Legal Insights

Prospect of new and renewable energy in Indonesia

Indonesia's hopes and aspirations to participate in the global commitments to overcome impacts of climate change due to rising temperatures by using clean and environmentally friendly energy have pushed the Government to focus on efforts to increase appetite of investors to invest in new and renewable energy projects. This is also forced by an awareness that Indonesia has great potential in terms of new and renewable energy resources that have not been managed and utilized to date.

The Electricity Infrastructure Acceleration Law mandates that the implementation of electricity infrastructure acceleration prioritize the use of new and renewable energy. The Government and Regional Governments can provide support in the form of fiscal incentives, ease of licensing and non-licensing, determining the purchase price of electricity, and/or provision of subsidies. Amidst the eagerness to implement a real Renewable Energy Market,  investors are waiting for the execution of a Presidential Regulation stipulating new benchmark of feed-in-tariffs of electricity generated from power plants utilizing new and renewable sources. The issue of purchase price is deemed crucial now as it is predicted to attract more investors in this field.

Other than that, the New and Renewable Energy draft bill has been listed as prioritized discussion in the House of Representatives until 2024 and is undergoing harmonization step. This bill provides regulatory umbrella to support the successful implementation of national energy policies so that Indonesia can achieve the target of 23% renewable energy mix by 2025. This bill is expected to provide more definitive legal framework on this particular topic. Given the siginificant regional growth in Renewable Energy and the time pressure to meet 2025 requirements, Indonesia is late with implementation. It is expected that this delay will be adressed and solved soon for Indonesia to remain competitive.