Indonesian Regulation Aims to Boost Renewable Energy

Indonesia issued a regulation late on Wednesday to try to retire some coal plants early and boost the use of renewable energy.

The country – the world’s largest exporter of coal – wants to nearly double its clean energy sources so that renewables account for 23% of its energy mix by 2025.

Currently, it has only reached 12% and coal provides 60% of its electricity – so authorities have been instructed to create a plan for early retirement of some coal power plants with the government possibly helping absorb any losses incurred, according to a presidential decree issued late on Wednesday.

Southeast Asia’s biggest economy said in the regulation no new coal power plants can be built, but those that are already in the pipeline or integrated with the natural resources processing industry will be allowed to go ahead.

However, emissions by new coal power plants must be reduced by 35% within 10 years of operation compared to average coal plant emissions in 2021, the document said. And they can only be operated up till 2050.

Indonesia set a goal last year to achieve net-zero emissions by 2060 and pledged alongside dozens of other countries to phase down coal use to help limit global warming to less than 1.5 degrees Celsius above pre-industrial levels.

Targeting Investment

The government also set a new pricing system for each type of renewable energy source – geothermal, hydro power, and solar power – to encourage investment.

Developers previously had to go through a lengthy negotiation process with the state utility company to reach a pricing agreement.

To boost renewable energy investment, government will also give fiscal incentives including financing facilities and ease of licensing in forest areas for renewable energy development.

The moves follow comments by the International Energy Agency (IEA), which said earlier this month that Jakarta needs to ensure policy reforms – such as introducing transparent and competitive tariffs and predictable project pipelines – pave the way for renewable power and to reduce the country’s reliance on coal.