Hopes remain for Indonesia's new solar policy despite minister sacking

The energy boat in Indonesia was rocked this week with the dismissal of Arcandra Tahar, however, there is no indication it will have any negative consequences on the country’s new drive to develop its solar industry. As part of the plan, a new FIT has been set with prices up to USD 0.25 per kWh, alongside a goal of adding 5 GW of solar capacity over the next 2-3 years.

Energy and Mineral Resources Minister Arcandra Tahar was fired in somewhat unusual circumstances, after President Joko Widodo discovered that he had been living in the U.S. for the last 20 years and was a holder of a U.S. citizenship. Although Tahar had only been in the position for three weeks, Widodo officially dismissed him once he was made aware of the situation.

In the interim, Widodo has appointed Coordinating Maritime Affairs Minister Luhut Pandjaitan to the position as a short term solution. However, there is no indication that this should have any immediate effects on the government’s new solar decree.

New life for solar in Indonesia

As Southeast Asia’s largest energy consumer, Indonesia’s solar market is woefully underdeveloped, with only two utility-scale solar plants, with a combined capacity of 7 MW, in operation. Up until now, the Ministry of Energy and Mineral Resources (ESDM) had been responsible for issuing tenders and funding off-grid projects.

The new government decree, signed in mid-July, has completely changed the landscape for solar PV within the country, by setting a new process for allocating capacity quotas. The major policy change is the introduction of a FIT for registered solar developers, who will be allocated projects on a first-come, first-serve basis.

The rates of the FIT will be between US$ 0.145 to 0.25 per kWh, and will be secured under an extendable 20-year power purchase agreement. The rate of the FIT is dependent on the region in the which the project will be developed, as each region has its own tariff and quota.

The government has put forth an ambitious target of developing at least 5 GW of solar projects under this scheme in the next 2-3 years. The first phase of the decree is to complete a 250 MWh quota, with different quotas existing in different regions.