Reg 26/2021 provides that the maximum capacity of a rooftop solar installation that is installed in a home or building that is connected to the PLN grid is limited to 100% of the maximum capacity that PLN is supplying to that house or building2. For homes or buildings that are not connected to PLN’s grid but rather to a grid operated by Other Public Power Suppliers, the maximum capacity of a rooftop solar installation that may be installed in such home or building will be limited to the local electricity system declared by the relevant Other Public Power Supplier3 .
The removal of “PLN Standards” as one of the standards that must be complied with when installing a rooftop solar installation MEMR Reg 49/2018 had previously regulated that for purposes of ensuring the safety and reliability of the operations of the rooftop solar installation installed within a home or building, the installation had to either comply with the relevant Indonesian National Standards (SNI), International Standards or PLN Standards. Under MEMR Reg 26/2021, the application of PLN Standards has been removed and therefore any installation of a rooftop solar installation must comply with either the relevant SNI or International Standards.
The increase of the coefficient percentage for calculating the amount of electricity exported by Rooftop Solar Operators to PLN or Other Public Power Suppliers from 65% to 100% The amount of electricity payable by a Rooftop Solar Operator to PLN (or Other Public Power Suppliers) is calculated monthly based on the difference between the amount of electricity imported by the Rooftop Solar Operator from PLN (or Other Public Power Suppliers) and the amount of electricity exported by the Rooftop Solar Operator to PLN (or Other Public Power Suppliers). MEMR Reg 26/2021 now provides that each VA or Watt of electricity that is exported by a Rooftop Solar Operator to PLN or to an Other Public Power Supplier recorded at the export metering system will be taken into account when calculating the total amount of electricity exported in each month. Previously, under MEMR Reg 49/2018 only 65% of all VA or Watt of electricity exported to PLN would be taken into account when calculating the monthly amount of electricity exported to PLN. Prior to the issuance of MEMR Reg 26/2021, this increase of the coefficient percentage from 65% to 100% was a major concern for PLN as this increase would reduce PLN’s nett sale of electricity to its customers who have installed rooftop solar installations. As an illustration4, based on the expected target of realising 3,600 MW of rooftop solar installed capacity by 2025 in stages during the next four years, on a 65% coefficient percentage, PLN’s reduction in electricity sales is expected to be approximately 5.1 TWh. However, because of the increase of the coefficient percentage from 65% to 100%, PLN’s reduction in electricity sales is now expected to be approximately 5.4 TWh. Therefore, there is an overall reduction in sales of electricity by PLN amounting to 0.3 TWh. Despite PLN’s above concern, the GOI nevertheless decided to increase the coefficient percentage from 65% to 100% due to a number of considerations, including5:
that PLN’s estimated electricity sale deficiency of 0.3 TWh constitutes only 0.1% of PLN’s 2021 electricity forecast of 261 TWh and therefore the reduction in electricity sales as a result of the increase of the coefficient percentage from 65% to 100% is negligible; and
based on a survey conducted by the GOI, the average amount of electricity exported by homes to PLN is approximately 24% of the total electricity produced by the rooftop solar installation, and the average amount of electricity exported by industrial clients to PLN is approximately 6% of the total electricity produced by the rooftop solar installation. This data provides a reliable indication that most of the electricity produced by Rooftop Solar Operators are consumed for personal use and not prioritised for export to PLN.
The period for a Rooftop Solar Operator to offset any surplus of electricity it supplied in a particular month against monthly invoices rendered by PLN (or Other Public Power Suppliers) in subsequent months is extended from three-monthly periods to six-monthly periods If during a certain month the amount of electricity exported by a Rooftop Solar Operator is larger than the amount of electricity imported, the surplus will be accumulated (“Electricity Surplus”) and used to offset invoices rendered by PLN (or Other Public Power Suppliers) during subsequent month. Electricity Surplus that is accumulated by a Rooftop Solar Operator is valid for a certain period of time before it is reset to zero. Previously, Electricity Surpluses could only be accumulated for a maximum of three months during a calendar year, namely: (i) January to March; (ii) April to June; (iii) July to September; and (iv) October to December. MEMR Reg 26/2021 now extends the offset period to six months and is divided into two main periods: (i) January to June; and (ii) July to December of a calendar year. At the end of each period, the relevant Electricity Surplus aggregated during the said period will be reset to zero. The retention of the “reset to zero” feature under MEMR Reg 26/2021 has been faced with criticism however the extension of the offset period from a three-monthly period to a six-monthly period is a step in the right direction.
Licence and approval required by a Rooftop Solar Operator MEMR Reg 26/2021 provides that for a Rooftop Solar Operator to operate a rooftop solar installation, it will require the following licences and approvals:
Business License for the Provision of Electricity for own use (i.e. IUPTL for own use) To operate a rooftop solar installation with a total power generation capacity of more than 500 kW and connected within 1 (one) electric power installation system (i.e. the solar module, inverter, electrical connection, safety system, export-import metering system and battery (if applicable) are all located within one house or building) the Rooftop Solar Operator is required to obtain a Business License for the Provision of Electricity for own use (i.e. IUPTL for own use)6. For installations below 500 kW, an IUPTL for own use will not be required, however, the Rooftop Solar Operator must report the installation to the MEMR or Governor (as applicable) prior to constructing or installing the installation.
SLO (sertifikat laik operasi or operations worthiness certificate) An SLO issued by the relevant certification board is also required for rooftop solar installations: 1. with a total power generation capacity of more than 500 kW and connected within 1 (one) electric power installation system; and 2. with a total power generation capacity equivalent to, or less than, 500 kW and where the control panel for the installation is not within the same electric power installation system. An SLO will not be required for rooftop solar installations with a total power generation capacity equivalent to, or less than, 500 kW and connected within 1 (one) electric power installation system. However, for these facilities, the relevant Rooftop Solar Operator will need to register the installation with the MEMR by submitting a statement letter confirming that they will be responsible for the installation’s safety. Upon review of the statement letter and ancillary documents submitted to the MEMR, the MEMR will issue a registration number for the relevant rooftop solar installation.
Approval from PLN (or Other Public Power Suppliers) for the Solar Rooftop Operator to install a rooftop solar installation Any person who intends to construct or install a solar rooftop installation whose home or building is connected to a PLN (or Other Public Power Supplier) grid will have to submit an application to PLN (or Other Public Power Supplier) setting out the details of the installation for approval. Upon reviewing the application, PLN (or the Other Public Power Supplier) is now required to approve or reject the application within five business days as compared to the previous 15 business days.
Capacity Charge apply only to Rooftop Solar Operators who are Industrial Clients of PLN (or Other Public Power Suppliers) Consistent with MEMR Reg 49/2018, MEMR Reg 26/2021 reiterates that Rooftop Solar Operators who are not industrial clients of PLN (or Other Public Power Suppliers) will not be charged with a capacity charge, whilst Rooftop Solar Operators that are industrial clients of PLN (or Other Public Power Suppliers) will be charged with a monthly capacity charge equivalent to: the inverter capacity x five hours x electricity tariff.
The Introduction of an Electronic Application System to receive Applications and Reports for Rooftop Solar Generation This electronic applications system will be developed by the EBTKE Directorate7 for purposes of establishing an integrated system that, amongst others:
receives: (i) a declaration of the capacity of the local electricity system declared by the relevant Other Public Power Supplier; (ii) an application submitted by a potential Rooftop Solar Operator to PLN (or Other Public Power Supplier) to install a rooftop solar installation; and (iii) reports to be submitted by PLN (or Other Public Power Suppliers) and by Rooftop Solar Operators required under MEMR Reg 26/2021.
provides: (i) approval or rejection confirmation from PLN (or Other Public Power Suppliers) on an application made by a potential Rooftop Solar Operator to install a rooftop solar installation; and (ii) access to the relevant Rooftop Solar Operator’s generation data. In addition, the MEMR has assigned PLN to develop a digital rooftop solar usage application system8 that is integrated with the Supervisory Control and Data Acquisition (SCADA) or smartgrid distribution for purposes of (i) maintaining the stability and reliability of the relevant electricity system; (ii) maintain the efficiency of electricity that is distributed; and/ or (iii) to monitor the energy production of rooftop solar Systems in real-time.
Carbon Trading MEMR Reg 26/2021 allows for the possibility for a Rooftop Solar Operator and PLN (or Other Public Power Suppliers) to enter into a carbon trade under a cap-and-trade program that will be introduced by the GOI. The MEMR had recently commenced trial runs for carbon trading within the electricity sector during the period from March to August 20219. This carbon trading trial run adopted a cap, trade and offset mechanism which was hoped to result in the limiting of value of carbon emissions generated by the relevant power plants (mostly coal power plants). The cap was set by the MEMR based on the weighted average intensity of GHG emissions produced in 2019, whilst the credits traded constitute the difference between the GHG level produced by the relevant power plant and the cap set by the MEMR. This trial run involved 80 power plants with various generating capacity. In addition, we are aware that the Government is in the midst of preparing a Presidential Regulation on the Implementation of the Economic Value of Carbon for the Achievement of Indonesia’s NDC Targets. This draft Presidential Regulation will further regulate carbon trading in Indonesia as well as other features such as performance-based payments and levies on carbon.
Restriction to Sell Electricity Produced from Rooftop Solar Installations MEMR Reg 26/2021 provides that Rooftop Solar Operators may not sell electricity produced from their rooftop solar installation. MEMR Reg 49/2018 did not expressly provide this restriction however this restriction would have applied in any event as a holder of a Business License for the Provision of Electricity for own use (i.e., IUPTL for own use) is permitted to sell electricity to a third party or to PLN in only certain circumstances and this would be subject to the approval of the MEMR. MEMR Reg 26/2021 does not restrict nor regulate private electricity offtake schemes between private developers who seek to provide operating leases or finance leases to home owners or building owners who intend to install rooftop solar installations.
Para 1 of MEMR Press Release Number 303.Pers/04/SJI/2021 dated 2 September 2021.
For example, if PLN is supplying a home with a maximum of 33,000 VA or 33 kVA, the home owner may only be permitted to install a rooftop solar installation with a capacity of up to 33,000 VA or 33kVA.
Such declaration is to be made to the EBTKE Directorate with a copy to the Directorate General of Electricity once every year during the month of December.
MEMR Press Release No 303.Pers/04/SJI/2021 dated 2 September 2021
Previously referred to as operational license (izin operasi). The change in requirement from previously needing to obtain an operational license to now requiring a business license for the provision of electricity for own use (i.e. IUPTL for own use) was introduced under Law No 11 of 2020 on Job Creation and Government Regulation Number 25 of 2021 regarding Implementation of the Energy and Mineral Resources Sector.
MEMR 26/2021 mandates that this electronic application system be available within six months from the issuance of the regulation.
MEMR 26/2021 requires this App to be available within six months from the assignment of PLN by MEMR to develop such App.
MEMR Press Release No 102.Pers/04/SJI/2021 dated 22 March 2021.
For any particular question regarding MEMR Reg 26/2021 reviewed in this update or the application of MEMR Reg 26/2021 to specific circumstances, please do not hesitate to contact:
AVINASH PANJABI Partner PSHP Law t + 62 5229705 - 06 m +65 9179 3819 e email@example.com
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to. Readers should take legal advice before applying it to specific issues or transactions.
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