In brief

The Government of Indonesia is making a big push to encourage the development of rooftop solar PV projects, in line with the policies it began to introduce with the issuance of Minister of Energy and Mineral Resources (MEMR) Regulation No. 49 of 2018 (“Reg 49“), in order to encourage Indonesia’s solar PV industry, and its global commitments to reduce greenhouse gas emissions.

The MEMR has now revoked Reg 49 and replaced it with MEMR Regulation No. 26 of 2021 on Rooftop Solar Power Plants Connected to the Electricity Grid for Public Interest License Holders (“Reg 26“). Reg 26 became effective on 20 August 2021.

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Contents

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Key takeaways

The regulation provides more incentives for solar PV development by, among other things: 

• removing the net-metering “discount” previously applied to energy ‘exported’ from rooftop solar PV projects to PLN’s grid
• extending the period for setoff of the unused credit (to the end of the relevant semester)
• shortening the timeline for issuing licenses and integrating information onto an online system

Reg 26 also paves the way for carbon trading, to be further set out in another MEMR regulation. 

Reg 26 also applies to rooftop solar PV projects installed outside PLN’s business areas, such as industrial estates where the electricity supplier (“Business Area IUPTLU holder“) is not PLN.

Key changes

Reg 26 also applies to consumers outside PLN’s business areas

While Reg 49 only applies to PLN’s customers, Reg 26 now covers customers of all electricity license (IUPTLU) holders with a business area, both in PLN and non-PLN business areas (for example, in industrial estates where a third party company is the sole electricity supplier).

In non-PLN business areas, the Business Area IUPTLU holder will have the right to cap the capacity of the rooftop solar PV projects installed by consumers within the area. This is slightly different from consumers within PLN’s business area, where Reg 26 sets the maximum capacity of rooftop solar PV systems (at the inverter) to equal the customer’s connected capacity with PLN. 

Reg 26 is silent about off-grid rooftop solar PV systems. We assume that these fall outside the scope of Reg 26. Under the Electricity Law, electricity consumers have the right to own captive power plants (both on-grid or off-grid). 

Net-metering discount on energy exported to the grid is now removed

Under Reg 26, for every one kWh exported by a consumer to its IUPTLU holder (whether PLN or another entity), the consumer will be entitled to a credit of one kWh for any energy that the consumer takes from the grid. Previously, under Reg 49, any kWh exported to PLN’s grid was subject to a 35% discount. 

This provision also applies to existing rooftop solar PV projects, whether in PLN or non-PLN business areas. 

Period for setoff of the unused credit is extended

Under Reg 49, if the amount of energy exported from a rooftop solar PV to PLN’s grid was higher than the PLN-generated energy consumed by the customer in a single month, the difference would be credited against future invoices, provided that the credit could only be set off against PLN invoices in months falling within the same calendar quarter.

Under Reg 26, the time limit is now extended to become six months (January – June, and July – December). Any credit remaining at the end of June or December cannot be rolled over into the future and will be cancelled.

This provision also applies to existing rooftop solar PV installations in PLN and non-PLN business areas.

Shorter period to obtain approval for construction

All IUPTLU holders now have to issue their approval or rejection of a customer’s application for construction of a rooftop solar PV project within five business days after receiving the application. Previously, the timeline for PLN’s customers was 15 business days.

Carbon Trading

Reg 26 opens up the possibility for trading carbon credits generated from solar PV systems. Reg 26 seems to anticipate that customers and IUPTLU holders might be able to trade carbon credits generated from such installations. This will be further set out in an MEMR regulation. It remains to be seen who will actually be entitled to claim the carbon credits.

Online licensing and reporting

Similar to Reg 49, Reg 26 requires PLN, or Business Area IUPTLU holders, to submit a report (for their respective areas) on the number of customers and the number of applications for the rooftop solar PV system, the total capacity of the rooftop solar PV system, and total exported and imported electrical energy, through the MEMR online system (expected to be established by February 2022).

SCADA or distribution smart grid system

To maintain the stability and reliability of the electricity system and the efficiency of distribution, and to monitor the energy production of the rooftop solar PV system in real time, the MEMR has assigned PLN to develop an IT application for digital-based rooftop PV systems, to be integrated with the Supervisory Control and Data Acquisition (SCADA) system or distribution smart grid. 

Business Area IUPTLU holders can also develop such systems, with MEMR approval. Industrial customers with a rooftop solar PV installed capacity of >3 MW are required to provide a weather forecast database that is integrated with the SCADA system or distribution smart grid owned by PLN (or the Business Area IUPTLU holder).

Local Content

Reg 26 requires the use of rooftop solar PV equipment to comply with laws and regulations on the use of domestic goods/services. It remains to be seen whether the rooftop solar PV system will be subject to local content requirements. Local content for power plant construction is currently regulated by Minister of Industry Regulation No. 54/M-IND/PER/3/2012 (as amended), which should only apply to electricity infrastructure for public use.  

Licensing requirements 

IUPTLS (Captive Power License, formerly known as Izin Operasi)

An IUPTLS is required for consumers that have a rooftop solar PV system with a total capacity of more than 500 kW that is connected to one electricity installation. The IUPTLS will be issued via the Online Single Submission system on behalf of the MEMR, or by a governor, in accordance with their authorities.

SLO (Operation Worthiness Certificate)

An SLO is required for a rooftop solar PV system having the following criteria: 

• system has a capacity of more than 500 kW with an integrated panel control (as described in Attachment 1 of Reg 26)
• system has a capacity of up to 500 kWh with an independent panel control 

A rooftop solar PV system with a capacity of up to 500 kWh with an integrated panel control does not need to have an SLO, but the customer is required to submit a statement letter as to its liability for safety, which must be registered at the MEMR.  

Status of ground-mounted solar projects? 

Similar to Reg 49, Reg 26 defines rooftop solar PV systems as power generation using PV modules installed and placed on rooftops, walls, or other parts of customers’ buildings. While this would seem to exclude the application of Reg 26 to ground-mounted solar PV projects, previously the MEMR had clarified that Reg 49 applied to any solar PV project developed by a PLN customer (regardless of how the solar PV modules were mounted) as long as the plant was connected to the PLN grid.  We expect a similar interpretation will apply for Reg 26.

Conclusion

We anticipate the removal of the discount on exported energy, the extension of the setoff period, and the introduction of quicker licensing processes will generate significant interest among customers seeking to develop rooftop solar PV projects. Against this context, it remains to be seen how the Government will deal with private developers seeking to provide electricity generation capacity for customers through “corporate PPA” schemes.