Key Points of Differences Between the Regulation of Minister of Energy and Mineral Resources Number 50 of 2017 and Number 12 of 2017



Recently Minister of Energy and Mineral Resources issued Regulation number 12/2017 on the Utilization of Renewable Energy Sources for Electric Supply called “MEMR Regulation 12/2017″. The regulation sets a reference tariff for all renewable energy technologies which include the solar PV (photovoltaic), wind, biomass, biogas, municipal waste, hydro and geothermal industry. The main focus of the regulation are (i) the applicable tariff for the purchase of electricity by PLN from the renewable power plants and (ii) the procurement mechanism to be conducted by PLN in awarding renewable projects to the independent power productions (IPP).

Following the issuance of the MEMR Regulation 12/2017, relevant parties in the renewable energy industries raise their concern on the reference tariff for the purchase of renewable energy by reference to the cost of generation or Biaya Pakok Penyediaan Pembangkitan or “BPP” which is lower substantially in some regions than the typical generation cost of most types of renewable energy plants in Indonesia. Furthermore, they also raise question about the integration between MEMR Regulation 12/2017 and the previous prevailing regulations covering the procurement process by PLN for awarding renewable energy projects.

As  a  result,  in  August     2017  the  Minister of Energy and  Mineral  Resources issued a new regulation  MEMR  Regulation  number 50  of 2017 (“MEMR  Regulation 50/2017″),  replacing MEMR Regulation 12/2017. In principle MEMR Regulation 50/2017 sets the same rules as under MEMR Regulation 12/2017 with a twist on the the procurement scheme by PLN and the tariff framework.

The key points and differences between the two regulations are as follows:

1. Scope of Regulation

MEMR Regulation 50/20127 MEMR Regulation 12/2017
Applicable for:

•   Solar PV

•   Wind

•    Hydropower

•    Biomass

•    Biogas

•    Municipal waste

•    Geothermal

•    Movement and difference of sea water temperature (sea water)

 

Applicable for:

•   Solar PV

•   Wind

•    Hydropower

•    Biomass

•    Biogas

•    Municipal waste

•    Geothermal

2. Procurement process by PLN

 

Sources MEMR Regulation 50/20127 MEMR Regulation 12/2017
Solar PV, Wind Direct selection based on Capacity Quota Open tender based onCapacity Quota
Hydro Direct selection Direct selection
Biomass Direct selection Direct selection
Biogas Direct selection Direct selection
Municipal waste Direct appointment (MEMR Regulation no. 44 of 2015)    Reference tariff
Geothermal Direct appointment to the holder of Working Area (Government Regulation no. 23 of 2014, MEMR Regulation no.  17 of 2014)    Reference tariff
Sea water Direct selection   Not regulated

The purchase of electricity (and the electricity price) shall be approved by the Minister of Energy and Mineral Resources.

3. Build, Own, Operate and Transfer/BOOT scheme

Under the MEMR 12/2017 the BOOT schemes does not apply to the solar PV and wind, where MEMR 50/2017 explicitly requires the BOOT scheme to be applied for all resources with the exception on municipal waste, as shown on the table below:

Sources MEMR Regulation 50/20127 MEMR Regulation 12/2017
Solar PV, Wind BOOT Not regulated
Hydro BOOT BOOT
Biomass BOOT Not regulated
Biogas BOOT Not regulated
Municipal waste Not regulated Not regulated
Geothermal BOOT BOOT
Sea water BOOT   Not regulated

4. Tariff framework

 

Sources MEMR Regulation 50/20127 MEMR Regulation 12/2017
Solar PV, Wind
Local BPP > National BPP No change The applicable tariff will be maximum  of 85%  of the local BPP.
Local BPP   National BPP The applicable tariff will be based on mutual agreement between PLN and IPP. The applicable tariff will be maximum of 100% of the local BPP.
Hydro
Local BPP > National BPP The applicable tariff will be maximum  of 100%  of  the local BPP. The   applicable reference tariff will be maximum of 85% of the local BPP.
Local BPP 5 National BPP The applicable tariff will be based on mutual agreement between PLN and IPP.Note: no reference tariff The   applicable reference tariff will be maximum of 100% of the local BPP.
Biomass/ Biogas
Local BPP > National BPP No change The   applicable reference tariff will be maximum of 85% of the local BPP.
Local BPP 5 National BPP The applicable tariff shall be based on mutual agreement between PLN and IPP. The   applicable reference tariff will be maximum of 100% of the local BPP.
Municipal waste
Local BPP > National BPP No change The   applicable   reference tariff will be maximum of 100% of the local BPP.
Local BPP 5 National BPP No change The  applicable  tariff shall be   based on mutual agreement   between   PLN and IPP.
Geothermal
Local BPP > National BPP No change The   applicable   reference tariff   will  be maximum 100% of the local BPP.
Local BPP 5 National BPP No change The  applicable tariff shall be   based   on         mutual agreement   between   PLN and IPP.
Sea water
Local BPP > National BPP The applicable tariff will be maximum  of 100%  of  the local BPP. Not regulated
Local BPP 5 National BPP The applicable tariff shall be based on mutual agreement between PLN and IPP. Not regulated