Renewable Energy Development: Large potential of solar power underoptimised

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia - Pengembangan Energi Terbarukan: Potensi Besar Surya Kurang Dioptimalkan

28 February 2019

By Anitana W. Puspa

 

Jakarta — Indonesia has potential solar energy of up to 500 gigawatts (GW) or seven times larger than the total installed electricity capacity in the country which is around 65 GW. Currently, the installed solar capacity in Indonesia is only at 24 megawatts (MW).

Based on Global Source Map research conducted by Energy Sector Management Support Program in the World Bank, solar heat in Indonesia averages out at 4,800 kWh per square metre a day.  Out of the figure, statistically Indonesia has potential solar power of more than 500 GW.

However, Indonesia is still lagging far behind other ASEAN countries in solar energy utilisation. Thailand has an installed solar capacity of 2.6 GW and the Philippines 868 MW. Even, Vietnam is working towards an increase of more than 3,000 MW in solar and wind power capacity by 2019 and 2020, and Malaysia is planning for an additional 3,000 MW in 2020.

According to the government’s plan summarised in the 2019 – 2018 Electricity Supply Business Plan (RUPTL), the target of solar power plant (PLTS) capacity is set at only 908 MW for 2028.

The Institute for Energy Economics and Financial Analysis (IEEFA), an energy research institute, forecast that there is around 14.7 MW of running solar power plant system in Indonesia’s electricity network, around 48 MW is under construction, and around 326 MW is in planning for construction.

PLTS projects in the planning stage are also facing high uncertainty. For instance, Cirata floating PLTS with a capacity of 200 MW at Cirata Reservoir in West Java owned by a subsidiary of PT Perusahaan Listrik Negara (Persero), i.e. PT Pembangkit Jawa Bali, has not been proven viable.

IEEFA also discovered that in Indonesia out of around 8.9 MWp rooftop solar panel capacity, 2.1 MWp is allocated for household use and the remainder are for commercial and industrial units.

“It is necessary to note that in the 2019 RUPTL, PLN considers it necessary to have additional 3,200 MW solar panels [besides the PLTS that have been planned in the RUPTL] so that Indonesia can reach 23% renewable energy mix in 2025,” said the IEEFA analyst, Elrika Hamdi.

In addition, IEEFA also found that funding is not a hampering factor for solar power plant development in Indonesia.

Elrika Hamdi said actually there are quite a few local and foreign banks interested in funding large-scale solar power projects.

According to her, the problem, in fact, lies in the locations, and policy and regulation barriers, so there are not many PLTS projects that have large capacity to meet banks’ requirements.

Indonesia is still trailing behind its Southeast Asian peers in solar power development. IEEFA study highlighted that there is only 24 MW of solar power, including rooftop solar power, that has been installed and is distributable through electricity network in Indonesia.

IEEFA analysts are also urging the government to draft policies conducive to solar power investments.

“Even though Indonesia has abundant potential for solar power, the government continues to formulate policies that hamper the development of solar power plants, especially for commercial and residential needs.”

In addition, among obstacles hampering the development of PLTS that are connected to the electricity network is the built, operate, own, and transfer (BOOT) scheme, which has a term of 25 – 30 years. After the contract ends, the power plant has to be transferred back to PLN.

IEEFA said that the currently installed solar power plants are only comprised of small projects that lack economies of scale compared to the industrial-scale projects commonly found in other countries.

Contact us

Julian  Smith

Julian Smith

Director, PwC Indonesia

Tel: +62 21 509 92901

Agung  Wiryawan

Agung Wiryawan

Partner, PwC Indonesia

Tel: +62 21 509 92901

Follow PwC Indonesia