Green Energy Technologies Indonesia Market Study
DECEMBER 2017
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EU Business Avenues in South East Asia
Central Management Unit
Indonesia Market Study
December 2017
Submitted to the European Commission on 08 December 2017
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Table of contents
TABLE OF CONTENTS ...... 4
LIST OF FIGURES ...... 7
LIST OF TABLES ...... 8
TABLE OF ABBREVIATIONS ...... 10
1. EXECUTIVE SUMMARY ...... 13
2. WHAT ARE THE CHARACTERISTICS OF INDONESIA? ...... 21 2.1 POLITICAL OVERVIEW ...... 21 2.2 ECONOMIC OVERVIEW ...... 22 2.3 TRADE OVERVIEW ...... 24 2.4 MARKET ACCESS ...... 26 2.5 BUSINESS AND COMPETITIVE ENVIRONMENT ...... 26
3. MARKET OVERVIEW & EU ENTRY OPPORTUNITIES IN INDONESIA ...... 29 3.1 THE GREEN ENERGY TECHNOLOGIES SECTOR IN INDONESIA...... 29 3.1.1 Overview of the Green Energy Sector ...... 29 3.1.2 Key Institutional Actors for Green Energy Technologies ...... 33 3.1.3 Relevant Policy Initiatives to Accelerate GET ...... 35 3.1.4 Domestic Research & Development (R&D) on GET ...... 38 3.1.5 Key Associations ...... 41 3.1.6 Entry Strategies ...... 42 3.1.7 Challenges and Entry Barriers ...... 45 3.2 WIND ...... 48 3.2.1 Market Overview ...... 48 3.2.2 EU Entry Opportunities ...... 57 3.3 SOLAR ...... 63 3.3.1 Market Overview ...... 63 3.3.2 EU Entry Opportunities ...... 74 3.4 AEROTHERMAL ...... 82 3.4.1 Market Overview ...... 82 3.4.2 EU Entry Opportunities ...... 82 3.5 GEOTHERMAL ...... 83 3.5.1 Market Overview ...... 83 3.5.2 EU Entry Opportunities ...... 94
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3.6 HYDROTHERMAL AND OCEAN ENERGY ...... 103 3.6.1 Market Overview ...... 103 3.6.2 EU Entry Opportunities ...... 107 3.7 HYDROPOWER ...... 114 3.7.1 Market Overview ...... 114 3.7.2 EU Entry Opportunities ...... 124 3.8 BIOMASS ...... 130 3.8.1 Market Overview ...... 130 3.8.2 EU Entry Opportunities ...... 137 3.9 LANDFILL GAS/ SEWAGE TREATMENT GAS / BIOGAS ...... 142 3.9.1 Market Overview ...... 142 3.9.2 EU Entry Opportunities ...... 151 3.10 POWER GENERATION ...... 158 3.10.1 Market Overview ...... 158 3.10.2 EU Entry Opportunities ...... 168 3.11 ENERGY EFFICIENCY & CARBON SERVICES ...... 173 3.11.1 Market Overview ...... 173 3.11.2 EU Entry Opportunities ...... 179 3.12 BIOFUEL ...... 183 3.12.1 Market Overview ...... 183 3.12.2 EU Entry Opportunities ...... 186 3.13 COGENERATION TECHNOLOGY ...... 191 3.13.1 Market Overview ...... 191 3.13.2 EU Entry Opportunities ...... 196 3.14 CARBON CAPTURE AND STORAGE ...... 201 3.14.1 Market Overview ...... 201 3.14.2 EU Entry Opportunities ...... 204 3.15 ELECTRIC VEHICLES ...... 210 3.15.1 Market Overview ...... 210 3.15.2 EU Entry Opportunities ...... 220
4. REGULATIONS ...... 225 4.1 IMPORT PROCEDURES ...... 225 4.2 GOVERNMENT TENDERS ...... 228 4.3 REGULATIONS AND AGENCIES RELATED TO GREEN ENERGY TECHNOLOGIES ...... 229
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5. ANNEX ...... 235 5.1 LIST OF USEFUL CONTACTS ...... 235 5.2 STARTING A BUSINESS IN INDONESIA ...... 237 5.3 USEFUL STATISTICS ...... 245 5.4 BIBLIOGRAPHY ...... 252
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List of Figures Figure 1: Map of Indonesia ...... 21 Figure 2: EU-Indonesia Trade in Goods & Services, 2014-2016 ...... 25 Figure 3: Total NRE Investment Needs until 2025 ...... 29 Figure 4: Current and Targeted Energy Mix in Indonesia ...... 31 Figure 5: Key Institutions for NRE and EE&EC Policy ...... 35 Figure 6: Clean Energy R&D Focus Areas and Budget (US$), 2016 and 2017 ...... 38 Figure 7: Wind Currents throughout Indonesia ...... 48 Figure 8: Wind Power Facility in Nusa Penida ...... 49 Figure 9: Wind Map developed via Danish-Indonesian Cooperation – Power Density at 50 m...... 53 Figure 10: Wind Map developed via Danish-Indonesian Cooperation – Average Wind Speed at 50 m...... 53 Figure 11: Development of PLTB Bayu Power Plant...... 57 Figure 12: The First Ever 2.5 MW Wind Turbine Components Arrive in Indonesia in August 2017 ...... 59 Figure 13: Vestas’ V126 Turbines at the Jeneponto 1 Site ...... 60 Figure 14: WES50, WES80, WES100 & WES250 Turbine Models ...... 62 Figure 15: Global Horizontal Irradiation ...... 64 Figure 16: Sulawesi’s Largest Solar Power Plant in East Sumalata District ...... 66 Figure 17: 1,000 Island PV Development Programme ...... 68 Figure 18: Indonesia’s Largest Solar Power Plant by PT Len Industri in East Nusa Tenggara ...... 73 Figure 19: Status of the 67 Geothermal Working Areas ...... 86 Figure 20: The Sarulla Geothermal Power Plant ...... 89 Figure 21: PT Medco Ijen Project at the Exploration Stage ...... 90 Figure 22: Drill site at Muara Laboh Project, West Java ...... 91 Figure 23: Patuha Geothermal 1 x 55 MW Power Plant in Bandung, operated by PT GDE ...... 94 Figure 24: Karaha Project Site for Karaha Plant by Alstom for Pertamina ...... 101 Figure 25: Kamojang Geothermal Complex, West Java, Indonesia ...... 102 Figure 26: Bombora mWave Converter ...... 106 Figure 27: Potency of Wave Energy in Indonesia ...... 108 Figure 28: Potency of Tidal Energy in Indonesia’s Marine Territory ...... 109 Figure 29: Potency of OTEC in Indonesia’s Marine Territory ...... 110 Figure 30: First MeyGen Turbine Deployment ...... 113 Figure 31: Hydropower Potential in Indonesia ...... 115 Figure 32: Construction of Upper Cisokan Hydropower Plant ...... 116 Figure 33: Wampu Hydroelectric Power Plant in Indonesia ...... 117 Figure 34: Mini Hydro Plant Location in Lau Gunung ...... 123 Figure 35: Biomass Potential in Indonesia (MWe) ...... 130 Figure 36: Biomass Sources in Indonesia ...... 131 Figure 37: Maris Projects Research to Investigate the Potential of Algae Biomass ...... 140 Figure 38: Market Size of the Biogas Industry, 2022...... 143 Figure 39: The first IPP Biogas Power Plant in Indonesia ...... 144 Figure 40: Bantargebang Landfill Gas Plant ...... 147 Figure 41: 1.5 MW Sewage Gas Cogeneration Power Plant ...... 148 Figure 42: PLT Biogas with Covered Lagoon Technology in Pagar Merbau ...... 150 Figure 43: Market Potential & Project Sizing in Indonesia: Palm Oil Mil Industry in Indonesia, 2010 ...... 153
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Figure 44: Installed Power Capacity and Electricity Generation, 2015 ...... 158 Figure 45: Current and Targeted Energy Mix in Indonesia ...... 159 Figure 46: Fast Track Programmes (FTP): Additional Capacity by Plant Type, 2015-2019 ...... 160 Figure 47: Projections of Electricity Generation in RUPTL, 2016-2025 ...... 161 Figure 48: Electrification Ratio in Indonesia (2014) ...... 163 Figure 49: First Unit of 330 MW Sarulla Geothermal Power Plant ...... 167 Figure 50: Indonesian Final Energy Use by Sector, 2000 and 2015 ...... 175 Figure 51: Policies and standards on transport energy efficiency across the South East Asian region ...... 177 Figure 52: The installed FuelMatic GSX 3 equipment ...... 190 Figure 53: 2x100 MW Tarahan Coal Fired Cogeneration Plant ...... 191 Figure 54: Annual Cogeneration Capacity Additions ...... 192 Figure 55: MWM TCG 2032 Gas Engines in Power Plant at Indonesian Industrial Site Panbil ...... 193 Figure 56: 1.5 MW Sewage Gas Cogeneration Power Plant ...... 194 Figure 57: The 14 Containerised MWM TCG 2020 V20 Natural Gas Gensets of the Rawa Minyak CHP Plant ..... 199 Figure 58: Business-as-usual Emissions Projections up to 2030 ...... 201 Figure 59: CCS Gundih Pilot Project Status since 2012 ...... 203 Figure 60: CO2 Storage Capacity Estimates in Depleted Oil and Gas Fields ...... 207
Figure 61: CO2 Storage Capacity in Geological Formations ...... 208 Figure 62: CCS Milestones in Indonesia & Cooperation over the Years...... 209 Figure 63: Domestic Research Initiatives to Develop Prototype EVs ...... 211 Figure 64: BYD Fully Electric Bus in Indonesia ...... 215 Figure 65: The Travellers on Motorbikes on Jalan Raya Bekasi km 22, Cakung, Jakarta...... 215 Figure 66: Electric Two-Wheel Vehicles Sales by Country in Asia Pacific (except for China), 2012-2018...... 216 Figure 67: Viar Q1 Model on Display in Bilai Kartini, Jakarta ...... 218 Figure 68: Zbee Model by Clean Motion ...... 222 Figure 69: An Italjet Ascot e-bike at the 23rd Indonesia International Motor Show ...... 223
List of Tables Table 1: GDP & GDP Growth Rates by Region ...... 23 Table 2: Ease of Doing Business in Indonesia ...... 27 Table 3: NRE Potential in Indonesia ...... 30 Table 4: NRE Installed and Potential Capacity by Grid Connectivity ...... 31 Table 5: Indonesia’s NRE Targets and Committed Capacity as of 2017 ...... 32 Table 6: Potential Energy Savings per Sector by 2025 ...... 33 Table 7: Clean Energy R&D Funding in 2016 and 2017 by Sub-categories ...... 39 Table 8: Foreign Ownership Restrictions for Power Generation ...... 43 Table 9: Wind Resources in Indonesia ...... 50 Table 10: Potential Locations for Commercial Scale Wind Energy in Indonesia ...... 51 Table 11: Java and Sulawesi Wind Energy Potential by Location ...... 51 Table 12: Government Planned Additions for Wind Power Plants between 2015-2019 ...... 52 Table 13: Solar Energy Potential in Indonesia ...... 63 Table 14: Solar On-Stream Development Plan (in MW) prepared in 2014 ...... 65 Table 15: Planned Distribution of 5 GW of solar PV in Indonesia ...... 69
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Table 16: Quotas and FiTs for Phase 1 of the 5 GW solar PV development, by Region...... 70 Table 17: Geothermal Resources and Installed Capacity in Indonesia (2015) ...... 83 Table 18: Installed Geothermal Capacity as of 2015 by License Holder and Developer ...... 85 Table 19: Government Plans for Additions to Geothermal Capacity, 2015-2019 ...... 87 Table 20: Overview of Star Energy’s Operating Geothermal Portfolio ...... 93 Table 21: Auctions for 30 Geothermal Working Areas (2016-2017) ...... 96 Table 22: Theoretical and Potential Power Generating Capacity of Ocean Energy In Indonesia ...... 103 Table 23: Ocean Energy Pilot Projects in Indonesia as of 2016 ...... 103 Table 24: Top 6 Countries by Unutilised Hydropower Potential ...... 114 Table 25: Planned Government Development of Hydropower (in MW), 2015-2019 ...... 118 Table 26: Expected Projects to be Completed, 2015-2019 ...... 118 Table 27: Biomass Energy Potential in Indonesia ...... 132 Table 28: Feed-inTariff for Purchase of Electricity by PLN from Biomass Power Plants ...... 134 Table 29: Feed-inTariff for Purchase of Electricity by PLN from Biogas Power Plants ...... 146 Table 30: New FiT for Waste-to-Energy Technologies...... 148 Table 31: Potential Projects in WtE Sector ...... 155 Table 32: Indonesia’s Generation Expansion Needs, 2015-2019 (MW of Capacity Additions) ...... 160 Table 33: Base Cost Investment Requirements for PT PLN’s Network, 2015-2019 (US$ billion) ...... 161 Table 34: Institutional Mapping of Indonesian Energy Sector ...... 165 Table 35: Potential Energy Savings per Sector by 2025 ...... 173 Table 36: Most Suitable Sedimentary Basins for CO2 Storage in Indonesia...... 207 Table 37: Top Ten Largest Markets for 2/2Ws in Asia and their Growth ...... 216 Table 38: Targets, Policies and Regulation for Renewable Energy in Indonesia ...... 231 Table 39 Summary of Regulation 12/2017 ...... 233 Table 40: Tariff Determination of Renewable Energy ...... 234 Table 41: Major Industrial Areas in Indonesia ...... 243 Table 42: Imports of Photosensitive semiconductor devices, incl. photovoltaic cells ...... 245 Table 43: Exports of Photosensitive semiconductor devices, incl. photovoltaic cells ...... 245 Table 44: Imports of Parts of non-electrical engines and motors, n.e.s.(Wind Turbine Blades) ...... 246 Table 45: Exports of Parts of non-electrical engines and motors, n.e.s.(Wind Turbine Blades) ...... 246 Table 46: Imports of Generating sets, wind-powered ...... 247 Table 47: Exports of Generating sets, wind-powered ...... 247 Table 48: Imports of Generating sets (excluding wind-powered and powered by spark-ignition internal combustion piston engine) - Wave/Tidal power converter ...... 248 Table 49: Exports of Generating sets (excluding wind-powered and powered by spark-ignition internal combustion piston engine) - Wave/Tidal power converter ...... 248 Table 50: Imports of Heat-exchange units (excluding instantaneous heaters, storage water heaters, boilers and equipment) ...... 249 Table 51: Exports of Heat-exchange units (excluding instantaneous heaters, storage water heaters, boilers and equipment) ...... 249 Table 52: Imports of Hydraulic turbines, water wheels, and regulators therefor (excluding hydraulic power engines) ...... 250 Table 53: Exports of Hydraulic turbines, water wheels, and regulators therefor (excluding hydraulic power engines) ...... 250 Table 54: Imports of Furnace burners for pulverised solid fuel or gas, incl. combination burners ...... 251 Table 55: Exports of Furnace burners for pulverised solid fuel or gas, incl. combination burners ...... 251
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Table of Abbreviations
AFTA ASEAN Free Trade Area APAMSI Indonesian Solar Module Manufacturers Association API Import Identification Number APLSI The Independent Power Producers Association of Indonesia APROBI The Indonesian Biofuel Producers Association ASEAN’s The Association of Southeast Asian Nations B2B Business-to-Business Bappenas Indonesian National Planning Agency BKPM Indonesian Investment Coordinating Board BOE Barrel of oil BOO Build-Own-Operate BOOT Build-Own-Operate-Transfer BOT Build-Own-Transfer BPH MIGAS Regulatory Agency for Upstream Oil and Gas BPP Biaya Pokok Pembangkitan BPS Badan Pusat Statistiks BTTP The Agency for the Assessment and Application of Technology CCS Carbon Capture and Storage CDM Clean Development Mechanism CHP or Cogen Cogeneration CMEA Coordinating Ministry of Economic Affairs DEN National Energy Council DGCE Directorate-General of Customs and Excise DGNREEC Directorate General of New and Renewable Energy and Energy Conservation EBTKE New Renewable Energy and Energy Conversion EE&EC Energy Efficiency and Energy Conservation EFB Empty Fruit Bunch EPC Engineering, Procurement and Construction ERF Energy Resilience Fund ESC Energy Sale Contract ESCO Energy Savings Company ESDM The Indonesian Energy and Mineral Resources Ministry Evs Electric Vehicles FiTs Feed-in Tariffs FSRU Floating Storage and Regasification Unit FTAs Free Trade Agreements FTPs Fast Track Programmes Gaikindo Association of Indonesian Automotive Industries Gesits Garasindo Electric Scooter ITS GET Green Energy Technologies GFF Geothermal Fund Facility GGCP Gresik Gas Cogeneration Plant
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GHG Greenhouse Gas GINSI Indonesian National Importer Association HRSG Heat Recovery Steam Generators HVDC High-Voltage Direct Current IEA International Energy Agency IIGF Indonesia Infrastructure Guarantee Fund INDC Intended Nationally Determined Contribution IPPs Independent Power Producers ISF Indonesian Science Fund ITPC Indonesian Trade Promotion Centre ITS Institute of Technology KADIN Indonesian Chamber of Commerce KNEB Bali National Clean Energy Area LAPAN National Institute of Aeronautics and Space LCGC Low Cost Green Car LEMIGAS Center for Oil and Gas Technology Research and Development LKPP Indonesia National Procurement Agency LPSE Electronic-Based Procurement Service MEMR Ministry of Energy and Mineral Resources METI Indonesian Renewable Energy Society MOEF Ministry of Environment and Forestry MoF Ministry of Finance MOI Ministry of Industry MOPWH Ministry of Public Works and Housing MOT Ministry of Trade MoU Memorandum of Understanding MSOE Minister of State-Owned Enterprise MTOE Million Tons Oil Equivalent MV Medium Voltage MW Megawatt MWp Megawatt peak NDC Nationally Determined Contribution NGO Non Governmental Organisations NPWP Taxpayer Identification Number NRE New and Renewable Energy O&M Operation and Maintenance ORC Organic Rankine Cycle OTEC Ocean Thermal Energy Conversion P3TKEBT Research and Development Centre for Electricity and Renewable Energy Technology PENS Electronics Polytechnic Surabaya PGN State-owned gas company (Perusahaan Gas Negara) PIB Import Declaration Form PKS Palm Kernel Shell PLN The State-owned electricity company (PT Perusahaan Listrik Negara)
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PLTB Wind Power Plant PLTS Solar Power Plant POME Palm Oil Mill Effluent PPA Power Purchase Agreement PPP Public-Private Partnerships PSCs Production Sharing Contracts PSO Public Service Obligation PV Photovoltaic System PwC PricewaterhouseCoopers R&D Research And Development RE Renewable Energy RE4I Renewable Energy for Indonesia REC Renewable Energy Corporation RENSTRA Strategic Plan RIKEN National Masterplan for Energy Conservation RPJMN The National Medium-term Development Plan RSPO Roundtable of Sustainable Palm Oil RUPTL Indonesia’s Electricity Supply Business Plan SIUP Business Trading License SMEs Small and Medium-sized Enterprises SOEs Ministry of State-Owned Enterprises TDP Company Registration Certificate UGM Gadjah Mada University UNFCCC United Nations Framework Convention on Climate Change UNS Sabelas Maret University USAID United States Agency for International Development USDA United States Department of Agriculture WHyPGen Wind Hybrid Power Generation WKP Working Areas WtE Waste-to-Energy WWF World Wide Fund
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1. Executive Summary Indonesia’s new and renewable energy (NRE) sector is slowly gaining momentum as a result of the country’s aim to move away from diminishing fossil energy reserves. A latecomer to develop its NRE market, Indonesia is rapidly shifting gears to accelerate the absorption of green energy technologies. Blessed with more than 200 GW of total NRE potential, the country is in a favourable position to become a global renewables and bio-economy leader of tomorrow. While much of its NRE potential remains underutilised, the market is increasingly witnessing the entry of private sector players, with projects ranging from small pilot studies to large-scale NRE power plant development. The country’s strategic roadmap to increase the share of renewable energy in the energy mix to 23% by 2025 is currently providing the right impetus for greater adoption of green energy technologies in Indonesia across most of its renewable energy subsectors.
Wind
With a total coastline of more than 54,000 km, where the wind is available during the day (from the sea) and the night (from inland to the coast), Indonesia appears to have what it takes to reap the benefits of wind energy. Although the potential for large-scale wind energy is limited, opportunities for small or medium-sized projects requiring low speed winds are available. While current installed capacity remains at around 1.1 MW, the government has plans to develop small- to-medium size projects with a view of having a total of 970 MW installed wind energy capacity by 2025. In the future, offshore wind is likely to provide additional opportunities for wind energy investments.
Solar
Solar energy is one of the most neglected forms of renewable energy in Indonesia with only 90 MW installed capacity when compared to its potential (around 50 GW). Blessed with strong solar radiation, Indonesia plans to scale up solar capacity to 5 GW by 2020 with a particular focus on remote outlying islands. Opportunities for solar technologies are plentiful given the government’s increasing interest to scale up its rural electrification programme.
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Aerothermal
Currently, Indonesia does not have a suitable market for aerothermal technologies. The government has identified that traditional power generating sources will be complemented with renewable energy and technologies in geothermal, hydro, solar, wind and bioenergy sectors. The NRE mix, however, does not anticipate the demand for aerothermal technologies.
Geothermal
A country of exceptional volcanic activity, Indonesia is belied to harbour around 40% of the planet’s geothermal potential, with estimated reserves totalling 28 GW. Currently, only a small fraction of its geothermal potential is being utilised. Unlike other forms of electricity generation, geothermal is dominated by Independent Power Producers (IPPs). Government plans for significant scaling up of its geothermal capacities in the near-to-medium term.
Hydrothermal and Ocean Energy
With thousands of miles of coastline, the country is estimated to have between 10-35 MW of available ocean energy per kilometre of coastline. Presently, only small pilot projects exist, but future growth in the industry is likely as technologies become further commercialised and some ocean energy projects are underway.
Hydropower
Hydropower and mini/micro hydropower potential is spread across Indonesia and it is predicted to hold a total capacity of 75,000 MW of energy. It is currently the most harnessed source of renewable energy in Indonesia, but its rate of utilisation reaches only 11%. While the sector has been largely underutilised, there is a considerable opportunity for hydropower development in the country.
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Biomass
As the largest crude palm oil producer in the world, Indonesia holds the potential to generate up to 32,000 MW of power via biomass energy resources. In 2015, however, electricity generated from biomass amounted to 1,740.4 MW, consisting of 114.3 MW connected to the grid and 1,626.1 MW operating via off-grid systems. Agricultural residues, including rice husk, bagasse, rubber and waste from the oil palm industry, as well as the residues from forestry activities hold the best potential for biomass-to-energy projects.
Landfill Gas/ Sewage treatment Gas/ Biogas
Biogas power generation potential has recently resurfaced as a result of increasing incentive schemes and the growing availability of feedstock resources. The government plans to scale up the on-grid biogas plant development to 18.8 MW in the coming years, as compared to 3.6 MW in 2016. The Indonesian biogas power generation market is expected to be in the leading position in South East Asia by 2022, with a total market size of EUR 3.65 billion. POME-to-energy and Waste-to-Energy (WtE) projects remain the most promising avenues for growth.
Power Generation
The Ministry of Energy and Mineral Resources estimates that domestic demand for energy will rise by around 7% annually, with electricity demand projected to triple between 2010 and 2030. Renewable energy sources are expected to play an increasingly important role in filling the need for more power generation and are projected to contribute 23% to the power generation mix by 2025, and 31% by 2050. Opportunities for private sector engagement are plentiful given the fact that around US$ 43.4 billion investment is needed for the period 2015-2019 to achieve the government’s energy targets.
Energy Efficiency & Carbon Services
Indonesia is among the countries with the clear need for energy efficiency as the national utility is struggling to supply the increasing demand for electricity. The country has set an ambitious
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target to achieve 17% energy savings by 2025, giving rise to opportunities for energy efficiency and energy conservation activities in all end-user segments.
Biofuel
Biofuels are gaining traction as Indonesia seeks to reduce oil imports and improve its ecological credentials, while securing the country’s future transportation needs. Both ethanol and biodiesel are produced in Indonesia, though the use of ethanol is limited to sectors outside transportation. The government has set ambitious targets to reach 20% ethanol and 30% diesel blending in industry, power and transport by 2025. Domestic demand for biofuels is increasing as vehicles and infrastructure facilities are adapted and blending requirements are tightening.
Cogeneration Technology
Currently the share of cogeneration in the total installed power capacity is around 7.3%, having a total installed capacity between 1,200 MW and 1,827 MW. In the past several years, projects with more than 537 MW capacity have been identified in the country with more than 80% of which will be implemented by power utilities, chemicals, pulp and paper, palm oil, rice and sugar industries. Current cogeneration plants are characterised by old to very old technologies, but the renewed interest from the private sector is bringing new technologies to the market. In addition to larger industries, smaller sectors are pooling resources together to utilise cogeneration technologies.
Carbon Capture and Storage (CCS)
In addition to its abundant resources and power generation capacities, Indonesia struggles with high levels of emissions of GHG, which come primarily from land use change and forestry activities, energy generation, peak fires, waste, agriculture and industry. While the CCS technology is very new to Indonesia, and only some R&D activities have taken place, the country holds enormous potential to utilise such technologies.
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Electric Vehicles
As the vehicle fleet is rapidly growing, Indonesia is evaluating its options for electric cars and other electric vehicles. While electric car market is close to non-existent, and limited to domestic efforts to develop a national electric car, the market for electric two-and-three wheelers is rapidly growing. Some initiatives to utilise electric vehicle technologies in public transport infrastructure are also showing signs of growth.
Opportunities
New and Renewable Energy (NRE) Project Development
Although the electricity production has increased at an annual rate of 13% in the last three years, around 12 million households are still without electricity. The annual electricity consumption is expected to increase to 375 Terawatt hour (TWh) in 2020 and the state-owned electricity company, Perusahaan Listrik Negara (PLN), is planning to invest US$ 9.6 billion/year until 2020 to new energy projects. The Indonesian Energy and Mineral Resources Ministry (ESDM) has, in late 2016, admitted that only 19,763 MW of power plant projects will be completed by end of 2019, representing 56.5% of the target 35 GW by 2020.
Although the energy sector is centrally planned, private investors are expected to play an increasingly significant role in large investments of renewable energy sources, such as geothermal, bio-energy and hydropower, and smaller NRE sectors, such as wind, solar and ocean energies. Only a small portion of these energy sources is utilised today. As a result, the market offers significant scope for expansion. With the renewed interest from the government to accelerate the use of renewable energy and increase Indonesia’s generating capacity, business opportunities for European companies may therefore consist of investing in renewable energy production and engineering, procurement and construction contracts, construction of new power plants, as well as development of transmission and distribution network for NRE connectivity.
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Export of Advanced Green Energy Technologies
Considering Indonesia’s aim to increase the share of NRE in the energy mix to 23% by 2025 and 31% by 2050, and improve energy efficiency by 17% until 2025, significant opportunities exist for European companies to export their green energy and energy conservation technologies. As the majority of turnkey solutions, equipment and parts are imported from abroad, international companies enjoy a good stream of potential business opportunities. Experienced European companies with turnkey solutions for clean energy implementation and energy efficiency optimisation will find significant avenues in Indonesia. These opportunities lie either in the sale and implementation of turnkey solutions and equipment for existing infrastructure, or in provision of such systems for the expanding Indonesian green energy network.
Retrofitting, Refurbishment and Upgrade of Existing Energy Infrastructure
The replacement market in Indonesia is also booming as there is a constant requirement for replacement parts and services for the ageing Indonesian power and electricity infrastructure. The continuous maintenance, upgrading and expansion of existing power plants and electricity production facilities to improve energy provision efficiency, the optimisation of energy management network, and the efforts to improve energy elasticity via more optimal solutions are driving the growth of opportunities.
In addition, there are also significant opportunities to provide technologies and solutions for energy efficiency and energy conservation (EE&EC) projects in residential, transport, commercial and industrial sectors. As electricity burnouts cause disruptions in industrial, business and everyday activities, there is a growing understanding, and demand, for more efficient energy elasticity. Thus, companies are likely to find market opportunities in addressing EE&EC needs.
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Skills, Technology and Expertise Transfer
Additional avenues for entry are available via technology licensing and training of local skillset. The Government of Indonesia aims to improve the domestic content of green energy and energy efficiency technologies and expertise via its increasing commitment to R&D. European companies willing to tap into the Indonesian green energy technology market may find success in entering it via collaborative projects with knowledge and technology transfer, and local skillset training, in mind. Particularly, collaborations between local and international partners are encouraged by the government and, therefore, may prove as the best entry points for securing strategic energy projects.
Regulations & Policies
Although the sector still remains heavily regulated with many challenges for New and Renewable Energy (NRE) developers, the Government of Indonesia has been active in recent years to promote a conducive policy and regulatory environment. With ambitious targets to increase the power generation from the current levels of 55 GW to 137 GW by 2025; expand the share of New and Renewable Energy (NRE) in the total energy mix up to 23% by 2025; reduce the energy intensity by 17% over the same period; and decrease the carbon footprint by 26% in 2020, it has been keen to attract investments in NRE sector via attractive Selling and Feed-in Tariffs for NRE, financial support, tax incentives and easing of permitting and licensing processes.
With new regulations in place, private investors are now provided with guaranteed and consistent revenue via FiT regimes, that can help make a viable business case for NRE projects. Simplification of the public-private partnership and power purchase agreements as well as expanded assistance on bureaucratic procedures is also helping to gradually remove obstacles that hinder the development of NRE. The overarching policy framework for green energy technologies is embedded in the National Energy Policy, with diversification, environmental sustainability and maximum use of domestic energy resources as the main priorities. The Government of Indonesia has subsequently released several roadmaps that guide NRE development in the country, including the 2007 National Action Plan Addressing Climate Change
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and National Action Plan for GHG Emission Reduction, the 2011 National Energy Conservation Masterplan, the 2014 National Energy Plan, and the 2015 Roadmap for Accelerated Development of New and Renewable Energy 2015-2025.
Some of the key remaining obstacles from the regulation and policy standpoint include the difficulty in obtaining land-use permissions, sometimes unclear regulatory environment with roles divided between multiple government agencies, and the legal status of the Perusahaan Listrik Negara (PLN) as the sole provider of electricity through the power grid, which complicates the incentives for foreign developers and often limits the profitability of projects.
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2. What are the characteristics of Indonesia? Indonesia is home to over 250 million people and is the world’s 4th most populous country. It is one of the most geographically dispersed countries in the world. Its total territory includes 1.9 million square km of land that consists of 17,840 islands, ranging from the large islands of Sumatra and Java in the west, through Sulawesi in the centre, to the territory of Irian Jaya in the east. Its territory also includes Kalimantan (which is part of the island of Borneo, the 3rd largest island in the world) and the Molucca Islands. Being located along the equator, it has a tropical monsoon climate, with distinct hot and wet seasons.
Figure 1: Map of Indonesia Source: International Enterprise Singapore
2.1. Political Overview
Indonesia is a unitary state, with political power organised around the executive, legislative and judicial branches of government. It is the world’s 3rd largest democracy, the largest economy in South East Asia and a member of the G20. It is politically stable and has a President led system of democracy. A comprehensive push for decentralisation has seen much power transferred to the regions. The executive branch is headed by President Joko Widodo, who became president in October 2014. Presidential elections are held every five years in Indonesia.
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2.2. Economic Overview
Indonesia is the world’s 10th largest economy in terms of purchasing power parity, with an estimated GDP of US$ 941 billion in 2016. Indonesia’s economy alone comprises nearly half of ASEAN’s economic output. According to the Statistics Indonesia (also known as Badan Pusat Statistiks Indonesia), Jakarta, Banten and West Java contributed 33.6% of GDP in 2015, despite only having 2.4% of Indonesia’s land mass.
With a higher economic growth rate compared to the more developed regions of Jakarta and West Java, Central and East Indonesia are catching the attention of investors.
Region Key Figures
Central Java (including Population: 37.4 million Key Cities / Regencies: Semarang, Kendal, Solo, Yogyakarta (Special DI Yogyakarta) Region) Capital: Semarang GDP: US$ 60.6 billion GDP Growth: 5.4% CAGR 2010 – 2015: 5.3%
East Java Population: 38.8 million Key Cities / Regencies: Surabaya, Gresik, Sidoarjo Capital: Surabaya GDP: US$ 106.4 billion GDP Growth: 5.4% CAGR 2010 – 2015: 6.0%
Kalimantan Population: 15.3 million Key Cities / Regencies: Balikpapan, Banjarmasin, Pontianak GDP: US$ 59.4 billion GDP Growth: 1.3% CAGR 2010 – 2015: 4.1%
Sulawesi Population: 18.7 million Key Cities / Regencies: Makassar, Manado, Bitung GDP: US$ 39.4 billion GDP Growth: 8.2%
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Region Key Figures
CAGR 2010 – 2015: 5.3%
Bali and Nusa Tenggara Population: 14.1 million Key Cities / Regencies: Bali, Lombok GDP: US$ 20.6 billion GDP Growth: 10.3% CAGR 2010 – 2015: 5.8% Table 1: GDP & GDP Growth Rates by Region Source: Badan Pusat Statistiks (BPS) Indonesia
Service and industry are the main economic drivers in Indonesia, accounting for 46% and 40% of GDP respectively, with the remaining 14% attributable to agriculture. Both the private sector and the government play an equally large role in the country’s economic development. The Indonesian government has implemented a long-term development plan for the future of the country, known as the Masterplan for Acceleration and Expansion of Indonesia’s Economic Development (MP3EI)1 in order to stabilise economic growth. Its main goals are to reduce poverty, promote the quality of human resources, improve science and technology, and strengthen economic competitiveness. Major sectors of the economy include manufacturing (tobacco, food and beverages, transport equipment and machinery), mining, construction, transport and communications, finance and real estate.
Indonesia’s young demographic profile, growing middle class and rising income levels have led to strong demand for consumer goods and services. According to the World Bank, this favourable demographic profile serves as one of the powerful drivers of growth in the country, with private consumption being the backbone of the economy.
Total Foreign Direct Investment in 2016 was US$ 28.9 billion. The investment climate, though generally positive, faces continued regulatory uncertainties and high logistics costs. In order to promote the open business culture in Indonesia, the government has launched a series of reform measures, which include opening up a range of business activities that were previously either
1Please visit http://www.indonesia-investments.com/projects/government-development-plans/masterplan-for-acceleration-and-expansion-of- indonesias-economic-development-mp3ei/item306 for details on MP3EI
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entirely closed or conditionally open to foreign investment. Among the industries that are fully opened for foreign capital are the communication and information, health, manufacturing, and general works sectors.
The government has unveiled 16 policy packages between September 2015 and August 2017 to stimulate investment, strengthen competitiveness, and diversify the economy. Included in the policy packages are measures to reduce regulatory bottlenecks, secure the legal rights of investors, facilitate international trade, and promote infrastructure investment.
Backed by strong expansion in private consumption and private-sector investment, Indonesia is forecast to grow by 5.5% in 2017. This is contingent on the success of recent reforms and implementation of an ambitious public investment programme.
2.3. Trade Overview
Indonesia has been ambitious in concluding Free Trade Agreements (FTAs). The country is a member of the ASEAN Free Trade Area (AFTA), which plays a key role in the nation’s intra-Asian trade. ASEAN has concluded FTAs with China, India, Japan, South Korea, Australia and New Zealand.
Indonesia recorded a trade surplus of US$ 8.78 billion in 2016, a 15% increase from the surplus achieved in 2015. With domestic demand accounting for nearly two-thirds of GDP, Indonesia is less dependent on exports than many of its neighbours. In the last 10 years, imports in Indonesia tripled as a large portion of the population entered the middle-class and propelled higher purchases of oil and consumption goods. Indonesia imports mainly oil and gas, machinery, electrical equipment, iron and steel, vehicles and plastics. Indonesia’s primary sourcing partners are China, Japan, Thailand, Singapore and the US (see ‘5.3 Useful Statistics’ for more information on trade distribution for relevant product/component groups).
The EU is currently negotiating a free trade agreement (FTA) with Indonesia. The third round of talks, which took place in September 2017, saw parties address a host of areas, including
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government procurement, investment, trade remedies, geographical indications, technical barriers to trade, and competition policy.
According to the EU’s report, more work is needed to reach common ground in relation to energy and raw materials. The EU’s proposal for legal text provisions on energy and raw materials for the EU-Indonesia FTA is available here: http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156108.pdf
Bilateral trade in goods between the EU and Indonesia amounted to EUR 25.1 billion in 2016, with EU exports worth EUR 10.5 billion and EU imports worth EUR 14.6 billion. The EU is Indonesia's fourth largest trading partner, while Indonesia ranks 30th in the overall EU trade worldwide.
Bilateral trade in services between the EU and Indonesia in 2015 amounted to EUR 6.1 billion in 2015, with EU exports amounting to EUR 4 billion and Indonesia's exports amounting to EUR 2.1 billion.
Figure 2: EU-Indonesia Trade in Goods & Services, 2014-2016 Source: European Commission
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2.4. Market Access
European companies should adopt a long-term view of Indonesia and consider venturing into Central and East Indonesia, which have much untapped potential and are less saturated than Jakarta and West Java.
There are various ways to enter the market in Indonesia such as appointing a sales agent or local partner (distributor) for the sales of products in the country, or by establishing a representative office, joint venture or investing in an existing local company. Local government organisations, foreign embassies, and associations (as identified in the Annex of this report) offer advice and information on investment and business in Indonesia.
Doing business in Indonesia takes patience and perseverance. Companies should be prepared to invest time and resources in regular visits over a period of months, sometimes years, before seeing returns. European companies must visit the Indonesian market in order to properly choose an appropriate agent or distributor. On the other hand, Indonesian representatives typically expect their foreign principals to visit the market on a regular basis to maintain a good relationship. Patience, persistence and presence are three key factors for success in Indonesia.
Deregulation has successfully reduced some barriers, but non-tariff barriers remain widespread and the bureaucracy can still be cumbersome.
2.5. Business and Competitive Environment
Indonesia ranks 91st in the latest Doing Business Rank report of the World Bank for 2017. The country went up by 15 places from 106 to 91, which was among the top 10 biggest climbers. Indonesia’s overall improved performance in the 2017 report was attributed to government efforts to simplify and remove unnecessary regulations.
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Ease of Doing Business in Indonesia 2017 Rank 2016 Rank Change in Rank
Overall Ranking 91 106 15
Starting a business 151 167 16
Dealing with Construction Permits 116 113 -3
Getting Electricity 49 61 12
Registering Property 118 123 5
Getting Credit 62 70 8
Protecting Minority Investors 70 69 -1
Paying Taxes 104 115 11
Trading Across Borders 108 113 5
Enforcing Contracts 166 171 5
Resolving Insolvency 76 74 -2
Table 2: Ease of Doing Business in Indonesia Source: World Bank
The World Bank noted that it is now easier to establish a business in Indonesia, have access to electricity, register property, acquire finance, pay taxes, to engage in cross-border trade and establish contracts. The encouragement of the use of online systems, the scrapping of the paid- in minimum capital requirement for SMEs, the introduction of simpler customs documents and a dedicated procedure for commercial litigation and small claims are some of the policies the government implemented that contributed to the country’s jump in the ranking.
Indonesia applies a flat rate of 25% corporate income tax. Public companies that satisfy certain conditions, including a minimum listing requirement of 40% of their total paid-up shares traded on a stock exchange in Indonesia, are entitled to a tax cut of 5% off the standard rate, giving them an effective tax rate of 20%. Small enterprises, i.e. corporate taxpayers with an annual turnover of not more than IDR 50 billion (EUR 3.4 million), are entitled to 50% of the standard tax rate which is imposed proportionally on taxable income of the part of gross turnover up to
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IDR 4.8 billion (EUR 326,750). Certain enterprises with gross turnover of not more than IDR 4.8 billion (EUR 326,750) are subject to final tax at 1% of turnover.
The administration of President Joko Widodo is committed to improving the state of public infrastructure in Indonesia. A series of concentrated efforts launched by the government has begun to speed up the development of strategic and priority infrastructure projects through better inter-ministerial coordination. The Indonesian government is also focused on developing the country’s ICT infrastructure, and has implemented projects such as the "Palapa Ring" Project, a broadband network project connecting the entire archipelago.
While Indonesia offers unprecedented opportunities, companies entering the Indonesian market should be prepared to deal with complex bureaucracy. To improve the situation, the government has plans to lay off 300,000 civil servants between 2017 and 2019 through golden handshakes and other mechanisms to show its commitment to improve the bureaucracy of the system. This plan also aims to remove incompetent and corrupt civil servants that contribute to the inefficiency of the government.
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3.1 Market Overview & EU Entry Opportunities in Indonesia
3.1. The Green Energy Technologies Sector in Indonesia
3.1.1 Overview of the Green Energy Sector
Green Energy Technologies (GET) fall under the New and Renewable Energy (NRE) and Energy Efficiency and Conservation (EE&EC) market segments in Indonesia and opportunities for GET are largely driven by the recent sub-sectoral growth.
To achieve its ambitious target set by the Government in 2014 to reach 23% share of NRE in the total energy mix by 2025, the Indonesian NRE market is estimated to require a total investment of US$ 135 billion over the next ten years.2 The investment requirements include equipment, NRE turnkey solutions and parts, maintenance and operations, services, and other NRE project development needs. The segmentation of investment is further divided into US$ 39 billion requirement for geothermal development, US$ 27 billion for hydro, US$ 54 billion for bioenergy, and US$ 13 billion for other NRE subsectors.
Figure 3: Total NRE Investment Needs until 2025 Source: National Energy Council (2015)
2 National Energy Council (2015)
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These NRE investment needs are in line with the growing Indonesian interest to move away from fossil fuel based power and electricity generation towards greener energy utilisation. After many years of neglect due to abundant oil and gas reserves which made NRE development an option and not a priority, the recent move is partly driven by estimations that country’s fossil energy resources may diminish as soon as 2025. While a latecomer to develop its NRE market, when compared to other countries, Indonesia has rapidly shifted gears when the country became for the first time a net oil importer in 2005. Since then, various efforts have been put in place to accelerate the market growth.
Market prospects based on resource availability are bright for Indonesia. It is estimated 200 GW of total NRE potential place the country in a favourable position to become a global renewables and bio-economy leader of tomorrow.
NRE Energy Type Total Potential Hydro 75,000 MW Geothermal 29,5 MW Bioenergy 32,000 MW Solar Cell 4.80 kWh/ m2 / day Wind and Hybrid 3 -6 m/s Ocean 61 GW Other NRE 6.4 GW Total 197.5 GW (plus wind and solar potential) Table 3: NRE Potential in Indonesia Source: MEMR 2017
Much of this potential, however, remains untapped. NRE utilisation in 2015 stood at approximately 6% (11,329 MW) of the total estimated potential.3 By NRE sectoral division, hydropower remains the most utilised renewable source with its 10.8% of the total potential, followed by bioenergy (5.4%) and geothermal (4.8%). According to the Indonesian National Energy Council, the market for other NRE resources remains largely untapped with low numbers of installed capacity and only broad estimates on the total resource utilisation availability.
3 National Energy Council (2015)
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Resource utilisation NRE Energy Source Off grid (MW) On grid (MW) Total (MW) ratio (%) Hydro 81.79 8,029.76 8,111.55 10.81% Geothermal - 1,403.50 1,403.50 4.8% Bioenergy 1,626.10 114.30 1,740.40 5.4% Solar Cell 66.02 5.00 71.02 - Wind 1.30 1.77 3.07 - Hybrid 0.54 - 0.54 - Total 1,775.75 9,554.33 11,330.08 Table 4: NRE Installed and Potential Capacity by Grid Connectivity Source: National Energy Council 2015
The market, however, is increasingly witnessing the entry of private sector players in all of its sub- sectors. The participation ranges from small pilot studies and R&D initiatives to equipment provision and large-scale NRE power plant developments.
Indonesia’s recent NRE strategic roadmap for new energy capacity additions also points to increasing opportunities for green energy technologies. Embedded in the National Energy Policy and the Fast Track Programmes, Indonesia’s capacity for NRE is expected to compete by 2025 and challenge traditional energy sources by 2050, for which large investments from the private sector are needed.
Figure 4: Current and Targeted Energy Mix in Indonesia Source: Asian Development Bank (2014) Energy Sector White Paper
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As of 2017, the significant uptake of additional commitments to expand installed NRE capacity is already pointing to the opening up of various opportunities for green energy technologies. Currently, nearly 59% of the 2025 targeted capacity has been committed via various NRE projects.
NRE Energy Capacity of Power Plants (GW) Source Type Committed 2025 target 2050 Target 17.5 GW (59% of 29.5 GW Geothermal 7.242 GW 7.242 GW Potential) Hydro Power 15.559 GW 20.987 GW 45 GW (60% of 75 GW Potential) 26.1 GW (80% of 32 GW Bioenergy 2.006 GW 5.500 GW Potential) Solar 0.540 GW 6.500 GW 45 GW Wind 0.913 GW 1.800 GW 28.6 GW Other Energy 0.372 GW 3.125 GW 6.4 GW Total 26.631 GW 45.153 GW 168.6 GW Table 5: Indonesia’s NRE Targets and Committed Capacity as of 2017 Source: MEMR (2017)
National electrification programme, which aims to provide access to electricity to 96.6% of its population by 2019, is also driving the development, and the need for GET, especially in rural and remote areas – locations with few national grid connections and government’s focus for electrification programmes.
Meeting these capacity and electrification targets requires both public and private investment. Investors are starting to notice Indonesia’s growing demand for energy and the abundant renewable resources as a significant reason to invest in the nation’s NRE sector. The Institute for Essential Service Reform (IESR) in Indonesia estimates that both government agencies and the private sector will be required to invest a combined US$ 15 billion per year until 2025.
GET market opportunities are also complemented by the growth of the EE&EC sector. Climate Investment Fund (CIF) estimates that the energy efficiency opportunity in Indonesia is worth approximately US$ 5 billion, with avenues for retrofitting (US$ 4 billion) and the implementation of new EE solutions (US$ 1 billion). The market growth is driven by the government’s commitment
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to achieve 17% energy savings by 2025,4 and opportunities are abundant in all end-user segments – industry, transport, residential, commercial and others:
Energy Consumption Per Target of Energy Potential of Energy Sector Sector Year 2013 (Million Conservation Sectoral Conservation BOE) (2025) Industry 335 (42%) 10 – 30% 17% Transport 324 (39%) 15 – 35% 20% Household 100 (12%) 15 – 30% 15% Commercial 36 (4%) 10 – 30% 15% Others (Agriculture, 23 (3%) 25% - Construction, Mining) Table 6: Potential Energy Savings per Sector by 2025 Source: Draft National Energy Conservation Master Plan (RIKEN), 2013
3.1.2 Key Institutional Actors for Green Energy Technologies
Green Energy Technologies are widely covered by a broad range of institutions involved in NRE and EE&EC policy making and implementation. The following institutions have the greatest relevance for the sector:
Ministry of Energy and Mineral Resources (MEMR) is responsible for energy policy and regulation. It hosts a Directorate General of New and Renewable Energy and Energy Conservation (DGNREEC) for the administration and promotion of renewables and energy efficiency. The MEMR also regulates the electricity sector through its Directorate of Electricity and supervises the performance of electricity companies, including the national utility PLN.
National Energy Council (DEN) is chaired by the President and it accommodates seven ministries as members and eight non-government members, responsible for formulating the National Energy Policy. This determines the overall strategy, goals and approaches to energy sector in Indonesia.
National Planning Agency (Bappenas) is responsible for economic planning, including strategies around energy.
4 Draft National Energy Conservation Master Plan (RIKEN), 2013
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Ministry of Finance (MoF) controls government expenditure and budgets, including renewables investment and incentives.
Ministry of Agriculture (MoA) regulates palm oil and other plantations for biofuel feed-stocks.
Local and regional governments also play important roles in policy implementation through developing regulations and issuing permits. Decentralisation reforms have led to re-allocation of some authority over investment policy to regional and local governments, requiring project developers to comply with regulation of both central and decentralised authorities. Within certain boundaries as set out in the Law on Regional Taxes and Charges, provincial and local authorities can apply their own fiscal policies related to renewables, and can license local electricity companies as well as determine local tariffs.
Other government agencies, such as the Ministry of Environment and the Ministry of Forestry affect renewables for instance through forest clearance for geothermal development, whereas the Ministry of State-Owned Enterprises (SOEs) controls energy SOEs and influences energy policy implementation. The Ministry of Industry is responsible for industry affairs, including those falling under NRE.
In contrast to practice in many other countries, including Thailand and the Philippines, there is no independent regulator to adjudicate disputes and advice/set prices for the NRE sector.
The subjects of policies on NRE are public and private enterprises. These include:
National Electricity Company (PLN), which owns most power plants in Indonesia and is in charge of most transmission and distribution.
Independent Power Producers, which sell power to PLN.
Fuel distributors, including the National Oil Company (Pertamina), PT AKR Corporindo, PT Surya Parna Niaga (SPN), Shell and Petronas, and others.
Biofuel producers, which develop biofuel resources across the country.
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Figure 5: Key Institutions for NRE and EE&EC Policy Source: Damuri & Atje (2012)
3.1.3 Relevant Policy Initiatives to Accelerate GET
As Indonesia committed itself to an aspirational target to increase the component of NRE to 23% by 2025 in the total primary energy mix, and reduce energy intensity by 17%, it has been active in accelerating a conducive policy and regulatory environment for the sector’s growth.
In recent years, a number of policies and regulations have been issued to promote accelerated adoption of green technologies, including NRE selling tariffs and Feed-in Tariffs (FiTs), NRE and EE&EC targets and incentives, financial support, simplified permits and licenses, and support regarding technical aspects of green technology implementation. The ley legislative policies are:
The overarching policy framework for green energy technologies has been embedded in the National Energy Policy, under which the government is emphasising energy diversification, environmental sustainability and maximum use of domestic energy resources.
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As outlined above, the government has also committed itself over the years to several strategic targets for GET, including 23% NRE share and 31% NRE share in the energy mix by 2025 and 2050, respectively (2014 National Energy Plan), 17% energy savings by 2025 (2011 National Energy Conservation Masterplan), and 26% reduction in GHG emissions by 2020 (2007 National Action Plan Addressing Climate Change and National Action Plan for GHG Emission Reduction).
Since 2012, the Ministry of Energy and Mineral Resources (MEMR) has also issued multiple iterations of Feed-in Tariffs (FiTs) for NRE to help accelerate the deployment of NRE power projects. Nearly every year, new iterations have been released to address existing challenges and incentivise private sector participation. These FiTs are expected to provide private investors with guaranteed and consistent revenue that can help make a viable business case for NRE projects.
Law No. 21/2014 on Geothermal was also passed, which introduced a new regime for geothermal business activities. The law aims to accelerate the development of geothermal activities as an alternative energy source, given Indonesia’s large unutilised geothermal resources.
In May 2015, the Government has further issued a Roadmap for Accelerated Development of New and Renewable Energy (NRE) 2015-2025 to support energy resilience and shift towards NRE.
Further to legislative and collaboration incentives, the Government of Indonesia is supporting NRE development via tax incentives, financial support, efforts to simplify permitting and licensing processes, and support regarding technical aspects of green technology implementation:
Incentives: Tax incentives for NRE-based power projects under Ministry of Finance (MOF) Regulation No. 21/PMK.011/2010 now include income tax exemption/reduction for 5-10 years; accelerated depreciation and amortisation; tax deduction per year for 6 years; exemption for VAT; accelerated depreciation of capital and fixed assets; and import duty exemption for NRE equipment. Under MOF Regulation No. 19/PMK.011/2011, the government also gives
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financial guarantee for NRE plant projects through cooperation with Independent Power Producer (IPP) in the case of payment failure by PLN.
Financial support: The Geothermal Fund Facility (GFF), the Indonesia Infrastructure Guarantee Fund (IIGF), also known as PT Perjaminan Infrastruktur Indonesia Persero, and loans at an interest rate lower than that provided by national banks are also available for NRE developments.
The Clean Technology Fund (CTF) also aims to accelerate the country’s initiatives to promote energy efficiency and renewable energy, and to help achieve the objective of increasing electrification rate up to 96.6% by 2019. Under a new US$ 400 million climate investment plan endorsed by the CTF, Indonesia’s geothermal power capacity is also set to nearly double. In March 2015, a CTF of US$ 500 million was further reallocated to the Geothermal Energy Upstream Development Project of Indonesia to support strategic NRE projects.
Permitting and licensing process simplification: The government has also been active to address the complicated processes of NRE permit and license acquisitions. Since January 2015, the government compiled the permit procedures of electricity power plant into the integrated one-stop service stationed in the Investment Coordinating Board (BKPM). The Temporary and Permanent Permit of Electricity Power Supply Business (IUPL), the Determination of Electricity Power Supply Business Area, and the Permit of Electricity Power Supporting General of Electricity office, are now available in BKPM’s integrated One-Stop Service, as well as other permit procedures. Simplifying related permits and regulations is one of the government’s priorities to further accelerate and streamline the NRE market and the utilisation of green energy technologies. NRE Cooperation Forum is also being integrated into Indonesian NRE framework to offer network and collaboration opportunities among agencies for accelerating the removal of obstacles that hinder the development of NRE.
Technical issues: To offer support in other technical areas, in July 2014 the state-owned PLN issued “Guidelines for Connecting Renewable Energy Generation Plants (REGP) to PLN’s Distribution System”, which aims to ensure connection and parallel operation of REGPs do not adversely affect the safety, reliability and power quality of PLN’s power system.
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It provides REGP developers with clear guidance in performing connection studies and technical requirements for early consideration in the REGP project planning and development stages, and useful reference of technical information on REGP engineering firms, equipment manufacturers and suppliers.
3.1.4 Domestic Research & Development (R&D) on GET
Despite the country’s abundance of almost every NRE source, including solar, wind, biomass, ocean, hydro and geothermal reserves, the technology and capacity to harvest these sources remains underdeveloped in Indonesia. Unlike traditional sources of energy, the deployment of GET is not about the energy itself, which is free, but rather the technologies that capture it. Unlike previous energy transitions from wood to coal, or coal to oil, the transition to GET represents a major shift from conventional energy systems and infrastructure. As a result, the Government of Indonesia, private sector and research institutions are actively engaged in developing Indonesia’s capacities for deploying green energy technologies.
2017 2016
BASIC ENERGY RESEARCH
ENERGY STORAGE
ELECTRICITY GRID
CLEANER FOSSIL ENERGY
SOLAR, WIND AND OTHER RENEWABLES
BIOFUELS
TRANSPORT
ENERGY EFFICIENCY $0 $4.000.000 $8.000.000 $12.000.000 $16.000.000
Figure 6: Clean Energy R&D Focus Areas and Budget (US$), 2016 and 2017 Source: Mission Innovation (2017). Indonesia
In 2016, Indonesia’s budget for clean energy R&D across various government institutions amounted to US$ 16.7 million, but the government has an ambitious target to increase it to US$ 150 million by 2020. This year, the budget has already nearly doubled, reaching more than US$ 30 million. Although research on cleaner fossil fuel still dominates the R&D efforts, there is
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growing interest to explore new and renewable energy technologies, basic energy research, and electricity grid. In renewables, geothermal energy research is receiving the largest share of the funding.
Budget for 2016 Budget for 2017 Clean Energy R&D (US$) (US$)
1 Energy Efficiency 776,771 272,727 Energy Efficiency and Conservation 776,771 272,727 2 Vehicles and other transport 12,545 16,309 Transport 12,545 16,309 3 Biofuels 1,239,381 759,645 Biofuels (Incl. Liquid biofuels, solid biofuels and biogases 1,239,381 759,645 4 Solar, wind and other renewables 2,543,278 4,503,436 Ocean energy 328,228 115,967 Geothermal energy 1,806,887 4,240,121 Other renewable energy sources 75,455 147,349 Unallocated renewable energy sources 332,599 - 5 Cleaner fossil energy 9,778,510 16,735,995 Oil and gas 3,829,381 9,604,995 Coal 5,548,739 7,149,000 Unallocated fossil fuels 400,390 - 6 Electricity grid 72,930 2,271,719 Electric power generation 63,839 2,259,900 Electricity transmission and distribution 9,091 11,818 7 Energy storage 235,386 490,973 Energy storage (non-transport application) 235,386 490,973 8 Basic energy research 2,067,067 5,320,091 Energy system analysis 149,616 - Basic energy research that cannot be allocated to a specific 1,099,269 4,501,909 category Unallocated 818,182 818,182
Total budget 16,725,869 30,388,895 Table 7: Clean Energy R&D Funding in 2016 and 2017 by Sub-categories Source: Mission Innovation (2017). Indonesia
Currently, Indonesia’s priority in R&D of energy is threefold: 1) mitigating the impact of climate change; 2) reducing dependency on fossil fuels; and 3) promoting clean energy in social and economic development.
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Indonesia also has a number of priority programs concerning clean energy R&D, including:
The establishment of Indonesia’s Centre of Excellence (CoE) for Clean Energy, which is a collective endeavour led by the Ministry of Energy and Mineral Resources (MEMR). CoE will target to holistically address research, deployment, investment and project development of clean energy as interlinked aspects that are required for acceleration of clean energy technology diffusion. The centre aims to enhance access to reliable and affordable supply of clean energy through three approaches: 1) consolidating information and high-quality data to stimulate synergy and innovation; 2) supporting higher certainty of financial viability through providing data and analysis; 3) reducing administrative and regulatory barriers through synchronising and coordinating government supervision over clean energy projects; and 4) enhancing quality of basic science and technical support.
Another R&D programme is Bali National Clean Energy Area (KNEB), which is a pioneer initiative where clean energy deployment is applied at provincial level. The main goal of the initiative is for Bali to use 100% of its energy from clean energy sources and to explore opportunities for larger areas to go green. In 2017, Energy Resilience Fund (ERF) is expected to allocate around US$ 740,740 for innovations in clean energy initiatives in Bali Province to further accelerate R&D efforts under KNEB programme.
Additionally, the Government also plans to accelerate R&D on clean energy through Energy Resilience Fund (ERF). ERF was established by the MEMR to focus on incentives for acceleration of new and renewable energy (NRE) deployment in Indonesia. Amongst its funding areas are: 1) off grid and on-grid electrification projects; 2) biofuel; 3) energy efficiency; and 4) R&D on NRE. In 2017, ERF plans to allocate US$ 1,881,481 for research proposals along the innovation chain from laboratory research, demonstration activities to pre- commercial development. Furthermore, ERF is planning to spend up to US$ 3.7 million to fund research and establishment of solar panel standards and certification in Indonesia.
Indonesia has also launched in 2016 its first research funding institution, named Indonesian Science Fund (ISF), supported by the Government of Indonesia, the U.S., Australia and the UK. ISF provides multi-year grants for fundamental and frontier research and aims to elevate
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the current state of science by providing sustainable funding for Indonesian scientists. Although call for proposal on energy area have not commenced yet, the ISF has shown interest in exploring future avenues for clean energy R&D.
Finally, the MEMR’s Research and Development Centre for Electricity and Renewable Energy Technology (P3TKEBT) is the leading domestic R&D centre in Indonesia, which is also driving R&D advances in the country.
3.1.5 Key Associations
In Indonesia, there are several key associations, which address the interests of the Green Energy Technologies market:
Indonesian Renewable Energy Society (METI) is a communication, consulting and cooperation forum for Renewable Energy practitioners, which provides space for stakeholders to advance the deployment of renewable energy. The forum aims to accelerate the use of new and renewable energy to fulfil national energy demand. The founding of METI was initiated in 1999 by a group of intellectuals, government officials, private companies and renewable energy professionals, who were concerned about the depletion of conventional energy resources and the need to find alternative energy sources. Currently, the membership of METI consists of scientists, educators, regulators, business developers and organisations, NGOs, private companies and other stakeholders, who discuss and exchange views on strategic and pragmatic issues of using renewable energy. METI is also committed to contribute to the global efforts in combating the negative effects of global climate change by producing ideas and solutions through advocacy and promotion of renewable energies. METI aims to be an effective vehicle for continuous efforts to develop and utilise renewable energy to meet national sustainable energy needs.
The Independent Power Producers Association of Indonesia (APLSI) is responsible for representing the interests of its 48 members, particularly in relation to issues such as renegotiation of tariffs and Power Purchase
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Agreements (PPAs). At the moment, all of the association’s members are companies operating coal-fired power plants, however, the association is seeking to expand its membership to include companies involved in energy generation for other types sources, particularly those engaged in renewable energy.
The Indonesian Biofuel Producers Association (APROBI) was established in 2006 to support the Government program in developing and using biofuels as a renewable fuel. Since its establishment, APROBI has continued to work with the Government and various parties to pursue the development of biofuels in Indonesia. It currently represents the interests of 22 members and unifies the biofuel industry business stakeholders.
3.1.6 Entry Strategies
There are multiple strategies that European companies may wish to consider when thinking about entering the Indonesian green energy technologies market. These include exporting and licensing, franchising, strategic alliances and partnerships for export distribution and project development via distributor or agent, joint ventures, wholly owned subsidiaries and specialised tradeshows. Although company size and level of resource commitment may influence the choice of entry mode – smaller, low resource commitment companies may prefer flexible contractual entry modes, such as exporting and licensing via a distributor or agent, while larger, high resource commitment companies may consider direct entry modes, such as joint ventures and wholly owned subsidiaries – local partnerships still remain the preferred entry mode by most companies, irrespective of company size, sector and international presence.
Many government tenders are also awarded based on the proven track record of providers, or long-established relationships between the government agency and the agent or distributor. As a result, the preferred path of entry into the Indonesian GET market is through the appointment of distributor or agent, or partnerships with local companies.
Foreign companies seeking to sell their goods in Indonesia without setting up a local Indonesian company must appoint an import agent or distributor, pursuant to Ministry of Trade Regulation
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No. 36/1977 on Termination of Foreign Business Activities in the Trade Sector. In many cases, foreign companies have established connections with Indonesian importers, allowing the two companies to effectively function as one, where the Indonesian company acts as importer or distributor and the foreign company promotes its products. Selecting the right local agent or distributor is therefore critical for successful project development and delivery of products or services.
While Indonesian Government is keen to encourage FDI in the utilisation of green energy technologies, foreign ownership for some green energy projects is also limited to 49%-95%, necessitating the partnerships with local stakeholders.
For example, the development of renewable energy based power plants is subject to a foreign investment limitation under Presidential Regulation No. 44/2016 concerning the List of Business Closed and Open with Conditions in the Field of Investment. As such, small scale IPPs (i.e. of less than 10 MW capacity) have a foreign ownership capped at 49%, thus requiring partnerships for such project development. Some ownership limitations also exist for other NRE projects, including:
No. Business Fields PR 39/2014 1 Power Plant < 1 MW 100% Local Capital (Domestic Direct Investment) Foreign Capital Ownership Maximum 95% (Maximum 100% Power Pant > 10 MW for the purpose of PPP during concession period) Foreign Capital Ownership Maximum 95% (Maximum 100% 2 Power Plant Transmission for the purpose of PPP during concession period) Foreign Capital Ownership Maximum 95% (Maximum 100% 3 Electricity Distribution for the purpose of PPP during concession period) 4 Small-scale Power Plant (1-10 MW) Foreign Capital Ownership Maximum 49% Construction and Installation of Electric Power – 5 100% Local Capital (Domestic Direct Investment) Installation of Electric Power Utilisation 6 Biomass Pellet Producing Industry for Energy Partnership 7 Electric Power Installation Examination and Testing 100% Local Capital (Domestic Direct Investment) Geothermal Power Plant with capacity of less than 10 8. Maximum of 67% foreign ownership MW Table 8: Foreign Ownership Restrictions for Power Generation Source: Presidential Regulation No. 39/2014
As a result, partnerships have become the preferred mode of entry in Indonesian NRE market.
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Specialised tradeshows often serve as a springboard for interested international companies to find relevant local partners. There are several upcoming events, which can offer opportunities to develop business-to-business partnerships:
Solartech Indonesia 2018 is Indonesia’s largest solar power and PV technology trade exhibition, which is going to take place on 3-5 May 2018 at JIExpo Kemayoran Exhibition Centre in Jakarta, Indonesia. The trade show has been recognised as the professional show of choice for solar power & PV technology professionals. It offers opportunities for industry players to network with local solar industry stakeholders and make new business contacts. The annual event gathers around 650 exhibiting companies and over 20,000 visitors. Solartech Indonesia is also supported by the Indonesian Ministry of Industry.
Renewable Energy for Indonesia 2017 (RE4I) is the 3rd International Conference and Exhibition on geothermal, hydro, solar, wind, ocean wave and bioenergy. It offers an interactive platform for potential investors and renewable energy technologies providers to understand market directions, opportunities and economic priorities of the Government of Indonesia on the renewable energy sector. At the same time, it provides space for building potential business networks with local authorities and industry stakeholders and establishing presence in the new market. The event is going to take place at Le Méridien, Jakarta on 28-29 November 2017.
Asia Power Week 2018 is the premier power industry event for the Asian region. Covering every aspect of the power generation industry, the event attracts over 8,500 attendees, 200 exhibitors and 150 industry speakers. This time, Asia Power Week converges two industry events, the Power- Gen Asia and Renewable Energy World Asia into a three days event packed with technical tours, more than 50 conference sessions, panel discussions, a comprehensive exhibition and multiple networking events. It offers ample opportunities for networking, business partnerships and new
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market entry points. The event is scheduled for 18-20 September 2018 and it is going to take place at ICE, BSD City venue in Jakarta.
The 3rd Industrial PowerGen & Renewable Energy Indonesia 2018 will take place at JIExpo, Jakarta from 3-5 May 2018. The show will be held in conjunction with Solartech Indonesia 2018, Battery Indonesia 2018, Inalight 2018 and Cable & Wire Indonesia 2018 as one stop platform for power generation, renewable energy, energy storage, lighting, cable and other electrical equipment under one roof. The show is designed to showcase the latest technology, innovations and solutions for the entire power generation sector, including the latest technologies in biogas and biomass sector, PV & thermal, wind, hydropower, geothermal, energy efficiency and conservation. The expo is expected to attract more than 25,000 professionals from 30 countries and offer multiple business networking opportunities.
Indonesia International Green Technology and Eco-Friendly Products Exhibition 2018 is a three -day event being held on 3-5 May 2018 at the Jakarta International Expo (JIExpo) in Jakarta. The event showcases products like green building, eco-friendly products & technology, green energy, green transportation, green ICT, green manufacturing, water & waste management, construction industry, construction equipment & technology, building materials & technology, and others, in the environment and waste management, power and renewable energy industries.
3.1.7 Challenges and Entry Barriers
Although the Indonesian green energy technologies market offers ample lucrative opportunities, foreign companies wishing to enter the market must be prepared for a challenging business environment.
Lengthy investment processes, issues over land permits and availability due to conflicting status of land use, lack of reliable data systems on renewable energy as well as feasibility of projects frequently lead to cost overruns. Remaining inconsistencies in regulations and financing as well
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as overlapping mandates between government units are also proving to add further challenges for the green energy technologies market. For example, in some cases, the MEMR has been reported to issue land permits for renewable energy projects without stating the exact location, resulting in local governments issuing two permits for one exact same location, and causing some projects to be delayed or effectively abandoned.
Indonesian infrastructure and service networks have also not been developed or maintained enough to keep pace with the booming consumer-led economy, causing increased transaction costs and inefficiencies that hamper exporters and investors.
Although significant anti-corruption measures have been undertaken by the Indonesian government, corruption remains a concern for many ventures looking to operate within Indonesia. The country has been ranked 90th on Transparency International’s Corruption Perceptions Index 2016.
In turn, while improving, significant rule-of-law issues still persist. Formal dispute settlement mechanisms are not considered effective, and business and regulatory disputes – which would generally be considered administrative or civil matters in Europe – may be considered criminal cases in Indonesia. International arbitration is widely discouraged by the Government of Indonesia. The lack of a robust legal system for arbitrating business matters sometimes proves to be a significant entry barrier for interested investors.
Access to site condition, availability of logistics facilities, on-site resources and local construction companies and materials also prove challenging for companies wishing to develop power plant construction business.
Furthermore, competition from 3rd country companies, such as Singapore, China, Japan, Australia, South Korea, Russia, and other regional players is intense, and European companies often have to significantly adapt their business model and pricing scheme to compete effectively. This poses entry challenges when the higher quality equipment and service provision has to balance with the locally acceptable requirements for cost-effectiveness.
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High initial costs for projects due to imported technology and difficult operational/maintenance environment are also deterring some potential investors. Quite often, financing institutions still consider renewable energy investment in Indonesia a high-risk area, making interest rates on loans rather high. Most loans for renewable power projects have interest rates of around 12%.
Indonesia has been also ranked 91st out of 190 countries in the Ease of Doing Business 2017 report by the World Bank. As a result, companies can often encounter complex bureaucratic and regulatory requirements, which make it time-consuming to do business in Indonesia.
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3.2 Wind
3.2.1 Market Overview
Indonesia offers an array of opportunities in renewable energy, including wind power. The country’s location on the equator offers it the confluence of air currents from both the northern and the southern hemispheres while its spreading across many islands provides it with a total coastline of more than 54,000 km., where the wind is available during the day (from the sea) and the night (from inland to the coast). Given its location, Indonesia appears to have what it takes to reap the benefits of wind energy.
Figure 7: Wind Currents throughout Indonesia Source: NephiCode.com
However, until recently the wind potential has not been seen as a great investment opportunity. Lack of infrastructure and geospatial data for potential wind power developments, low interest from the Government of Indonesia, marginal domestic demand, and stringent regulatory environment – all have been seen as part of the problem.
More importantly, the estimated potential of wind energy in Indonesia has historically been regarded as relatively small primarily because wind velocity was considered (in general) to be
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relatively low. The exception has been in the eastern islands, where wind velocity can support wind power developments. However, Indonesia’s windiest regions are also the least populated and lack transmission infrastructure capable of sustaining large wind farms. As a result, wind power opportunities have been often limited to small- and medium-sized projects with turbines capable of power generation under lower wind speeds.
Pilot wind projects (mostly small projects with capacities of less than 400 kW) have been built, for example, in Nusa Penida and several other locations, under bilateral grant financing. But only a few of those units have operated until 2012. At the end of 2012, the total installed capacity of wind power in Indonesia was just 1.4 MW.
Figure 8: Wind Power Facility in Nusa Penida Source: windenergysolutions.nl
New studies have recently identified that Indonesia may have greater wind potential than previously thought. EBTKE data together with the data from the National Institute of Aeronautics
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and Space (LAPAN), currently the most comprehensive data on wind potential in circulation, have identified at least 19 sites with good wind potential (wind speeds greater than 5 m/s at 50 m) out of a total 153 investigated sites. 34 additional sites with a fair power potential (wind speeds of 4-5 m/s) have also been identified. Global Atlas of the International Renewable Energy Agency has further noted that speeds of over 7 m/s are available in Indonesia at the height of 80 meters in Sumatra, West Timor and Sulawesi.
Wind resources in Indonesia Summary Data from Wind Resources Assessment and Research for 153 sites Resource Potential Wind Wind Power No. of Provinces Speed at Density, at sites 50 m., 50 m., (m/s) (W/m2) Lowest < 3.0 < 45 66 West Sumatra, Bengkulu, Jambi, Central Java, South Kalimantan, West Nusa Tenggara, East Nusa Tenggara, South-East Sulawesi, North Sulawesi, Maluku Low (small-scale) 3.0 – 4.0 < 75 34 Lampung, Jogyakarta, Bali, East Java, Central Java, West Nusa Tenggara, South Kalimantan, East Nusa Tenggara, South-East Sulawesi, Central Sulawesi, North Sumatra, West Sulawesi Medium (medium- 4.1 – 5.0 75 – 150 34 Bengkulu, Banten, DKI, Central Java, East Java, scale) East and West Nusa Tenggara, South-east, South and Central Sulawesi, Gorontalo High (large-scale) >5.0 >150 19 Central Java, Yogyakarta, East and West Nusa Tenggara, South and North Sulawesi Table 9: Wind Resources in Indonesia Source: RENSTRA DITJEN EBTKE 2015 – 2019
Given the availability of more robust data on wind resources, The Asian Development Bank has more recently suggested that the total wind potential in Indonesia might be as high as 9 GW.5
5 ADB Paper No. 9, Summary of Indonesian Energy Sector Assessment December 2015. Soeripno Martosaputro and Nila Murti of WHyPGen also cite the MEMR as assessing the total Indonesian wind capacity at 9.29 GW in Blowing the Wind Energy in Indonesia presented at the Indonesia Renewable Energy & Energy Conservation Conference and Exhibition [Indonesia EBTKE CONEX 2013] online at Energy Procedia Volume 47, 2014, pp. 273-282.
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While the Indonesian wind power market is still in its nascent years, the geospatial studies have revived interest from both the government and the private sector to explore existing opportunities further via identification of potential locations for commercial scale wind energy.
Potential locations for commercial scale wind energy Broad Area (ha) Potential Energy (MW) Sumatera 85,779 1,716 Banten and West Java 319,244 6,385 Stern Java and Bali 305,231 6,105 Eastern Nusa Tenggara 493,630 9,261 Maluku and Papua 1,539,401 30,788 TOTAL 61,973 Table 10: Potential Locations for Commercial Scale Wind Energy in Indonesia Source: Statistik EBTKE 2014
Within Java and Sulawesi, an initial study by Agency for the Assessment and Application Technology on Wind Hybrid Power Generation systems (BPPT-WHyPGen) has also indicated that there is wind energy potential of around 970 MW, distributed as follows:
No. Locations Potential Energy (MW)
1 Lebak 100.0 MW
2 Sukabumi Selatan 100.0 MW 3 Garut Selatan 150.0 MW 4 Purworejo 67.5 MW 5 Bantul 50.0 MW 6 Gunung Kidul 15.0 MW 7 Sidrap 100.0 MW 8 Jeneponto 62.5 MW + 100 MW 9 Oelbubuk 10.0 MW 10 Kupang 50.0 MW (Indicative) 11 Palakahembi 5.0 MW (Indicative) 12 Seluyar 10.0 MW 13 Takalar 100.0 MW (Indicative) 14 Bulukumba 50.0 MW (Indicative) Table 11: Java and Sulawesi Wind Energy Potential by Location Source: Statistik EBTKE 2014
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Given the renewed interest in the exploration of wind energy in recent years, the beginning of 2015 has already seen the installed wind power capacity increase to 3.6 MW, of which 1.77 MW was connected to the state-owned Perusahaan Listrik Negara (PLN’s) grid and 1.84 MW were the off-grid projects for rural power supply. The largest grid-connected wind power facility was at Nusa Penida in Bali (0.735 MW) and at Sangihe and Selayar in Sulawesi (combined capacity of 0.54 MW). The on-grid projects were the result of the cooperation between the Ministry of Energy and Mineral Resources (MEMR) and the PLN.
While the planned development of wind energy by the MEMR still appears to be very modest (Table 12), a number of private sector developments have been prospected in the country in recent years to fill the gap.
On-stream capacity of wind power plants 2015 2016 2017 2018 2019 2015-2019 Wind non-state budget 2.0 5.0 7.0 9.0 13.0 Wind state budget – MEMR 0.5 0.2 0.5 1.0 2.0 Wind special allocation fund 0.2 0.5 0.8 1.0 1.2 Construction of wind power plants 2.7 5.7 8.3 11.0 16.2 Table 12: Government Planned Additions for Wind Power Plants between 2015-2019 Source: RENSTRA KEDSM 2015 – 2019
Several big areas from the initial study by BPPT-WHyPGen have now been prospected and developed with the backing of credible promoters, bankable feasibility studies and comprehensive wind resource data, and have now moved into construction stages in 2016. At the beginning of 2016, Indonesia’s wind project pipeline had already totalled to 280 MW,6 including 195 MW in South Sulawesi, 60 MW in Java, and several smaller projects in West Timor and Sumba.7 At the same time, more than 500 MW in projects was in negotiation for Power Purchase Agreements (PPAs), or was already in the feasibility study/data validation stages. In 2017, PLN has additionally signed PPAs for the construction of wind power farms combined with a solar and mini-
6 Indonesia’s wind project pipeline conssits of: Jeneponto, South Sulawesi (125 MW); Sidrap, South Sulawesi (70 MW); Central Java (50 MW); Ciemas, West Java (10 MW); TTS, West Timor (20 MW); Hambapraign, Sumba (4 MW / 0.6 MW). 7 Asian Development Bank (2015). Summary of Indonesia’s Energy Sector Assessment.
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hydro power plant in Selayar, Kei Kecil, Ambin, and Buru Islands with PT UPC Renewable Indonesia and PT Binatek Energi Terbarukan.
In addition to the private sector, the development of wind energy is also being supported by international governments and organisations. Denmark for example, is assisting Indonesia in developing wind power for power generation, which was marked by the launch of wind energy maps and studies, expected to locate cities in Indonesia that have the potential to host wind power farms.
Figure 9: Wind Map developed via Danish-Indonesian Cooperation – Power Density at 50 m. Source: http://indonesia.windprospecting.com
Figure 10: Wind Map developed via Danish-Indonesian Cooperation – Average Wind Speed at 50 m. Source: http://indonesia.windprospecting.com
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Even though in 2012 the sector was 99% underdeveloped, the private sector is starting to notice Indonesia’s potential.
The Indonesian government has also set a target of increasing wind power capacity to 1.5 GW8 in order to support its goal of generating additional 35 GW of power capacity by 2025 (23% coming from renewable energy sources). It is expected that Independent Power producers (IPPs) will develop the majority of the wind power plants to reach this target. Given the crucial role that the IPPs are expected to play in wind power capacity development, the framework conditions are being developed to ensure that developers and investors embark on this ambitious path.
For example, the Indonesian government has recently implemented several key policies to support wind power development. In January 2017, the Ministry of Energy and Mineral Resources (MEMR) introduced a new Feed-in Tariff (FiT) and procurement schemes. The Regulation 12/2017 will offer lower tariffs paid to private developers, causing some projects to become commercially unviable. However, this will arguably encourage Indonesia’s state-owned utility company, PLN, to purchase electricity from renewable energy sources by lowering PLN’s financial burden through indexing all renewable energy tariffs to its local production costs.
The Regulation 12 also requires PLN to operate any solar or wind energy based plant with a capacity of up to 10 MW on a ‘must run’ basis, meaning that PLN must dispatch qualifying projects if they are available to produce energy. The use of auction to award wind capacity also introduced price bidding as a factor in competitive tenders, and replaced the existing system of first come/first served allocation of capacity quota. In addition, fiscal incentives for private sector participation in renewable energy were introduced through corporate income tax reductions, reduced custom duties and tax breaks.
The wind power generation sector is regulated by the Directorate General of New Renewable Energy and Energy Conservation (DGNREEC) in the MEMR. It is responsible for wind energy policies and regulation. The National Energy Council, established in 2008, is responsible for formulating national energy policy and creating a national energy plan. The MEMR’s Research
8 http://www.aseanenergy.org/blog/wind-power-development-in-asean-its-promising/
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and Development Centre for Electricity and Renewable Energy Technology (P3TKEBT) is the leading domestic R&D centre in Indonesia for wind generation technologies. Other organisations involved in the wind energy sub-sector include the Indonesian Wind Energy Society, which promotes wind energy and facilitates collaboration between stakeholders; and the Indonesian Renewable Energy Society (MET), which provides a forum for stakeholders to advance the deployment of renewable energy in the country.
See ‘5.3 Useful Statistics’ for more data on importers and exporters of Wind Turbine Blades and other parts of non-electrical engines and motors, used in wind power generation.
Local Players
PT Binatek Reka Energi (Binatek)
PT Binatek Reka Energi (Binatek) was established in 1991 and started its business as a local agent for several products of various foreign energy and power generation companies. It has been active in participating as a supplier for state-owned companies, such as PT PLN (Persero), Pertamina; and government departments, such as the Department of Mines & Energy, Department of Public Works, and Department of Agriculture & Forestry. In 1995, Binatek developed into a Project Development Company, servicing the oil and gas, power generation, mining and agriculture sectors. Its activities include Engineering, Procurement and Construction (EPC), finance and investment.
Binatek started developing wind power expertise through collaboration with UPC Renewables, acting as its local partner. In May 2015, Indonesia launched its first on-shore wind turbine farm project in Bantul, Yogyakarta – a project developed by a joint venture PT Binatek Energi Terbarukan and UPC Renewables Indonesia Ltd.
In 2017, PT UPC Sidrap Bayu Energi – a joint venture project company owned by UPC Renewables, Binatek and AC Energy Holdings AC – has also achieved financial close for the 75 MW Sidrap project in South Sulawesi. The US$ 150 million development will become Indonesia’s first utility-scale wind farm. The completion is scheduled for 2019.
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PT Redaya Energi
PT Redaya Energi is a local wind farm construction company, based in Jakarta. It is an Equis Group controlled development platform, renewable energy investor and asset manager, established to construct and own wind, solar, hydro and bio energy assets in Indonesia. The company was formed with a vision to be Indonesia’s leading developer and owner of renewable energy. In 2016, it has taken part in the development of the Tolo 1 Wind Farm (60 MW) in Jeneponto, South Sulawesi, acting as a local Indonesian platform.
PT Indonesia Power/ PT Perusahaan Listrik Negara (Persero) (PLN)
PT Perusahaan Listrik Negara (Persero) (PLN) is an Indonesian, state-owned company tasked with supplying the electricity needs of the Indonesian people. Established in 1953, it has become one of the leading construction and investment enterprises in Indonesia. Over six decades, PLN has successfully completed various large-scale projects across Indonesia through its diverse business lines and subsidiaries. Established in 1993, PT Power Indonesia is a PLN subsidiary responsible for creating power generation business competition with Independent Power Producers (IPPs). The company holds a monopoly on the distribution of electricity in Indonesia and it is the second-largest state company by assets.
In recent years, PLN has built two small-scale wind power plants as pilot projects in the Aceh and East Nusa Tenggara areas. PLN was also involved in the six-month study of slow-pace wind power production in Sumba, before building a full-size plant.
PT Citrakaton Dwitama
PT Citrakaton Dwitama is an Indonesian wind power development company based in Jakarta. The company was established in 1992 as an Engineering, Procurement and Construction (EPC) company in the field of Power Generation. It participates actively in utilising existing natural resources to generate maximum electricity. Among other projects, the company provided wind turbines for the PLTB Bayu power plant.
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Figure 11: Development of PLTB Bayu Power Plant Source: PLTB
3.2.2 EU Entry Opportunities
Indonesia presents multiple opportunities in wind energy for European companies. Among the most promising avenues are:
Small- to medium-sized, off-grid, low wind solutions;
Offshore wind solutions
Technical knowledge development and quality assurance programmes
Export opportunities in turnkey solutions, turbines and wind power components
Small- to medium-sized, off grid, low wind solutions
Indonesia’s wind potential lies mainly in the eastern parts of the country, which are less populated and lack the transmission infrastructure to support large wind farms. The government is also keen to explore options for rural electrification – areas, which typically have low levels of on-grid electricity provision. Wind power development opportunities, as a result, may be available for
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European companies with expertise in small- to medium-sized projects, designed with off-grid, low wind solutions.
Offshore wind solutions
Due to Indonesia’s lengthy coastlines and consistent ocean breezes, there may be future opportunities to explore offshore wind potential. While Indonesia does not at present have any offshore wind farms, European companies such as Norway’s Global Maritime that have expertise in offshore wind technologies are already eyeing the market and ensuring that they have personnel with the relevant experience and capability stationed in Indonesia to help develop the market. As the government set up a 1.5 GW wind power target for 2025, projects exploring and utilising offshore wind may be in high demand in future.
Technical knowledge development and quality assurance programmes
There is also insufficient knowledge and capacity in the domestic manufacturing, project operation and maintenance industries. Wind turbines require regular maintenance and spare parts to function. Trained technicians are needed to perform such tasks. However, the lack of investments and interest from domestic markets has led to the skills gap. The difficulty in securing these resources makes it challenging to promote the acceptance of wind power projects in rural and remote areas. Companies with the skills and expertise in technical knowledge development and quality assurance programmes will find opportunities to gain a foothold in Indonesian wind market.
Export opportunities in turnkey solutions, turbines and wind power components
Finally, the domestic manufacturing market is in its nascent years. As a result, there are many export opportunities, including exports of complete turnkey solutions, turbines, and wind power components. Some of the European companies are already reaping the benefits of the new export market. However, the increasing number of wind power projects may offer additional opportunities for market players.
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European Companies
Siemens Gamesa Renewable Energy (Gamesa)
Siemens Gamesa Renewable Energy (Gamesa) is a Spanish manufacturing company, specialising in the fabrication of wind turbines and the construction of wind farms. Gamesa develops, manages, and sells wind farms, for which it also supplies wind turbines. It is the market leader in Spain and the fourth largest wind turbine manufacturer in the world. The company has installed over 10,000 MW and presently has over 20,000 MW of production in development across four continents. Siemens Wind and Gamesa reached an agreement in 2016 to merge their wind turbine businesses, thus forming Siemens Gamesa Renewable Energy. Gamesa’s footprint in the Asia Pacific region extends to Vietnam, Philippines, Taiwan, South Korea, Japan, Sri Lanka, China, India, Australia and New Zealand, having installed 9 GW in these markets.
Gamesa entered the Indonesian market in 2017 after winning turbine and EPC order from PT UPC Renewables. The company has been chosen to supply 30 G114 2.5 MW machines for the Sidrap project – the first Indonesia’s wind farm, which will be commissioned in the first quarter of 2018.
Figure 12: The First Ever 2.5 MW Wind Turbine Components Arrive in Indonesia in August 2017 Source: Yermia Riezky for UPC Renewables Indonesia
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In July 2017, Gamesa has secured its second contract from IPP Equis Energy to build and operate the 60 MW Tolo 1 wind farm. The manufacturer will install 20 wind turbines at Jeneponto in South Sulawesi. The scope of the contract also includes Engineering, Procurement and Construction (EPC) and long-term Operation and Maintenance (O&M).
Vestas / Vestas Wind Systems AS (Vestas)
Vestas / Vestas Wind Systems AS (Vestas) is a Danish global energy company dedicated exclusively to wind energy. It manufactures, sells, installs and services wind turbines. Founded in 1898, it is the largest wind turbine company in the world with 83 GW of installed wind power and more than 71 GW under service across the globe. The company operates in two segments: projects and services. The project segment sells wind power plants, wind turbines and other equipment. The service segment engages in the sale of service contracts, spare parts and related activities.
Vestas made its first move into Indonesia’s wind market in 2014 via joint initiative with the Danish government to support wind project on Sumba island. The initiative was part of Vestas’ Wind for Prosperity Programme, endorsed by the Indonesian government. Through its Programme, Vestas supported a refurbished V47-660kW turbine.
Figure 13: Vestas’ V126 Turbines at the Jeneponto 1 Site Source: windpowermonthly.com
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More recently, Indo Wind Power Holdings, a subsidiary of Asia Green Capital, signed an EPC agreement with Vestas for its 62.5 MW Jeneponto 1 wind power project.
The project will be the first utility-scale wind farm in Indonesia and construction was expected to start in May 2016. Indo Wind Power Holdings have also expressed wishes to sign contracts with Vestas for its other two wind farms in South Sulawesi and West Timor. Vestas was also signed by Equis as a turbine supplier for 60 MW South Sulawesi project.
EREN Renewable Energy (EREN)
EREN Renewable Energy (EREN) was founded in 2012 and it is a French global renewable energy power provider. Through its different subsidiaries and activities, EREN offers solutions in the renewable energy industry. It also acts as an Independent Power Producer (IPP). It develops, owns and operates wind and solar energy power plants. The Group already owns 525 MW of renewable energy assets in operation or under construction, and 1,500 MW in development, worldwide.
Determined to establish itself as a pioneer in wind energy development in Indonesia, EREN mobilised a team based in the country in 2014. In 2015, EREN partnered with CWP Energy Asia to create PACE Energy, dedicated to developing, building and owning greenfield wind power plants. PACE Energy is currently developing a portfolio of around 300 MW of greenfield wind projects. In March 2017, PACE Energy and PLN signed a Memorandum of Understanding (MoU), which covers eight innovative renewable energy (wind/solar) projects across Indonesia.
Wind Energy Solutions (WES)
Wind Energy Solutions is a Dutch manufacturer of the WES50, WES80, WES100 and WES250 midsize wind turbines for the grid connected and off-grid solutions.
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Figure 14: WES50, WES80, WES100 & WES250 Turbine Models Source: windenergysolutions.nl
WES partnerships with its dealer channel are key to establishing WES, and wind-power itself, in specific markets and/or regions. WES is now targeting simultaneously the high-volume projects and international project developers around the world. The company also has a specific focus to further develop its solutions for isolated grids that use diesel to generate electricity. In 2005, it installed five WES80 wind turbines on a small island of Nusa Penida, Indonesia.
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3.3 Solar
3.3.1 Market Overview
An advantageous geographic position on the equator has long afforded Indonesia with immense potential for solar energy. Often touted in tandem with geothermal energy and hydroelectric power as the next wave of energy sources to boost national power output, the country’s solar energy industry now appears ready to begin realising its potential.
The potential of solar energy in the country ranges from 4.5 to 5.1 kWh/m2/day, averaging approximately 4.8 kWh/m2/day of solar insolation, twice the levels of solar insolation in Germany.9
Average Insolation No Regency/City Location Province Geographic Position (kWh/m2/day) 1 Banda Aceh Nanggroe Aceh Darussalam 4°15’N;96 °52’E 4.10 2 Palembang South Sumatera 3°10’S;104°42’E 4.95
3 Menggala Lampung 4°28'S 5.23 4 Jakarta Special Capital Region of Jakarta 6°11’S;106°SE 4.19 5 Bandung West Java 6°56’S;107°38’E 4.15
6 Lembang West Java 6°50’S;107°37’E 5.15 7 Citius, Tangerang West Java 6°07’S;106°30’E 4.32 8 Darmaga, Bogor West Java 6°30’S;106°39’E 2.56 9 Serpong, Tangerang West Java 6°11’S;106°30’E 4.45 10 Semarang Central Java 6°59’S;110°23’E 5.40 11 Surabaya East Java 7°18’S;112°42’E 4.30 12 Kentang, Yogyakarta DI Yogyakarta 7°37’S;110°01’E 4.50 13 Denpasar Bali 8°40’S;115°13’E 5.26 14 Pontianak West Kalimantan 4°36’N;9°11’E 4.55 15 Banjarbaru South Kalimantan 3°27’S;144°50’E 4.80 16 Banjarmasin South Kalimantan 3°25’S;114°41’E 4.57 17 Samarinda East Kalimantan 0°32’S;117°52’E 4 .17 18 Menado North Sulawesi 1°32’N;124°55’E 4.91 19 Palu Central Sulawesi 0°57’S;120°0’E 5.51 20 Kupang West Nusa Tengarra 10°09’S;123°36’E 5.12 21 Waingapu, Suma Timur Central NT 9°37’S;120°16’E 5.7 22 Maumere East NT 8°37’S;122°12’E 5.72 Table 13: Solar Energy Potential in Indonesia Source: Statistik EBTKE 2014
9 Re4I (2016). Renewable Energy for Indonesia. Link: http://there4i.org/conference/page/AboutIndonesiaRE
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While the level of solar insolation varies across the country, it is regarded as offering good solar potential by international standards, and represents a viable source of power, particularly suitable for remote islands and communities with limited or no grid connections.
Figure 15: Global Horizontal Irradiation Source: SolarGIS, 2016 GeoModel Solar
The solar market of South East Asia’s largest energy consumer has been relatively underdeveloped so far. But new regulations are being implemented and the government has shown increasing interest to diversify its energy portfolio, thus, spurring attention from domestic and international investors and power developers.
The current market for PV systems in Indonesia is broadly divided into three segments: a market that came from the Government via village electrification projects, which targets over 1,000 rural locations and islands; a retail market, especially in the areas outside Java and Bali islands; and a ‘commercial’ market, where the demand for alternative energy comes from urban and industrial areas. While segmented, the market is still dominated by off-grid developments, mostly as solar
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home systems, solar rooftops, utility-scale solar PV plants, and small-to-medium off-grid solutions.
Despite the fact that the current installed solar power capacity is still low (about 90 MW), especially when compared to its potential (50,000 MW),10 the Government of Indonesia readjusted its plans in February 2016 to scale up solar capacity to 5 GW by 2020, a significant increase from its previous commitments.
2015 2016 2017 2018 2019 Installed capacity – beginning of year 67.1 76.9 92.1 118.6 180.0 Construction of solar power plants 9.8 15.2 26.5 61.4 80.3 Solar non-state budget - 5.0 15.0 50.0 70.0 Solar state budget – MEMR 2.8 3.0 4.0 3.5 2.0 Solar special allocation fund 7.0 7.2 7.5 7.9 8.3 Installed capacity – end of year 76.9 92.1 118.6 180.0 260.3 Table 14: Solar On-Stream Development Plan (in MW) prepared in 2014 Source: RENSTRA KEDSM 2015-2019
The readjustment comes in line with the country’s expected ability to exceed its yearly targets via strong project pipeline and its commitment to increase the share of renewable energy in the energy mix (up to 23% of the additional 35 GW of energy to be drawn from renewable sources). Although the country had previously planned to increase its installed capacity of solar power only to 260.3 MW by 2019, it had already exceeded its target for 2015 by increasing installed capacity to 85.2 MW (compared to targeted 76.9 MW). It expects that the interest from private developers will continue driving the solar power project developments above the previous benchmarks.
Some of the recent domestic developments include the signing of a Power Purchase Agreement (PPA) in 2016 by PLN with T Global Karya Mandiri for the construction of a solar power plant (PLTS) with a capacity of 1 MWp in Atambua, and with PT Indo Solusi Utama for the construction of PLTS with a capacity of 2 x 1 MWp in Ende-Ropa-Maumere. A year later in 2017, PLN has also signed additional PPAs for six PLTS construction projects with a total capacity of 45 MW,
10 PwC (2016). Power in Indonesia: Investment and Taxation Guide
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which are the PLTS Gorontalo (10 MW) by PT Quantum Energi; PLTS Pringgabaya, Lombok (5 MW) by PT Infrastruktur Terbarukan Adhiguna; PTLS Sengko, Lombok (5 MW) by PT Infrastruktur Terbarukan Cemerlang; PLTS Selong, Lombok (5 MW) by PT Infrastruktur Terbarukan Buana; PLTS Kuta, Lombok (5 MW) by PT Delapan Menit Energi; and PLTS Likupang Minahasa (15 MW) by PT Infrastruktur Terbarukan Lestari.11
Figure 16: Sulawesi’s Largest Solar Power Plant in East Sumalata District Source: Global Expandia
In addition, there are two other PPAs for PLTS construction projects with diesel and gas engines in Lombok, Bangka, Karimun Islands, Kupang, Minahasa and Gorontalo with PT Arsari Enviro Industri and Sunpower Systems Sarl, and in Sumbawa, Bima/Sape, Lombok, Ambon, Madura/Ketapang/Bawean, Waena, Bombana, Bangka/Belitung, Nias under PT Sumberdaya Sewatama.12 These domestic investments are also complemented with a strong project pipeline, which is expected to come out with the support of international investors and project developers.
According to the Government, the total existing pipeline of projects currently amounts up to 250 MW of solar PV installations. The Government has also indicated that even more solar PV capacity will be tendered in the near future. By mid-2016, the commitments by PLN to develop utility-scale solar PV systems together with the Memorandums of Understanding (MoUs) amounted to 700 MW.
11 http://www.gbgindonesia.com/en/energy/article/2017/overview_of_renewable_energy_in_indonesia_progress_albeit_slow_11781.php 12 http://www.gbgindonesia.com/en/energy/article/2017/overview_of_renewable_energy_in_indonesia_progress_albeit_slow_11781.php
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The domestic solar PV manufacturing market is currently limited to the presence of six companies comprising the Indonesian Solar Module Manufacturer Association (APAMSI): PT Len Indonesia (Persero), T Adyawinsa Electrical & Power, PT Surya Utama Putra, PT Swadaya Prima Utama, PT Azet Surya Lestari and PT Wijaya Karya Inatrade Energi. With a combined production capacity of 90 MW per annum, these six companies alone are currently not able to curb the need for imported components, such as solar cells (often the most expensive component of a solar panel) amidst growing market demand.
Local solar panel manufacturers must still contend with limitations to production capabilities attributed to the still nascent state of the industry and their relatively new proficiency in carrying out many processes to create solar modules. Having first developed expertise in manufacturing modules suited for small PV power generation systems and home installation (as dictated by demand from sparsely populated and remote communities in outlying islands), the local industry still requires investment and involvement of experienced foreign players to accelerate industry growth (see ‘5.3 Useful Statistics’ for relevant data on exporters and importers of photosensitive semiconductor devices, incl. photovoltaic cells).
Chinese and Japanese companies are still dominating the export market, but the market is increasingly witnessing new entrants, including French and German companies.
Government Initiatives
In order to encourage solar energy development in Indonesia, the government has created three main development categories for solar power by size: (1) below 100 kWp, to be implemented by Ministry of Energy and Mineral Resources (MEMR) through its own procurement system and by state-owned Perusahaan Listrik Negara (PLN); (2) between 100 kWp and 1 MWp, intended by PLN as hybrid systems with existing small-scale power plants (mostly diesel); and (3) above 1 MWp, intended for Independent Power Producers (IPPs). The government has also shown
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interest to encourage solar PV rooftop power as a way to supplement power generation in urban grids.13
In addition, the government has recognised the low electrification rate across remote and rural areas, and the need to support the energy demand. As a result, it has embraced the strategy, called “The 1,000 Islands PV Development Programme”, which aims to develop solar PV projects in remote islands with some of the lowest electrification rates in the country (below 60%).
In March 2016, Pertamina, a state-owned company, also announced its plans to assist with rural electrification under the Bright Indonesia Programme by building 1 GW of solar plants in areas without or low levels of electricity.
Figure 17: 1,000 Island PV Development Programme Source: Mach, Sofyan (Head of New and Renewable Energy Division PT PLN Persero, “PLN – Solar PV Development Plan”, Solar Workshop, Jakarta, 8 February 2013
13 Asian Development Bank (2016). Indonesia: Energy Sector Assessment, Strategy, and Roadmap
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Further to the 1,000 Islands PV Development Programme, the Government has further released in February 2016 its strategy to achieve the ambitious target of 5 GW of solar capacity by 2020. The solar PV power development includes:
Cooperation with the Financial Services Authority, MEMR and the Local Governments for ten provinces;
Development of “Program Energi Terbarukan Listrik Desa” with a target to electrify 10,300 villages;
Subsidisation of solar Feed-in Tariffs;
Development of regulations for hybrid PV, on-grid PV and rooftop PV; and
Development of a quality standard for the solar panel industry with qualified expert resources.
According to the Government, the planned distribution of 5 GW solar PV is expected to come from the following sources:
The planned distribution of 5 GW of solar PV On-grid general scale 1.5 GW Hybrid (diesel and PV) 1 GW Government and private building (rooftop PV) 0.5 GW Industrial zone (Rooftop PV) 0.5 GW Solar special Residential fund (Rooftop PV) 0.5 GW Villages without electricity 1 GW Table 15: Planned Distribution of 5 GW of solar PV in Indonesia Source: PwC (2016). Power in Indonesia
To revitalise the interest in solar power energy from IPPs, investors, manufacturers and distributors, a series of new regulations and policies have been introduced. For example, the July 2016 MEMR Regulation No. 19/2016 replaced the previous Regulation No. 17/2013, and set a competitive reference tariff for many of the prevailing renewable energy technologies, including those in the solar PV industry. The new regulation also established a Solar Auction, in which the PLN is obliged to purchase solar electricity from solar PV plants of between 1 and 6 MW at a ceiling price.
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Purchase Price No Region Capacity Quota (MWp) (cent US$ / kWh)
1 DKI Jakarta
2 West Java 3 Banten 150.0 14.5 4 Central Java and Yogyakarta 5 East Java 6 Bali 5.0 16.0 7 Lampung 5.0 15.0 8 South Sumatra, Jambi and Bengkulu 10.0 15.0 9 Aceh 5.0 17.0 10 North Sumatra 25.0 16.0 11 West Sumatra 5.0 15.5 12 Riau and Riau Islands 4.0 17.0 13 Bangka – Belitung 5.0 17.0 14 West Kalimantan 5.0 17.0 15 South and Central Kalimantan 4.0 16.0 16 East and North Kalimantan 3.0 16.5 17 North and Central Sulawesi and Gorontalo 5.0 17.0 18 South, South-East and West Sulawesi 5.0 16.0 19 West Nusa Tenggara 5.0 18.0 20 East Nusa Tenggara 3.5 23.0 21 Maluku and North Maluku 3.0 23.0 22 Papua and West Papua 2.5 25.0
Table 16: Quotas and FiTs for Phase 1 of the 5 GW solar PV development, by Region Source: PwC (2016). Power in Indonesia
The government has further encouraged cell manufacturers to develop their business in cooperation with domestic players in Indonesia via higher tariff rates – US$ 0.30/kWh for projects using at least 40% of local content – in order to create jobs and improve the local solar PV service and maintenance sector.
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Local Players
PT Contained Energy Indonesia
PT Contained Energy Indonesia (CEI) is a leading Indonesian solar system integrator. It provides PV engineering, supply, installation and support services to governments and the private sector. Since its founding in 2004 by two Dutch engineers, the company has implemented more than 120 successful PV projects.
In 2014, CEI deployed successfully stand-alone, off-grid, solar-powered cold storage facilities on remote islands of Wakatobi and Pacitan for the EU- and Swiss-funded project. It also signed a contract with PT Samudera Biru International in 2015 to supply and install almost 1 MW solar power for two factories of Samator, the industrial gas manufacturer from Surabaya. Its Sampoerna Kawawang tender for 500 kWp Solar PV plant system was also completed in 2017.
After being acquired by Impiro, a full-service investment firm from Singapore in 2015, the company is set to accelerate its expansion further. The CEO, Lion Kraaijbeek, notes: “We are currently in expansion mode and hope to open more branches soon. We expect explosive growth.” The company already has offices in Jakarta, Surabaya, Bali and Singapore.
PT Buana Energy Surya Persada
PT Buana Energy Surya Persada (BESP) is one of the first independent PV power producers in Indonesia. The company is specialising in consulting, project development, and finance for small to utility-scale solar power. It is majority-owned by Jakarta-based Multi Buana Group (MBG), which is dealing with heavy equipment and infrastructure, laboratory and medical equipment, and sustainable investments.
The company’s milestone is its partnership with Conergy in 2015 to build the very first PV power plant in Indonesia. BESP entered into an agreement with Conergy on a project to build three 1 MW ground-mounted solar PV power facilities that would generate electricity for three towns
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within East Nusa Tenggara province. BESP was responsible for on-ground construction and installation of PV power facilities in Sumba.
PT Rekasurya
PT Rekasurya is an Indonesian provider of comprehensive solar-power systems. The company has secured a particular niche in a nascent solar power market in Indonesia. While other companies specialise in solar panels, solar cells, or solar-power accessories, it provides complete systems with competitive pricing.
At its production facility in Bandung, West Java, the company manufactures its proprietary range of solar modules, inverters, solar-charge controllers, batteries and all other components required for the installation of bespoke sustainable power systems. At present, PT Rekasurya’s clients are government facilities, local businesses and a growing number of residential customers.
PT Surya Energi Indotama / PT LEN Industri (Persero)
PT Surya Energi Indotama (SEI) is a subsidiary of PT LEN Industri (LEN), a state-owned enterprise, which manufactures and develops electronics for various industries. LEN has been driving the development of renewable energy in Indonesia since 1997 via its Energy Business Unit. In 2009, the Unit developed into a subsidiary by the name of SEI to expand further the LEN’s renewable energy market. LEN remains a major shareholder (90%) while PT Altran Indonesia holds 10% of the shares.
Its subsidiary, SEI, is a leading EPC company and one of the very few solar module manufacturers in Indonesia. As a solar design and engineering company, SEI provides solar system solutions, including system design, engineering and system integration; services, such as installation, testing, commissioning and training; and sales, including solar module, energy limiters, solar lighting, controllers, and other products. Its solar products have been installed in remote areas of Indonesia. The company has dealt with hundreds of renewable energy projects, catering both private sector and government clients.
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Figure 18: Indonesia’s Largest Solar Power Plant by PT Len Industri in East Nusa Tenggara Source: Retail Asia
SEI / LEN have been engaged in some of the major solar power projects across Indonesia. For example, in 2013, SEI, as part of LEN, developed the first large-scale solar power project (2 MW capacity) in Karangasem, Bali.
In 2014, SEI engaged in a 5 MW solar power plant development in Kupang, East Nusa Tenggara. The plant was finished in 2016 and LEN operates it under Independent Power Producer (IPP) scheme. In 2016, SEI was also developing the project in Kepulauan Riau to install a stand-alone PV plant. The PV plant delivers 300Wh to each household every day for nearly 2 million residents.
Furthermore, in the rural electrification project, SEI installed more than 100,000 units of solar home systems in various provinces of Indonesia while its PV hybrid systems are installed in 20 sites across the country and cater commercial, industrial and residential sectors.
PT Quantum Energy Indonesia
PT Quantum Energy is an Independent Power Producer, specialising in the development of both grid-connected and off-grid, remote Hydropower, Solar PV and PV-Hybrid energy solutions
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through acquisitions, strategic partnerships and greenfield developments. The company draws expertise from over 30 years of project work in 22 countries. In October 2015, PT Quantum Energy signed a Memorandum of Understanding (MoU) with PLN to conduct a feasibility study up to 100 MW of utility-scale PV projects in Indonesia. The first projects are planned to be developed in West Nusa Tenggara, Maluku, North Sulawesi, Central Sulawesi and Gorontalo. The construction of the first project was expected to begin in the first quarter of 2016. Although the project start has been delayed, in March 2017, the company signed an additional agreement with the PLN to install 10 MW in Gorontalo province.14
Over the next 5 years, Quantum Energy plans to finance, build and operate a minimum of 500 MW of clean power generation projects with an estimated total investment of more than US$ 1 billion. PT Quantum Energy is also investigating the potential of co-locating technologies, such as Solar PV-Gas, Solar PV-Coal and Solar PV-Biomass systems.
3.3.2 EU Entry Opportunities
The solar panel industry in Indonesia appears primed to thrive with the increase in solar power projects, offering abundant opportunities for investment in its booming solar energy industry. Some of the opportunities for European solar PV companies may be in:
Provision of on-grid and off-grid solar PV solutions Provision of rooftop solar solutions Large-scale solar farm development Export opportunities for solar modules and parts Add-on services for solar power projects Development of solar PV manufacturing facilities Provision of solar panel quality assurance programmes
Domestic skills and knowledge development
14 https://www.pv-magazine.com/2017/04/10/indonesias-pln-signs-deals-for-45-mw-of-solar/
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Provision of on on-grid and off-grid solar PV solutions
Although Indonesia’s electricity generating capacity has doubled in the past decade, the country still has low electrification rate when compared to its ASEAN neighbours. In 2014, only 84% of Indonesia’s population had access to electricity, with some remote provinces, such as Papua, providing electricity only to 43% of its population. Given the Government’s National Energy Policy to nearly complete electrification of the country by 2020, and its programme for rural electrification, European companies are welcomed to support solar energy market via on-grid and off-grid solar PV and solar PV-Hybrid solutions.
Following PLN’s announcement of a long-term plan to develop new solar power plant projects, the government is aiming to attract IPP involvement in more than 60 projects (ranging between 1 MW to 10 MW) in existing isolated, on-grid systems currently powered by diesel.
In addition to incentivising IPPs to develop new on-grid systems to replace diesel power generation facilities, the many off-grid and PV Stand Alone system projects undertaken by PLN in remote, outlying islands also present another opportunity. The Government is increasingly seeking the participation of the private sector to complement the efforts of the PLN for off-grid solar power development in remote locations via new project development. Companies with experience in deploying off-grid solar PV technologies in outlying islands, where most of the current PV projects currently take place, may enjoy a successful pipeline of business opportunities.
Provision of rooftop solar solutions
With the technological advancements, cost reductions of solar PVs, and the rise of residential demand for more sustainable energy, solar panels are also gaining pace in the rooftop sector, including parks, utility lands, commercial and residential buildings. Small-scale engineering solutions, such as rooftop panels, solar home systems, utility-scale solar PV plants, and small-to- medium off-grid solutions, are needed to address this growing market.
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Large-scale solar farm development
The new regulations for FiTs and power purchase by the PLN on solar power development have made investment in large-scale solar farms more attractive to domestic and international developers. Some European companies, such as Conergy, Engie and Akuo Energy have already signed MoUs to explore opportunities for large-scale solar projects in Indonesia, but a strong solar power demand, and expected further tendering process for new projects, indicate that more opportunities are likely to appear.
Export opportunities for solar modules and parts
Following the PLN’s announcement of a long-term plan to develop new solar power plant projects, demand for components and equipment used in these projects is projected to create greater opportunities for manufacturers of solar panels and modules.
Leading European PV exporters may find good opportunities to tap into the relatively nascent solar market, especially taking into consideration that the majority of solar PV modules are imported and the domestic manufacturing market is still limited. Moreover, even those components which are produced locally (DC lamps, battery charge regulators and storage batteries, among others) are often seen as low-quality products. As a result, European companies can find lucrative export markets for turnkey solutions, PV modules, hybrid power conditioning systems, batteries and other solar power solutions.
Add-on services for solar power projects
The relative lack of maturity of the industry also provides entry points for panel manufacturers to extend their services into lucrative add-on areas, including project management, Engineering, procurement and Construction (EPC), and even finance. Cooperation between international and domestic solar power developers is particularly encouraged by the Indonesian government, which aims to improve domestic capabilities in the solar energy market. The government’s plan hinges on the use of attractive Power Purchase Agreements (PPAs) and Feed in Tariffs (FiT), to lure both local and foreign developers to invest in large scale solar farms.
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Development of manufacturing facilities in Indonesia
The Government of Indonesia is strongly encouraging the development of domestic manufacturing industry. The new regulations offer better FiTs for those companies that use at least 40% of local content. However, the domestic manufacturers are still not fully prepared to satisfy the market demands. As a result, there are opportunities for companies to boost the domestic manufacturing industry by developing new manufacturing facilities. Interest in opening new manufacturing facilities through a joint venture with Indonesian companies has in the past been expressed by global industry leaders, such as Canadian Solar Inc, which signed an MoU with PT Swadaya Prima Utama to build a 60 MW solar module factory, which, if completed, would be among the largest of its kind in Indonesia, and alone would match two-thirds of the local industry’s present production capacity. Other opportunities for joint ventures include developing solar cell production capabilities to directly address the current reliance on imports for this main component. In 2012, state-owned oil and gas company, Pertamina, set the precedent for this type of cooperation by working with PT Len Indonesia to boost the manufacture of solar cells.
Solar panel quality improvements
Improving solar panel quality will be another area where the guidance of an experienced partner will prove most beneficial, as the prevalence of low quality components has impinged upon the reliability of solar power generation in the market. Without a formally established certification institute for solar panels in Indonesia to provide quality assurance, demonstrating high product quality to consumers disillusioned with local panels can often prove difficult. Therefore, a foreign partner with a history of adhering to international solar panel production standards and a proven track record in more mature renewable energy markets can go a long way to providing this assurance. As a result, companies with expertise and experience in quality assurance programmes may find increasing opportunities in Indonesia.
Domestic knowledge and skills development
There is also a knowledge and expertise gap when it comes to managing solar installations optimally. European companies with expertise in monitoring technology, experience in efficiency
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optimisation in power installations, and skills training programmes will find a strong demand for their services.
European Companies
Conergy
A leading German photovoltaic (PV) solution and service provider, Conergy offers development, financing, EPC and O&M services with more than 1.3 GW of installed capacity, globally. Founded in 1998, the company has pioneered the expansion of solar power globally and, today, it combines industry-leading solar PV expertise with access to capital across six continents. Within Asia Pacific region, Conergy has closed over 460 MW of EPC contracts and it has provided O&M services for over 400 MW of solar projects.
The company entered the Indonesian market in 2014 in cooperation with local partner, PT Buana Energy Surya Persada (PT BUSP). One of the factors that drove Conergy’s successful entry into the Indonesian market was the government’s interest to open up the renewable energy sector for foreign companies.
In 2015, Conergy received a contract to develop its first-ever utility-scale solar power plant in the country, which brought 35,000 homes in East Nusa Tenggara access to clean energy for the first time. The project was developed in partnership with PT BUSP and PT Indo Sulosi Utama (PT ISU). The company developed three 1 MW projects that would generate electricity in three towns, namely, Suma, Ende and Maumere. Conergy was responsible for engineering, planning, design, equipment, procurement and long-term maintenance of the three solar installations. BT BUSP and PT ISU were to handle on-the-ground construction. The project cost US$ 2.2 million. It was completed and connected to the grid in 2017.
Engie
Engie is a French multinational electric utility company, which operates in the fields of electricity generation and distribution, natural gas, nuclear and renewable energy. Founded in 1880, it
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develops its business with innovative solutions largely based on its expertise in four key sectors: renewable energy, energy efficiency, LNG, and digital technology. Within renewable energy, the company is involved in the development, construction, financing, operation and maintenance of various renewable power generation assets.
The company operates throughout North America, Latin America, Africa/Asia and Europe. In 2016, Engie took a major step in the transformation of its portfolio by selling 13 GW of power generation assets, including the 2 GW PT Paiton coal-fired power plants in Indonesia. The divestment was in line with Engie’s global strategy to move away from fossil fuel to clean and green energy technology.
In turn, the company began investing in renewable energy. In March 2017 the French power giant signed three partnership agreements to develop, co-finance, operate and maintain micro-grid and other renewable energy projects across Indonesia for a total value of US$ 1.25 billion over the next five years. The largest partnership is with sugar producer Sugar Group, for joint US$ 1 billion investments in 500 MW of solar PV and biomass projects in Sumatra and Eastern Indonesia. Of this, 300 MW will be dedicated to solar parks, including the 140 MW park in Lampung – one of the largest solar power facilities in South East Asia. The second partnership is with micro-grid developer Electric Vine Industries to invest US$ 240 million in building and operating smart PV micro-grids for 3,000 villages in Papua. The projects are set to power around 2.5 million people over a 20-year period.
The third partnership is with PT Arya Watala Capital to invest US$ 15 million in up to 10 MW of solar plants in East Nusa Tenggara, the southernmost province, over the period of three years. The projects will be located in 10 different areas on major islands, such as West Timor, Flores and Sumba.
The three partnership agreements come as part of the Terrawatt Initiative, a non-profit organisation that was launched by Engie during COP21. The projects contribute to the Indonesian government’s target to enable 100% electrification across the country by 2020, and it has received support from the local government under the guidelines of MEMR Regulation No. 038/2016
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“Acceleration of Electrification in Areas of Undeveloped, Rural, Border and Small Inhabited Islands through Small Scale Electric Generation”.
Akuo Energy
Founded in 2006, Akuo Energy is the leading French independent renewable energy power producer. The company operates across the whole value chain, including project development, financing, construction, and operation. As of end-2016, Akuo Energy had invested US$ 2 billion for a total capacity of 960 MW of renewable energy in operation and under construction worldwide. While based in France, it has subsidiaries in 11 countries, including Indonesia. Akuo Energy aims to have a global production capacity of 3,500 MW by 2022.
Akuo Energy entered Indonesian market in 2012 via the creation of its subsidiary, PT Akuo Energy Indonesia (AKI). Today, AKI partners with PT Pertamina (Persero) in co-developing hundreds of MW, covering wind, solar PV and (Ocean Thermal Energy Conversion) OTEC technologies.
A significant milestone for AKI was reached in 2017 when it signed a cooperation agreement with Millennium Challenge Account Indonesia (MCA-Indonesia) to develop 3 off-grid PV projects in Berau, Easy Kalimantan. The company will be developing Indonesia’s biggest off-grid hybrid solution (Solar PV-Battery-Micro Hydro-Genset) in East Kalimantan/ Borneo island. Furthermore, in March 2017, AKI signed a Memorandum of Understanding (MoU) with PT PLN (Persero) regarding the conduct of a feasibility study and system stability of renewable energy with a hybrid system. The project’s potential capacity within this framework is 500 MW, involving a total investment of US$ 850 million. AKI has a team of 25 people with offices in Bali and Jakarta, with future intentions of opening new offices in Sumatra and Kalimantan to support their projects.
Renewable Energy Corporation (REC)
Founded in Norway in 1996, Renewable Energy Corporation (REC) is a leading vertically integrated solar energy company. The company manufactures polysilicon, wafers, cells, high- quality solar photovoltaic (PV) panels, and also provides turnkey Engineering, Procurement and
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Construction (EPC) solutions. In partnership with a sales channel of distributors, installers, and EPCs, REC panels are installed globally.
To reap the benefits of the growing pressures from the Indonesian government for all installers to develop and regularly upgrade their installation skills, REC Solar launched a certification scheme in November 2015. This came after a similar programme was launched in the Philippines in May.
The new scheme is aimed at promoting a long-term alliance between local customers and local solar installers. Only the best and the most qualified installers are selected for REC Solar Professional status, setting them apart from other installers.
It is anticipated that the programme will equip installers with the tools and know-how for them to differentiate themselves as professional installers, increase their credibility and grow their business. In addition to training programmes and exclusive seminars, REC Solar Professionals will benefit from extended product warranty, a service fee for approved claims and access to sales and marketing tools to support their business.
Customers are expected to benefit from the programme in the form of a consistently high-standard installations backed by excellent technical and safety expertise, with the assurance of REC’s high performing solar panels. Five solar installers have been signed up to the scheme. The companies with the certification of REC Solar Professional Installer in Indonesia are Tesaputra Adiguna, Witraco Perdana, Gaspro Wahyu Widana, ADL Energy and Adidaya Abadi Sentosa.
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3.4 Aerothermal
3.4.1 Market Overview
Currently, Indonesia does not have a suitable market for aerothermal technologies. The Government of Indonesia has identified that traditional power generating sources will be increasingly complemented with renewable energy (RE) and technologies in geothermal, hydro, solar, wind and bioenergy sectors. Indonesia’s Electricity Supply Business Plan (RUPTL) for 2017-2026, prepared by the state electricity company PT Perusahaan Listrik Negara (PLN), does not anticipate the implementation of aerothermal technologies in the near- to medium-term future. The government also does not have any suitable laws and regulations to govern the aerothermal market.
Local Players
There are currently no domestic companies specialising in aerothermal energy in Indonesia and no pilot projects or pre-feasibility studies have been conducted yet.
3.4.2 EU Entry Opportunities
Given the absence of the market and the lack of interest from the Indonesian government to pursue aerothermal technologies, there are very limited opportunities for European companies. Some technology showcasing avenues may be available by way of renewable energy trade exhibitions in Indonesia, however it may be a while before practical implementation of these technologies becomes a viable option in the country.
European Companies
Currently, there are no European companies that have successfully entered the Indonesian aerothermal market.
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3.5 Geothermal
3.5.1 Market Overview
Indonesia, located in the “ring of fire” volcano belt, is said to possess the world’s largest geothermal resources. Its 29,543 MW of potential across 329 locations represents 40% of the world’s total geothermal supplies. The country’s current installed capacity for geothermal power is 1,438 MW, placing Indonesia third in the world behind the US and the Philippines. However, the current levels of resource exploitation represent only 4% of the country’s potential.
Potential Energy (MWe) No. of Total Installed No. Island Resources Reserves Locations Potential Capacity Speculative Hypothetical Possible Probable Proven
1 Sumatera 97 3,091 2,408 6,992 15 380 12,886 122 2 Java 73 1,560 1,739 4,023 658 1,815 9,795 1,224 3 Bali-Nusa Tenggara 33 301 535 1,052 - 15 1,903 12 4 Kalimanta n 14 153 - 90 - - 243 -
5 Sulawesi 76 1,239 302 1,451 150 78 3,220 80 6 Maluku 33 532 89 800 - - 1,421 - 7 Papua 3 75 - - - - 75 -
Total 329 6,951 5,073 14,408 823 2,288 29,543 1,438 12,024 17,519 Table 17: Geothermal Resources and Installed Capacity in Indonesia (2015) Source: LAKIP KESDM 2015
The physical location of geothermal resources across Indonesia and their lack of “tradability” means that this power source is well-placed to assist Indonesia in improving its domestic energy security.15
15 Geothermal is regarded as a “clean” energy, emitting up to 1,800 times less carbon dioxide than coal-fired burning plants and 1,600 less than oil-fired burning plants. Being a renewable resource, geothermal energy is unaffected by changes in hydrocarbon prices. It is also the only renewable source with a potential factor close to 100%.
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Recognising the benefits of geothermal energy, the government has recently prioritised geothermal in its power generation expansion plans. Under the Fast Track programmes, geothermal is expected to account for over 3.1 GW of power by the end of 2019, mostly coming from Independent Power Producers (IPPs).16
Until 2015, most geothermal fields have been developed by the state-owned oil company, Pertamina, and its subsidiary PT Pertamina Geothermal Energy (PGE), in collaboration with major oil companies. Over 90% of the current installed capacity remains in Pertamina-owned fields.
However, while the PGE still holds the authority to develop an additional 15 fields, it has not been allocated with the capital it needs to proceed. As a result, the market is being increasingly scouted by private investment and power development companies.
There are currently only nine working (or concession) areas which are producing energy, but the government has identified an additional 58 working areas, which have already been, or are likely to be, tendered in the near future. The current geothermal working areas are located in North Sumatra, West Java, Central Java, North Sulawesi, Lampung and Nusa Tenggara Timur provinces.
Installed Geothermal Working Power Turbine Capacity No. License Holder Developer Capacity Area Location Plant (MW) (MW)
PT Pertamina Sibayak – Sinabung, 1. Geothermal PGE Sibayak 12 1 x 10 2MW North Sumatra Energy (“PGE”)
JOB – Chevron Cibeureum – Parabakti, 3 x 60 2. PGE Salak 376.8 West Java Geothermal 3 x 65.6 Salak, Ltd
16 FinerGreen (2017). Renewables Overview: Indonesia. Link: www.finergreen.fr/wp-content/uploads/2016/07/September-2016-Indonesia.pdf
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Installed Geothermal Working Power Turbine Capacity No. License Holder Developer Capacity Area Location Plant (MW) (MW)
JOB – Star Energy Wayang 1 x 110 Pangalengan, West Java PGE Geothermal 55 Windu Wayang 1 x 117 3. Windu Ltd
PT Geo Dipa Energi Pangalengan, West Java GDE Patuha 55 1 x 55 (“GDE”)
1 x 30
Kamojang – Darajat, West 2 x 55 PGE PGE Kamojang 235 Java 1 x 60 1 x 35 4. JOB – Chevron 1 x 55 Kamojang – Darajat, West PGE Geothermal Darajat 270 1 x 94 Java Indonesia, 1 x 35 LTD
Dataran Tinggi Dieng, 5. GDE GDE Dieng 60 1 x 60 Central Java
Lahendong – Tompaso, 6. PGE PGE Lahedong 80 4 x 20 North Sulawesi
7. Ulubelu, Lampung PGE PGE Ulubelu 110 2 x 55
PT PLN Geothermal 8. Ulumbu, NTT PLN G Ulumbu 10 4 x 2.5 (“PLN G”)
9. Mataloko, NTT PLN G PLN G Mataloko 2.5 1 x 2.5
Table 18: Installed Geothermal Capacity as of 2015 by License Holder and Developer Source: Statistik EBTKE 2015 & LAKIP KESDM 2015
In addition to nine producing geothermal working areas, there are currently 28 areas under the exploration stages, 13 of which have active exploration projects and 15 are within constrained exploration phases. Additional 30 working areas with over 1,630 MW of potential power generation capacity are being prepared for auctioning process.
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Figure 19: Status of the 67 Geothermal Working Areas Source: Rencana Strategic Ditien EBTKE 2015-2019
With only 1,438 MW of current installed capacity, the Government plans to achieve around 3,200 MW of installed geothermal power capacity by 2019, mainly via following additions to its existing geothermal capacities:
2015 2016 2017 2018 2019
Installed capacity – beginning of year 1,404 1,439 1,713 1,977 2,611
Planned Additions: Kamojang Unit 5 35
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2015 2016 2017 2018 2019
Ulubelu Units 3 and 4 55 55
Lahendong Units 5 and 6 20 20 Sarulla Units 1, 2 and 3 114 119 119 Karaha Bodas Units 1 and 2 30 60 Lumut Balai Units 1, 2 and 3 55 55 55 Muaralaboh 70 Tulehu 20 Rantau Dedap 220 Rajabasa Units 1 and 2 110 110 Hululais Units 1 and 2 55 55 Dieng Units 2 and 3 55 55 Patuha 110 Sungai Penuh 55 Cisolok Cisukarame 45 Kotomobagu 40 Construction of geothermal plants 35 274 264 634 585 Installed capacity – end of year 1,439 1,713 1,977 2,611 3,196
Table 19: Government Plans for Additions to Geothermal Capacity, 2015-2019 Source: RENSTRA KESDM 2015-2019
Given that the Government’s target for the new and renewable energy share of the power generation fuel mix is 23%, the Government is planning for the geothermal energy to reach approximately 7,500 MW in installed capacity by 2025. Such steep increase in geothermal power capacity is estimated to require an investment of funds in excess of US$ 25 billion and roughly 300 MW of yearly additions (or drilling around 60 new wells, annually). While the progress so far suggests that this may be an ambitious target, such targets open up many opportunities for private sector participation.
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Recent developments within the regulatory field are also encouraging for geothermal energy development. The Ministry of Finance (MoF) has recently taken a significant step in setting up a US$ 300 million Geothermal Fund in order to alleviate some of the initial exploration risks which often deter private developers from investing in geothermal energy exploration in Indonesia.
Geothermal law was also revised in 2014 to allow geothermal exploration and exploitation in protected forest areas – locations with the majority of viable geothermal resources. Furthermore, tendering authority has been shifted from local to central government in order to simplify the application processes, and MoF and MEMR have begun consulting with each other to formulate a set of ceiling prices to encourage competition and the lowest possible process within the attractive range to developers. In January 2017, the Government has also introduced new, revised Feed-in Tariff (FiT) for geothermal power and procurement schemes under its Regulation No. 12/2017. The Decree established a reference tariff for geothermal power projects and the developers are now permitted to negotiate with the PLN on matters relating to the development of the transmission interconnection between the plants and the PLN grid on a Business-to- business (B2B) basis.
With new policies in place and the increased flexibility for B2B negotiation on transmission matters, projects that were long delayed are now starting to move forward. For example, the 330 MW Sarulla geothermal project in North Sumatra – initiated in 1990 and developed by a consortium of investors from Japan, the US and Indonesia – have finally achieved financial closure. Its first 110 MW unit has commenced commercial operation in March 2017.
The improving regulatory environment is to a large extent driven by the need for the private sector participation in geothermal power development. According to the PLN, over half of the investment funding needed for the period of 2015-2019 for geothermal development in Indonesia has been allocated to private sector stakeholders.
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Figure 20: The Sarulla Geothermal Power Plant Source: Global Geothermal News
Local Players
PT Medco Energi International (PT Medco)
PT Medco Energi International (PT Medco) owns and operates power plants in Batam Island and Palembang. The company develops and operates small-to-medium size independent power projects in Indonesia; and provides power project services with business activities, including operating and maintenance power plant services; as well as project engineering, procurement, and construction (EPC) services. It focuses on small to medium independent power producers in domestic and international markets. The company was founded in 2004 and it is based in Jakarta. It operates as a subsidiary of PT Saratoga Power, which is the largest national listed energy company in Indonesia.
PT Medco, together with its partner PT Saratoga Power, has conducted power development business since 2011 via joint venture PT Medco Power Indonesia (MPI). Medco Power is
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developing renewable projects comprising of mini-hydro and geothermal power plants in Sarulla in North Sumatra and Ijen in East Java. In 2006, it won a contract to develop 3 x 110 MW of Sarulla geothermal power project. Construction of Sarulla Geothermal Power Plant project has started in early 2014 and once completed it would be the largest single-contract of the geothermal power in the world. Together with partners Itochu, Ormat and Kyushu Electric (Sarulla Consortium), it is currently in the final phase of an Energy Sale Contract (ESC) negotiation with PLN, as well as the negotiation with PT Pertamina Geothermal Energy (PGE) for a Joint Operating Contract (JOC). The commercial operation of the first 110 MW unit was slated for 2016 but it started operations in 2017. The remaining two units are to be finished by the end of 2017 and 2018, respectively.
Figure 21: PT Medco Ijen Project at the Exploration Stage Source: Medco Power Indonesia
In June 2011, PT MPI has also secured a contract from the Provincial Government of East Java for the development of a 2 x 55 MW geothermal power plant at Ijen. The geology and geophysics study was conducted in 2012. Currently the company is preparing to drill an exploration well at the site. It is also negotiating a Power Purchase Agreement with PT PLN.
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PT Supreme Energy
PT Supreme Energy is an Indonesian pioneer of geothermal exploration and development. The company carries out geothermal explorations, exploitations and development. Since its establishment in 2007, Supreme Energy has conducted four pre-feasibility studies in Sumatra with success in three areas. Following “preliminary survey” stages, it successfully secured three geothermal permits in Sumatra with support and participation of the international partners via joint ventures.
The company aims to develop at least 220 MW of geothermal capacity in Rajabasa Project, 86 MW for Rantau Dedap Project Stage I, and 80 MW for Muara Laboh Project Stage I. The projects for Supreme Energy are expected to cost around US$ 230 million and the commercial production should start in 2019. It is funding the early construction through internal cash, however it is exploring international bank funding for the EPC phase.
Figure 22: Drill site at Muara Laboh Project, West Java Source: Engie
The projects are developed in a consortium with international companies, such as Sumitomo Corporation, Marubeni, and Engie, under the 30-year Power Purchase Agreement.
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PT Supreme Energy, Engie and Sumitomo Corporation are the shareholders of the Supreme Energy Muara Laboh and Supreme Energy Rajabasa project ventures. As for Rantau Dedap project, Marubeni Corporation has later joined the consortium as the newest shareholder.
PT Star Energy
PT Star Energy is an independent energy company, which engages in the production and exploration of oil, gas and geothermal energy with assets in three operating sites: Darajat, Salak and Wayang Windu. With a total installed capacity of 875 MW, Star Energy is the largest geothermal operator in Indonesia and the third largest in the world. It was founded in 2003 and it is based in West Jakarta, Indonesia. The company operates as a subsidiary of PT Barito Pacific Tbk.
In 2004, Star Energy acquired the 110 MW Wayang Windu geothermal generation facility. Via its subsidiary, Wayang Windu Power Generation, which is managed under a Joint Operation Contract with Pertamina, the company has the right to develop up to 400 MW of geothermal resources within the 12,960 hectares contract area over a period of 42 years. While the first geothermal unit (110 MW) in the area was completed in 1999, the company opened the second Wayang Windu unit in 2009, which increased the total generation capacity to 227 MW. Planning is now underway to expand Wayang Windu further through the addition of a third unit with generation capacity of 127 MW.
A consortium led by Star Energy has completed an acquisition of two geothermal power plants from global energy giant Chevron. The geothermal power plants sold to Star Energy consortium are the 370 MW power plant in Mount Salak in Bogor, West Java, and 240 MW geothermal power plant Darajat in Garut, West Java.
Commercial Project Name Unit Capacity Operation Sales Expiry date Date
Unit 1 110 MW 2000 Electricity 2030 Wayang Windu Unit 2 117 MW 2000 Electricity 2039
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Commercial Project Name Unit Capacity Operation Sales Expiry date Date
Sub-total 227 MW
Unit 1-2 2x60 MW 1994 Steam 2040 Salak Unit 3 60 MW 1997 Steam 2040 Unit 4-6 3X65.6 MW 1997 Electricity 2040
Sub-total 377 MW
Unit 1 55 MW 1994 Steam 2041 Darajat Unit 2 95 MW 2000 Electricity 2041 Unit 3 121 MW 2007 Electricity 2047
Sub-total 271 MW
GRAND TOTAL 875 MW Table 20: Overview of Star Energy’s Operating Geothermal Portfolio Source: Star Energy, Mirae Asset Sekuritas Indonesia
PT Geo Dipa Energi (GDE)
PT Geo Dipa Energi operates as a geothermal energy company with offices in Bandung and Wonosobo. It engages in exploration and exploitation of geothermal source area, power plant development, and distribution of geothermal products in the form of electrical energy to the electrical transmission interconnection networks. Founded in 2002 as a joint venture of Pertamina and PLN to manage Dieng and Patuha geothermal fields, PT Geo Dipa Energi operates as a subsidiary of PT Pertamina (Persero). In 2017, the company changed its name to PT Geothermal Nusantara, following its expansion into geothermal energy processing.
The company announced in 2017, that it will soon manage two new geothermal working areas in Umbul Telomoyo and Arjuno Welirang (West Java) aside from its existing sites in Dieng Plateau, Central Java, and Patuha, West Java.
The company is pushing forward the development of its Dieng and Patuha geothermal power projects, which could potentially add up to 275 MW capacity by 2021, when the projects start operation.
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Figure 23: Patuha Geothermal 1 x 55 MW Power Plant in Bandung, operated by PT GDE Source: Takenaka Doboku Indonesia
In 2014, GDE has also successfully completed the construction of 1 unit of PLTP in Patuha with 60 MW capacity. The company has plans for additions of PLTP Patuha units 2 and 3, each with 55MW of capacity. GDE’s long-term plan is to develop up to 1,100 MW of geothermal energy by 2030.
3.5.2 EU Entry Opportunities
Indonesia possesses around 40% of the global geothermal reserves, which remain largely untapped. Under the Fast Track Programmes, geothermal energy is expected to amount to 3.2 GW of power capacity by 2019 and 7.5 GW by 2025, mostly developed by Independent Power Producers (IPPs). The Government of Indonesia has also devoted US$ 375 million from the 2017 state budget for geothermal exploration, which accounts for half of the total renewable budget. As the geothermal market opens up for IPPs, new opportunities are becoming available at all stages of geothermal power development – exploration, exploitation, production and provision of equipment. Some of the best prospects for European companies lie in the following avenues:
Exploration and exploitation of new geothermal resources
Building and maintaining of geothermal power plants
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Export opportunities for geothermal equipment and turnkey solutions
Energy efficiency optimising solutions
Cost-effective solutions for resource confirmation
Skills development and training
Exploration and exploitation of new geothermal resources
At the moment, the MEMR is auctioning 30 geothermal working areas through open tenders or direct appointment of state-owned enterprises (PGE, PLN G and GDE). These working areas are expected to be tendered in 2016-2017, or at a later stage, and they offer good prospects for geothermal exploration and exploitation companies to enter the Indonesian geothermal market. European companies with experience in greenfield and brownfield project development are likely to find opportunities to compete for the geothermal exploration and exploitation programmes in the following working areas:
Block Capacity (MW) Estimated Status Investment (US$ million) Bonjul 60 240 Open
Gunung Talang Bukit Kili 20 80 Re-tender in 2016 Hunung Endut 40 160 Open Candi Umbul Telomoyo 55 220 Assigned to GDE
Gunung Wilis 20 80 Tender in 2016 Gunung Arjuno Wlirang 110 440 Assigned to GDE Gunung Pandan 10 40 Open Gunung Gede Pangrango 55 220 Assigned to PGE Songgorit 20 80 Open Sipoholon Ria-Ria 20 80 Open Simbolon Samosir 110 440 Tender in 2016 Graho Nyabu 110 440 Tender in 2016 Suwawa 20 80 Open Sembalun 20 80 Assigned to PLN G
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Block Capacity (MW) Estimated Status Investment (US$ million) Oka-Ile Ange 10 40 Open Bora Pulu 40 160 Open Gunung Hamiding 10 40 Tender in 2016 Songa Wayaua 5 20 Open Gunung Geureudong 110 440 Open Gunung Galunggung 110 440 Tender in 2016 Gunung Ciremai 110 440 Open Way Ratai 55 220 Optima Nusantara Energy & Enel Green Power SPA won the tender Gunung Lawu 165 660 PGE won the tender Kepahiang 110 440 Tender in 2016 Danau Ranau 110 440 Tender completed – no winner Marana 20 80 Re-tender in 2016 Seulawah Agam 55 220 Tender in 2016 Telaga Ranau 10 40 Tender in 2016 Ciater 30 120 Re-tender Atedai 10 40 Re-tender Table 21: Auctions for 30 Geothermal Working Areas (2016-2017) Source: Statistik EBTKE 2015; Bisnis Indonesia 19 March 2016; Bisnis Indonesia 30 December 2015; Investor Daily 30 March 2016; Investor Daily 18 January 2016; Bisnis Indonesia 29 March 2016; Jakarta Post 3 March 2016; Jakarta Post 20 April 2016; Bisnis Indonesia 10 May 2016; Investor Daily 4 July 2016; Detik Finance 13 November 2015
Building and maintaining of geothermal power plants
Private operators have previously found success in Indonesian geothermal market through project financing strategy tools, such as build-own-operate (BOO), build-own-operate-transfer (BOOT), and build-own-transfer (BOT). As these initiatives have significantly increased the speed of geothermal development in the country, the government is keen to explore additional projects with similar strategies. Opportunities, therefore, exist for European companies in power plant and small-scale power plant development under the aforementioned strategies. In addition, as the number of geothermal power plant projects increases, European companies may also find opportunities in operations and maintenance services, including geothermal drilling and
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installation, electricity distribution, Engineering, Procurement and Construction (EPC) services, as well as electricity and plant maintenance consultation.
Export opportunities for geothermal equipment and turnkey solutions
Indonesia is expected to spend the next few years developing and constructing geothermal power plants across the country, creating significant opportunities for suppliers of geothermal equipment. Exports of geothermal related goods and services to Indonesia have reportedly increased significantly over the past few years and the upward trend is likely to stay at least until 2019.
Indonesia is also experimenting with new and combined technologies, such as flash cycle, dry steam and binary cycle geothermal power plants. As a result, Indonesia is likely to witness high demand for a diverse mix of geothermal turbine types and combined energy technologies. Given the EU’s strong geothermal market with advanced technological solutions, European companies are well placed to offer such turnkey systems for exportation to Indonesia.
Energy efficiency optimising solutions
As some of the lower temperature geothermal sites are starting to be explored for energy production, there is a strong demand for energy extraction optimisation solutions. The engineering sector may find opportunities to undertake a number of equipment and process development projects, targeted at more efficient utilisation of geothermal resources. Currently, there is a particular focus on binary cycle units, as demand for smaller scale and lower temperature resource developments is increasing.
In addition, avenues for scaling up of existing geothermal plants also exist for qualified European companies. As the existing power plants are seeking to improve site efficiency, companies with expertise in scaling up single site utility may find their services in demand across Indonesia.
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Cost-effective solutions for resource confirmation
Additional opportunities may be available for companies which can provide solutions to finding the most cost-effective way for quick resource confirmation. Given the risks that geothermal power developers undertake when exploring potential resources, such technologies would be highly valued in a growing Indonesian geothermal market. Cheaper hard-rock, high-temperature and high- pressure drilling technologies as well as new drilling methods are some of the avenues for entry.
Skills development and training
Indonesia is also facing a stiff competition for staff given the lack of Indonesians trained in geothermal skills. The lack of qualified human resources means that there is high demand for skilled workers for geological explorations and trained operators of geothermal plants. Opportunities may be available for consultancies to provide expertise and/or training for local staff. As the government is seeking to improve domestic geothermal market conditions, it is also likely that companies, which commit to developing local skillset, may find it easier to compete for existing greenfield and brownfield projects.
European Companies
Enel Green Power (EGP)
Enel Green Power (EGP) is an Italian multinational renewable energy corporation, which generates electricity from renewable resources across six continents. The company was formed as a subsidiary of the power generation firm, Enel, in December 2008, grouping Enel’s global renewable energy interests together, but it was absorbed back into the general Enel Power company in 2016.
EGP started its presence in the Indonesian renewable market in 2016, after signing a Memorandum of Understanding (MoU) with the Indonesian power utility company PT PLN (Persero) to cooperate on sustainable power generation in Indonesia. The MoU marked an important partnership and the EPG’s commitment to develop an operational presence in the
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country. The company also signed an MoU with Japanese Marubeni Corporation to evaluate possible cooperation opportunities in renewable energy projects in the Asia-Pacific region.
More recently, EPG and Indonesia’s PT Optima Nusantara Energi (PT ONE) have been awarded the exploration and development license for the 55 MW Way Ratai power project in Lampung. Way Ratai will be the first geothermal project developed by EGP in the country and marks its full entry into the geothermal sector. It is expected that EPG will invest up to US$ 22 million in the exploration phase. Based on the results, the project construction is expected to be completed and commissioned by 2022. Electricity generated by the plant will be sold to the PT PLN under a 30-year Power Purchase Agreement.
Engie
Engie (known as GDF Suez prior to April 2015) is a French multinational electric utility company, which operates in the fields of electricity generation and distribution, natural gas, nuclear and renewable energy. It is the leading producer and supplier in Europe of geothermal energy for heating and cooling of residential and commercial facilities. It develops its business with innovative solutions largely based on its expertise in four key sectors: renewable energy, energy efficiency, LNG and digital technology.
In 2016, Engie took a major step in the implementation of its transformation plan to redesign and simplify its portfolio. The company sold its 13 GW of power generation assets, including the 2 GW PT Paiton coal-fired power plants in Indonesia. The divestment was in line with Engie’s global strategy to move away from fossil fuel to clean and green energy technology.
In turn, the company began its investment in renewable energy, especially in geothermal plant development. Its first major projects are Muara Laboh, Rajabasa and Rantau Dedap geothermal power plants which are developed in a consortium including PT Supreme Energy, Sumitomo Corporation and Marubeni Corporation.
In January 2017, Engie reached the financial close for the Phase I of the Muara Laboh geothermal project, the Group’s first high temperature geothermal power generation plant in the world. With
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commissioning planned in 2019, the first phase will generate 80 MW of emission-free electricity, the equivalent of the energy consumption of around 120,000 households.
With the strong expertise in geothermal, wind and solar sectors, Engie expects to develop its efficiency energy business and facility management services in Indonesia. Through its subsidiary, Storengy, the Group has all the drilling and underground expertise to manage such projects. The company has a presence in Indonesia for over 60 years.
Alstom Power
Alstom Power provides clean power technologies, including power generation services, support and equipment for global utility and industrial energy markets. It designs, manufactures and supplies products and systems in gas, coal, wind, hydro and geothermal sectors. The French company was incorporated in 1999 and operated as a subsidiary of Alstom Group until 2015 when it was acquired by GE Group.
The company has nearly 50 years of strong presence in Indonesia with offices in Jakarta, Bandung and Surabaya. Alstom in Indonesia has made strategic partnerships with strong local players to bring advanced technologies to the power generation market in the country. It has been awarded over 100 contracts, covering engineering, manufacturing, project management, commissioning and services.
In 1995, PT PLN granted Alstom a contract to develop a 20 MW geothermal power plant unit under the supervision of the Compagne Française de Géothermie (CFG). The contract required Alstom to build a turnkey geothermal power generation unit. The company built its first geothermal power plant in 2000 in Lahendong, North Sulawesi. The 20 MW unit began its commercial operation in 2001 after an extended construction period.
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Figure 24: Karaha Project Site for Karaha Plant by Alstom for Pertamina Source: Think Geoenergy / Hawkins
In 2015, Alstom has been awarded an EPC contract worth over EUR 61 million by PT Pertamina Geothermal Energy (PGE) to supply and install a 30 MW geothermal plant for the Karaha Power Plant in West Java, Indonesia. Alstom will design, supply, install and commission the entire power plant.
Ansaldo Energia Group (AEG)
Ansaldo Energia Group (AEG) is an Italian power engineering company. AEG is a leading international player in the power generation industry. It offers integrated models for turnkey plants and components (gas turbines, steam turbines, generators and microturbines) for energy sector. The Group operates on international markets for customers ranging from public administration to Independent Power Producers (IPPs) and industrial clients. It covers the entire power generation spectrum with a combination of plant engineering, manufacturing and service activities.
The AEG made its debut in Indonesia in 2015 when it signed two US$ 88 million contracts in the geothermal sub-sector. The first covers the supply of two AE94.2 gas turbines and two air-cooled generators with the relative auxiliary systems for the 500 MW Grati-Pasuruan combined cycle plant in eastern Java for Lotte E&C. The second contract covers the total refurbishment of a 30 MW geothermal plant in Kamojang, western Java.
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Figure 25: Kamojang Geothermal Complex, West Java, Indonesia Source: Think Geoenergy
The company is acting as the EPC contractor and it is supplying the geothermal steam turbine and relative air-cooled generator for PT PLN subsidiary Indonesia Power. The two contracts increase the total geothermal output installed by Ansaldo Energia in the area to 270 MW.
To supervise the activities and to seize future opportunities in the market with promising prospects, the company has opened a branch office in Jakarta in 2016.
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3.6 Hydrothermal and Ocean Energy
3.6.1 Market Overview
Indonesia is the world’s largest archipelago and it has one of the greatest potentials for ocean energy in the world. With 54,716 km of coastline, the country is estimated to have between 10 MW and 35 MW of available ocean energy per kilometre of coastline.17
Main ocean resources in Indonesia include tidal stream, waves and ocean thermal energy, which amount to a total commercial potential of 61 GW:
Theoretical potential (GW) Commercial potential (GW)
Waves 140 2
Tidal Stream 290 18
OTEC 4,250 41 Table 22: Theoretical and Potential Power Generating Capacity of Ocean Energy In Indonesia Source: Ernst & Young (2016) Ocean energies, moving towards competitiveness: a market overview
Ocean energies often offer some benefits when compared to solar or onshore wind, as they provide better predictability of production and do not require onshore land acquisition – issues that are critical in a country like Indonesia. Despite this major potential, Indonesia’s ocean energy sector has been characterised by only few pilot projects so far.
Project proponents Technology Location Capacity (MW) Development stage Platform built and on Ponte di Archimede site, waiting for a SpA (Italy) – PT Tidal stream East Lombok island 0.18 budget to deploy at Walinusa sea PLN – Institut Early stage of Teknologi Sepuluh Wave power Madura – East Java 0.02 development Nopember Early stage of BPDP-BPPT ILH OTEC Flores island 0.01 development Table 23: Ocean Energy Pilot Projects in Indonesia as of 2016 Source: Ernst & Young (2016) Ocean energies, moving towards competitiveness: a market overview
17 US Department of Commerce (2010). Renewable Energy Market Assessment Report: Indonesia
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Recent developments in Indonesia, however, suggest that ocean energy may experience a more rapid growth in the upcoming years. As the country embarks on its ambitious strategy to achieve 23% of renewables in its energy mix by 2025, ocean energy is increasingly recognised as a potential supplement to Indonesia’s power supply. Although the estimated share of ocean energies in the renewable energy portfolio is estimated to remain below 1%, the government is expected to invest approximately EUR 8 million over the next five years to accelerate the segment growth.18
In addition, the state-owned company, PLN, has recently published its power supply business plan for the period of 2015-2024. The document comprises a development plan for new and renewable sources of energy, encompassing mini hydro and geothermal power plants, wind turbines, biomass, biofuel, solar and marine energies. In regard to ocean energies, PLN is expecting to increase the installed capacity up to 5 MW by 2020, and up to 10 MW by 2024, mainly via small-scale pilot tests on several ocean technologies in the form of R&D projects (similar to those conducted in Madura).19
On the research and development side, several actors are actively involved in promoting ocean energy in Indonesia:
The Indonesian Ocean Energy Association (INOCEAN) is in charge of promoting the development of ocean energies through research and advocacy;
International development agencies, such as France’s Agence Francaise de Development (AFD) and British Department for International Development (DFID), support the development of ocean energies in Indonesia by organising and funding pilot programmes (e.g. AFD has granted EUR 500,000 for Ocean Thermal Energy Conversion (OTEC) projects);
Indonesian and foreign private technology providers are starting to initiate pilot projects and partnerships with local actors (e.g. Ponte di Archimede SpA and PT Walinusa; Sabella, PLP and Meindo; Bombora Wave Power and Anoa Power). Via such collaborations, foreign
18 Ernst & Young (2016). Ocean energies, moving towards competitiveness: a market overview. 19 PLN (2015). Electricity supply business plan
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technology providers are aiming to adapt their products to the local content before bringing them to the market.
Although the market for ocean technologies remains largely unexplored, recent major announcements by technology providers and development agencies are expected to boost the development of the ocean energy sector in Indonesia. These announcements include:
The French company Sabella, which signed in February 2015 a Memorandum of Understanding (MoU) with Indonesian companies PLP and Meindo to commercialise its D10 submarine tidal turbines;
The Australian company Bombora Wave Power, which has also signed in June 2015 a technology evaluation agreement with Indonesian company Anoa Power, in order to manufacture and distribute its Wave Energy Collector in the country;
The British company SBS, which is engaging in a technology transfer partnership with PT Pertamina;
The French company Akuo Energy, which has signed an agreement in 2015 with PT Pertamina to develop renewable energy projects in Indonesia, including OTEC; and
The British company Atlantis, which has partnered with SBS in 2016 to develop ocean energy technologies in Indonesia.
Together with the Indonesian Ministry of Energy (EBTKE), PLN, DFID and AFD have also initiated a programme to identify appropriate sites to develop tidal stream facilities and select technology providers to develop these facilities. A request for proposals was expected to launch at the end of 2016.
On the other hand, although there is an increasing interest to develop ocean energies, the government has yet to design a Feed-in Tariff (FiT) in order to incentivise ocean energy IPPs to deliver bankable projects with a fair return on investment.
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Local Players
Anoa Power
Anoa Power is an Indonesian hydropower developer. In June 2015, the company signed a technology evaluation agreement with Australian Bombora Wave Power. Under the agreement, Anoa Power will evaluate suitable deployment sites for Bombora marine hydrokinetic devices (MHK) while Bombora will confirm electricity generation capability across these locations. The agreement is a precursor to the formulation of a manufacturing and distribution arrangement for Bombora Wave Energy Collectors (WEC) into Indonesia.
Figure 26: Bombora mWave Converter Source: Bombora Wave Power
PT Arus Indonesia Raya (AIR)
PT AIR is an Indonesian company focused on marine renewable energy, which is spearheading the domestic marine tidal energy industry in the country. PT AIR’s manufacturing facility manufactures tidal turbine products for use in the country and throughout South East Asia. The company works closely with marine consulting and coastal engineering research firm PT ASR, which has been actively surveying and scouting suitable locations for tidal energy projects throughout the Indonesian archipelago.
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The company has also partnered with OpenHydro, company, which specialises in the design and manufacture of marine turbines to generate renewable energy, and over the next three years the two companies plan to develop up to twenty 2 MW turbines in a pilot tidal array in the Bali strait, which will supply power directly to state energy company Pertamina.
PT Meindo
PT Meindo is an Indonesian industrial and construction company, which specialises in providing construction sites, marine equipment and material, and transportation and installation for the oil and gas industry. More recently, Meindo has partnered with Sabella and PLP in 2015 to develop ocean current energy in Indonesia. Together they aim to produce and deploy from 100 kW to 2,500 kW turbines to harness marine currents.
3.6.2 EU Entry Opportunities
Ocean covers nearly 70% of the Indonesia’s archipelago and represents an enormous energy generation opportunity in the form of wave, wind, tidal, ocean current and thermal resources.20 Indonesia’s marine area has the potential to generate up to 61 GW commercial power via these channels and most of the resources are currently unutilised. This offers great avenues for private developers to tap into the Indonesian ocean energy market in its early days.
Based on the increasing interest from the Indonesian government to accelerate the development of ocean energy, the private sector is keen to address this nascent market. European companies with their technological advancements would be well positioned to offer their products and innovations in ocean power plant development, storage and pioneering grid solutions.
Ocean energy in Indonesia can be harnessed via Ocean Thermal Energy Conversion (OTEC), chemo kinetics as well as tide and wave conversion technologies and the government is keen to support interested IPPs. There are currently at least 11 known areas with potential ocean energy
20 http://www.sciencedirect.com/science/article/pii/S1876610215000363
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resources that have proven commercial viability for projects. Some of the potential entry points for European companies exist in:
Wave energy development
Tidal energy development
Ocean thermal energy (OTEC) development
Manufacturing and export of ocean energy technologies and components
Wave energy development
Wave energy potential spreads across Sumatra, Java and Nusa Tenggara seas. The highest potential is located in the west of Sumatra with 20 kW/m wave length, while the outskirts of southern Java, eastern Kalimantan and southern Sulawesi are estimated to have the potential of 15 kW/m wave length. These areas offer good opportunities for foreign investors to engage in research and development initiatives and deploy their technologies via pilot projects.
Figure 27: Potency of Wave Energy in Indonesia Source: P3GL & ESDM 2011
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Tidal energy development
Meanwhile, the tidal energy potential spreads across the southern Java, Nusa Tenggara, Sulawesi and southern Papua, and has the average sea surface difference of 3-5 metres (between high and low tide). These areas have sufficient tidal potential to support power generation and provide bankable opportunities for private developers. Some of the areas for consideration are the R&D initiatives, pilot projects and small-to-medium scale tidal energy power plant development.
Figure 28: Potency of Tidal Energy in Indonesia’s Marine Territory Source: P3GL & ESDM 2011
Ocean thermal energy (OTEC) development
Ocean thermal energy also offers huge potential to develop OTEC technologies, especially for application in tropical areas. There are at least six potential areas for OTEC application, including south of Sumatra (A) in areas such as Siberut and Nias Islands, North of Sulawesi (B), North of Maluku (C), such as Morotai Island, South of Maluku (E), such as Taliabu, Buru and Seram islands (F). Given the fact that the subsector is very new to Indonesia, there are opportunities for
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European companies to export their equipment and turnkey solutions for pilot projects as well as to cooperate with local stakeholders on research and development initiatives.
Figure 29: Potency of OTEC in Indonesia’s Marine Territory Source: Koto, J. (2016). Potential of Ocean Thermal Energy Conversion in Indonesia
Manufacturing and export of ocean energy technologies and components
Manufacturing of significant components, such as large turbine support structures and marine base facilities as well as logistics, is also not readily available locally. This presents an enormous opportunity for the EU companies to seize, including the avenues for investment in ocean energy infrastructure and industry as well as the massive potential to export its products and expertise.
The EU is at the forefront of technology development, with about 50% of tidal energy and about 60% of wave energy developers being located in the EU, and it is positioned well to offer both the technology and knowledge transfer to the growing Indonesian ocean energy market.
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European Companies
Sabella
Sabella is a French company, which develops reliable and efficient tidal turbine technologies to supply turnkey energy solutions worldwide. The company signed in February 2015 a Memorandum of Understanding (MoU) with Indonesian PLP and Meindo to commercialise its D10 submarine tidal turbines via upcoming tidal wave projects. Sabella is in charge of engineering and manufacturing of the turbines, while PLP is to provide technical assistance and project management. Meindo is expected to take over the construction phase.
Akuo Energy
As the leading independent renewable energy producer in France, Akuo Energy specialises in the implementation of electricity generating units from renewable resource: wind, solar, hydro and biomass. It develops, finances, constructs, and operates renewable energy generation power plants in France and abroad. The company was founded in 2006 and today it has subsidiaries in France, the US, Uruguay, Croatia, Poland, United Arab Emirates, Indonesia and Turkey.
The company entered the Indonesian ocean energy market in 2015, when it signed the agreement with PT Pertamina to develop renewable energy projects in Indonesia, including OTEC. In April 2016, PT Pertamina, French company Akuo Energy and French development agency AFD have signed an additional agreement to develop solar PV energy, wind energy and OTEC. AFD contributed with a EUR 500,000 grant specifically dedicated to the development of OTEC in Indonesia. A first phase of the project will consist of the identification of the most appropriate sites to develop OTEC projects.
SBS
SBS is a UK-based international renewable energy project developer with international branches, including a branch office and IPP in Jakarta. The company is an independently-owned business which is still operated by its founder, Group Chairman and CEO, Michael J. Spencer. SBS delivers
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the full range of marine and subsea design and development engineering consultancy services, more recently, in the area of ocean energy renewable energy generation projects.
The company established its first South East Asian branch office, SBS Indonesia, in Jakarta, in 2004. Subsequently, offices in Thailand and Malaysia were opened.
After more than three years of research, SBS completed a study of the potential for commercial scale tidal arrays in the archipelago and submitted detailed feasibility studies to PLN and the government. This was followed by the signing of a technology transfer agreement with PLN to develop the first three offshore sites for exclusive development by SBS in the eastern archipelago. SBS is now working on the launch of the first ocean energy technology at a commercial scale in Indonesia.
The first of the three sites will be developed with a 150 MW tidal array power generation facility at a privately funded cost of US$ 750 million. After the launch of this first facility, two other facilities will be built on other sites. In order to sell produced electricity, the company incorporated PT SBS Energi Kelautan (which will become the first ocean energy Independent Power Producer with 100% Indonesian ownership), and signed an agreement between PT Pertamina and PT SBS Energi Kelautan for energy supply to the national grid.
Atlantis Resources Limited
Atlantis Resources is a British vertically integrated marine renewable power company developing tidal power generation technology for commercial deployment globally. Atlantis works with the industry to provide turbine technology solutions, greenfield project origination, site selection, resource assessment and array optimisation consultancy, offshore installation and completion management, as well as operations and maintenance to governments, utilities and power companies worldwide.
In 2016, the company has signed a Preferred Supplier Agreement with SBS for the supply of turbines, engineering services and equipment for a 150 MW tidal stream array in Lombok, Indonesia. The project will be supported via a 25-year power purchase agreement with PT PLN.
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Atlantis is planning to establish a dedicated local facility for turbine assembly, testing and maintenance and a local turbine manufacturing facility once aggregate orders for turbines exceed 100 units in Indonesia.
Figure 30: First MeyGen Turbine Deployment Source: Atlantis Resources
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3.7 Hydropower
3.7.1 Market Overview
Hydropower is currently the single largest source of renewable power in Indonesia, accounting for 6% of generation in 2015 and is expected to grow to 10.4% in 2025.21 The country’s technical hydropower potential is estimated at around 75,000 MW, with untapped resources concentrated on the islands of Sumatra, Java and Sulawesi, ranking Indonesia among the top six of countries with unutilised hydropower potential.22
Country Undeveloped (GWh/year) Total Potential (GWh/year) Current Utilisation (%)
Russia 1,509,829 1,670,000 10%
China 1,013,600 2,140,000 41%
Canada 805,111 1,180,737 32%
India 540,000 660,000 21%
Brazil 435.542 817,600 48%
Indonesia 388.289 401,646 3% Table 24: Top 6 Countries by Unutilised Hydropower Potential Source: World Energy Council (2016). Hydropower
According to the Directorate General of New Renewable Energy and Energy Conservation, the existing hydropower resources are distributed in Indonesia across the following locations:
21 PwC (2016). Power in Indonesia. Link: https://www.pwc.com/id/en/energy-utilities-mining/assets/power/power-guide-2016.pdf 22 IHA (2016). Indonesia. Link: https://www.hydropower.org/country-profiles/indonesia
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Figure 31: Hydropower Potential in Indonesia Source: RENSTRA DITJEN EBTKE 2015-2019
The state-owned utility PT PLN has recently identified 96 potential hydropower sites for commercial hydropower energy development. Of those locations, about 60% will be developed by PLN, while the remaining 40% are expected to be offered to independent power producers (IPPs). According to the Ministry of Energy and Mineral Resources (MEMR), these sites have the commercial potential to deliver up to 12,800 MW of energy in addition to the current installed hydropower capacity of 5,705 MW.
The hydropower development in Indonesia is driven primarily by the government’s target to increase the share of renewables in the country’s total energy mix up to 23% by 2025, and the need to ensure a more stable power supply to the country’s growing energy demand. In addition to developing domestic hydropower energy sources, Indonesia is also now importing hydropower to the West Kalimantan from the neighbouring state of Sarawak in Malaysia.
For data on exporters and importers of hydraulic turbines, water wheels and regulators, see ‘5.3 Useful Statistics’.
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Recent developments
The hydropower energy market in Indonesia is booming, with many projects under construction, under negotiation, or in study and design phases. Several big hydropower projects are currently taking place in Indonesia. As of 2016, seven hydropower projects totalling 1,559 MW were under construction while an additional ten projects totalling 1,819 MW were subject to negotiations and 19 projects totalling 2,131 MW were in the study or design phases.23 In 2017, an additional four mini-hydropower plant developments were negotiated, which are expected to add up to 36 MW to the hydropower energy generation mix.
For example, four hydropower projects with a total capacity of 146 MW in East Java, the 47 MW Rajamandala project in West Java and 360 MW Maung project in Central Java have progressed towards completion while a pumped storage facility, planned for Upper Cisokan, may soon provide 1,040 MW of power to the Java grid. Furthermore, additional pumped storage projects in Sumatra and Java are being explored for additional construction opportunities.24
Figure 32: Construction of Upper Cisokan Hydropower Plant Source: Rambu News (2017)
23 Ibid. 24 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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Several additional IPP projects are also under the Power Purchase Agreement negotiation stages, including the Merangin (350 MW), Meurebo (56 MW) and Karangkates & Kesamben (137 MW) projects. The IPP Wampu (45 MW), Batang Toru (510 MW), Hasang (40 MW), Peusangan (83 MW), Semangka (2 x 28 MW), Bonto Batu (110 MW) and Malea (2 x 45 MW) hydro projects are also under development stages, or are close to completion.
Figure 33: Wampu Hydroelectric Power Plant in Indonesia Source: The Steel Wire
In addition, the 35 GW Programme lists two PLN hydro projects under construction and there are nine further IPP hydro projects with a total capacity of 413 MW that the government expects to allocate by direct appointment.25
A series of successfully commissioned micro hydropower projects by PT PLN and IPPs in West Nusa Tenggara, East Nusa Tenggara, Papua, and other provinces of eastern Indonesia have also provided much needed project development experience and capacity, and IPPs are developing more run-of-river hydropower plants in Central Java, Sumatra, and Sulawesi.
25 Deloitte (November 2016). Power in Indonesia: Investment and Taxation Guide, 4th edition
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Director General of NREEC reported in 2016 that in the period of September 2014 to December 2015 there were proposals for 175 small-scale hydropower plants with an investment of US$ 783 million.26 For example, PT Terregra Asia Energy Tbk has announced in 2017 its plans to construct four mini-hydro plants in North Sumatra with a total capacity of 36 MW and investment of IRD 1 trillion (EUR 60 million).
According to the strategic roadmap for renewable energy development in Indonesia, the plans to develop hydropower (including small hydro) for the period of 2015-2019 are expected to come via the following yearly additions:
Development of Hydro (Including Small Hydro), MV 2015 2016 2017 2018 2019 Hydro (including small hydro) non-state budget 222.0 899.0 326.0 477.0 527.0 Hydro (including small hydro) state budget – MEMR 0.7 1.7 4.0 3.0 2.0 Hydro (including small hydro) special allocation fund 8.0 8.5 9.7 10.0 11.0 Construction of hydro (including small hydro power 230.7 910.2 339.7 490.0 540.0 plants) Table 25: Planned Government Development of Hydropower (in MW), 2015-2019 Source: RENSTRA KESDM 2015-2019
The strategic hydropower projects that that the government expects to be completed yearly, however, are more modest:
Unit 2016 2017 2018 2019 Wampu MW 45.0 Meurebo – 2 MW 56.0 Oksibil MW 1.0 Supiori MW 3.0 Ilaga MW 0.7 Rajamandala MW 47.0 Jatigede MW 110.0 Asahan – 3 MW 174.0 Table 26: Expected Projects to be Completed, 2015-2019 Source: RENSTRA KESDM 2015-2019
26 Deloitte (November 2016). Power in Indonesia: Investment and Taxation Guide, 4th edition
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Government initiatives
To incentivise the market growth and the IPP involvement in hydro power development, the Government of Indonesia (GoI) has prioritised the creation of a favourable environment for the private sector. Among its initiatives are the numerous tax incentives for power projects, including the tax deduction per year for six years; import duty exemption for renewable energy-related equipment; income tax reduction/exemption for 5 to 10 years; exemption from value-added tax; and accelerated depreciation of capital and fixed assets.
The Government expects that such incentives will boost investment, supply and trade for domestic renewable industry, thus, attesting to the favourable environment for European market entry opportunities.
In addition, two key legislations have been implemented since 2014 that are of significance for hydropower development in Indonesia: Power Purchase Agreements (PPA) and Feed-in Tariffs (FiT). Power Purchase Agreements allow for greater private sector participation in hydropower development while the new FiTs incentivise the PLN to create more bankable opportunities for IPPs.
Most recently, the Ministry of Energy and Mineral Resources (MEMR) Regulation 12 has further added new lower maximum FiTs for hydropower and new contracting regimes, which are expected to further boost hydropower development in Indonesia:
Lower FiTs: The previous FiTs for hydropower were considered to be too high when compared to tariffs charged by thermal power plants. New, lower tariffs are expected to encourage and incentivise Indonesia’s state-owned energy company, PLN, which controls around 74% of the country’s installed electricity capacity, to issue more tenders for renewable energy projects and purchase more electricity from renewable sources.
Under Regulation 12, all renewable energy tariffs (except for geothermal and urban waste) have been also set to be either lower or equal to the local production cost (also known as BPP). The maximum permissible tariff has been set to 85% of BPP if the local production cost
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is higher than the national average production cost, and 100% of BPP if the cost is the same or lower. As of March 2017, the BPP in Indonesia has been estimated to be around IDR 1,400 (EUR 0.088) per kWh. While local production costs vary from region to region, the tariff has been set subject to negotiation in certain areas (including for projects in Sumatra, Java and Bali).27
A new FiT for micro hydro projects (less than 10 MW) was also issued in 2012, and revised upward in 2014 and 2015, successfully heightening the IPP interest in investing in small-scale hydro power development.28
New contracting regimes have been also implemented, making hydropower projects subject to either “reference price” or “direct selection” mechanisms. In selecting a developer, Regulation 12 now requires the PLN to carry out due diligence process on technical and financial capabilities of the candidates, and permits imposing fines and sanctions on the Power Purchase Agreement (PPA) in the event of completion delay caused by the project developer. These new regulatory processes make experienced international developers more competitive against domestic IPPs, which may have lower capacities for project development and management.
Currently, large-scale power plants with PPAs are negotiated with the state-owned PLN and foreign private sector participation is allowed through IPP concessions. Electricity business licenses for public use (IUPTLs) can be offered to IPPs with up to 95% foreign shareholding when generating more than 10 MW of electricity, and this has been increased to 100% foreign shareholding if the initiative constitutes a PPP project.
For small-scale power plants, which generate between 1-10 MW, there is a 49% foreign shareholding cap and power plants generating less than 1 MW are closed to foreign investment.29
27 https://www.dlapiper.com/en/australia/insights/publications/2017/03/new-indonesian-feed-in-tariffs/ 28 MEMR Ministerial Regulation No. 4/2012, MEMR Ministerial Regulation No. 12/2014 & MEMR Ministerial Regulation No. 22/2015. 29 http://emerhub.com/indonesia/investing-hydro-solar-power-indonesia/
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Obstacles for hydropower development in Indonesia
Despite the booming market for hydropower development and the increasing interest by the Government to ease the process of private sector participation, several obstacles still exist. A key obstacle in developing hydropower projects arises from the need for vast areas of land. Environmental issues also frequently delay project developments.30
A number of other hydropower projects have been delayed due to constrained process of getting the forest use permits. Even in forest areas where hydropower projects can be constructed, the permit processes from the Ministry of Environment and Forestry has often taken years, and sometimes they were never issued due to conflicting claims on the land or protests by environmental groups. As license regulations do not specify time limits, this creates uncertainty in project preparation and implementation
Land ownership also remains a controversial issue since many hydropower plant sites are located in remote forest areas, where land is often claimed by multiple owners in the absence of a reliable land registration system. Land registered as government-owned forests has even been found to overlap with privately-owned land.
Permitting issues have also been complicated in some instances where local governments issued an excess of development licenses without the knowledge of PT PLN. In several potential hydro project sites in Sumatra, for example, a large water resource has been divided by permits for a number of mini hydro developments, preventing PT PLN from optimising the utilisation of the resource for larger-scale development.
Local Players
Perusahaan Listrik Negara (PLN)
PLN is a state-owned power company which controls around 74% of the country’s installed electricity capacity, as well as the transmission and distribution infrastructure in accordance with the 2009 Electricity Law.
30 For example, the preparation for Kusan 3, PLN’s potential project in South Kalimantan, was stalled after the feasibility study found small populations of International Union for Conservation of Nature red-listed proboscis monkeys that live only in the project area.
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As part of its second phase of the “Fast Track Programme”, aimed at meeting Indonesia’s increasing energy needs, the company aims to shift away from coal power generation towards new energy sources, including hydropower. The company has recently identified 96 potential hydropower sites for commercial hydropower energy development and it has the aim to develop approximately 60% of the new hydropower sites.
The largest project currently under construction by PLN is the 1,040 MW Upper Cisokan plant, a pumped storage project located in western Java. The project is being built by South Korea’s Daelim and Italy’s Astaldi Group, in a joint venture with an Indonesian firm, Wika. The total project cost is estimated at US$ 800 million, supported by a US$ 640 million specific investment loan from the World Bank with the remaining US$ 160 million supplied by the project owner, the PLN. According to the World Bank, the goal of this project is to increase the peak capacity of the Java- Bali grid in an environmentally and socially sustainable way, while strengthening PLN’s institutional capacity to oversee hydropower planning, development and operations.31
PT Nusantara Infrastructure Tbk
PT Nusantara Infrastructure Tbk is a leading Indonesian integrated infrastructure company, with infrastructure concessions in both western and eastern parts of Indonesia. Established in 2006, the company is investing in five different business sectors: toll roads, water, energy, power and telecommunication towers. Currently, the company provides services to more than 103 million customers, 550,000 households, 103 million vehicles, and more than 210 vessels.
In 2012, it established its subsidiary, PT Energi Infanusantara (EI), in order to expand its focus to renewable energy sector. At the moment, the company is constructing a mini hydro power plant with 2 x 5 MW capacity, located in North Sumatra, approximately 74.5 km from Medan.
31 https://www.hydropower.org/country-profiles/indonesia
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Figure 34: Mini Hydro Plant Location in Lau Gunung Source: PT Nusantara Infrastructure Tbk
The project was signed with the PLN under a 20-year Power Purchase Agreement. Overall progress has reached 22% and the hydropower plant is scheduled to commence operation in the third quarter of 2018. To develop this project, Nusantara has partnered with PT Pembangunan Perumahan Tbk (PTPP) as a joint shareholder and main contractor.
In 2015, EI has also signed a Memorandum of Understanding (MoU) with Norwegian SN Power and the Philippine Aboitiz Power to co-develop a 127 MW hydropower project in Lariang river, Central Sulawesi. The hydroelectric project is expected to cost around US$ 476 million and it will begin with the implementation stages, such as hydrology, topography, geological survey and the evaluation of social impact.
PT Terregra Asia Energy
PT Terregra Asia Energy is an Indonesia-based company engaged in renewable energy business. The company develops, builds and operates renewable energy projects, including hydro power plant projects, utility-scale solar photovoltaic power plant and rooftop power projects. Its hydro power plants include large-scale hydro power plants in Aceh province operated by PT
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Teunom Hidro Power and PT Meutia Hidro Perkasa. It is the first renewable energy firm to list on the Indonesia Stock Exchange (IDX).
In April 2017, Terregra unveiled its plans to raise up to US$ 14.9 million from its upcoming stock market listing to fund four micro hydropower plants (PTLMHs) in North Sumatra with a total capacity of 36 MW and investment value of between US$ 70 - 90 million. Electricity generated from those power plants will be sold at a price of IDR 1,210 (EUR 0.076) per kilowatt hour (kWh). The company signed Power Purchase Agreements for those four PTLMHs with PLN for a period of 20 or 30 years.
Overall, Terregra - through its subsidiaries PT Terregra Hydro Power and PT Terregra Solar Polar - currently has a total of 12 power plant projects in the pipeline, including several using hydro and solar power planned to be constructed within the next five years, with an estimated total capacity of 492 MW. The company, which also has a solar division, currently has 72 MW of installed hydropower and solar power plants throughout the country.32 By 2023, it expects to operate over 300 MW of renewable power in Indonesia.
3.7.2 EU Entry Opportunities
The hydropower market in Indonesia is thriving and offers many opportunities for European companies. Some of the best options to consider are:
Development of large-scale hydropower projects
Development of mini-hydropower plants
Export opportunities for hydropower equipment and turnkey solutions
Development of dam sites
32 https://www.pressreader.com/indonesia/the-jakarta-post/20170411/282050506925707
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Development of large-scale hydropower projects
As renewable - and especially hydropower - energy projects are gaining momentum in the Indonesian energy sector, new business opportunities are to be found in large-scale hydropower projects not just in the most populated and industrial island of Java but also in remote regions such as Maluku, Kalimantan and Sulawesi. The 75 GW of untapped hydropower capacity potential is split according to region and offers abundant opportunities for project development:
Java - 12.05 GW
Sumatera - 16.1 GW
Sulawesi - 14.55 GW
Kalimantan - 5.9 GW
Maluku - 21.05 GW
Bali-Nusa Tenggara - 4.9 GW33
The revised shareholding regulations, which now allow 100% of foreign ownership, are offering additional incentives to tap into the hydropower plant development sector.
Development of mini-hydropower plants
In remote communities where connection to the national power grid is prohibitively expensive, local hydropower production from small power plants with capacities of less than 10 MW – known as mini-hydropower plants – is also an attractive and viable option. Therefore, there is a growing need to conduct accurate feasibility assessments for hydropower generation at such sites. European companies with expertise in feasibility assessment, design and maintenance of small- scale hydropower plants will find a demand for their knowledge.
Small hydropower plants are mostly targeted at rural electrification, with the largest potential in Java, Sumatra and Papua. In May 2016, PLN has already signed hydropower Power Purchase
33 www.euind-tcf.com/download/.../2015_TCF_SectorPropositions_HydroEnergy.pdf
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Agreements with the following companies to increase the rural electrification rate, but further opportunities exist given the scale of the untapped hydropower potential:
PT Bakara Energi Lestari (10 MW)
PT Dempo Sumber Energi (13.4 MW)
PT Green Lahat
PT Nusantara Indah Energindo
PT Midigio, PT Sahung Brantas Energy
PT Malaka Guna Energi
PT Tropisindo Sumber Energi and PT Klaai Denden Lestari (totaling 21.2 MW)
PT Uway Energy Perdana (7 MW) to support electricity need in Sumatera.
PT Tirta Mukti Lestari (PLTMH Cibuni – 3.2 MW)
PT Lima Energi Lestari (PLTMH Pesantren 1 – 1.8 MW)
PT Petro Hidro Optima (PLTMH Cikaengan – 5.1 MW)
PT Cikaengan Tirta Energi (PLTMH Cikaengan 2 – 7.2 MW)
PT Manha Daya Mandir (PLTMH Cibuni Mandiri – 2 MW)
PT Republika Mandiri Energi (PLTMH Cikandang – 6 MW)
PT Bangun Bumi Bersatu (PLTMH Cobarero 1 – 5 MW) in West Java and Banten Province.
Export Opportunities for hydropower equipment and turnkey solutions
Indonesia’s imports of hydraulic turbines, water wheels, and regulators (excluding power engines) surged to their highest levels in 2016. The country’s imports in these categories were valued at US$ 31.5 million – close to a US$ 10 million increase over the previous year. Imports from the Netherlands have increased greatly from US$ 20,000 in 2015 to US$ 6.95 million in 2016, placing it as the top supplier of hydraulic technology to Indonesia.
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Italy, Austria, Slovenia and the Czech Republic are also leading suppliers of hydraulic technologies. With the extensive pipeline of hydroelectric projects, Indonesia’s demand for hydraulic equipment is likely to continue its upwards trend, offering good opportunities for European exporters.
Development of dam sites
The government is also screening 239 possible locations to identify 5 to 6 dam sites (over 30 MW) for possible conversion and development by IPPs into multipurpose dams to be managed by the Ministry of Public Works. Possible locations include Sutami, Kesamben, and Lodoyo in East Java.34 Companies with expertise and a successful track record in dam development are likely to find opportunities in Indonesia. Some avenues may be available for equipment provision, project management, EPC, and provision of turnkey solutions.
European Companies
Andritz Hydro
The Austrian company Andritz Hydro is a global leading supplier of plants, equipment, and services for hydropower stations, the pulp and paper industry, the metalworking and steel industries, for solid/liquid separation in the municipal and industrial sectors, as well as for animal feed and biomass pelleting. The multinational company has been active in Indonesia for more than a century with its first delivery in 1910 (Bangoen Poerbo) and the establishment of its subsidiary in Jakarta in 1996. The company has installed or modernised about 180 hydropower units with more than 3,000 MW in Indonesia, making it a leading player in Indonesia’s hydropower market.
One of the Andritz Hydro’s successful projects is the Cirata hydropower plant with units I and II, which are the largest hydropower plant units in the country with a combined output of 1,000 MW. The company has been contracted to construct the plants and deliver the electro-mechanical equipment, including eight Francis turbines, generators, valves, transformers, and control system.
34 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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Royal HaskoningDHV
Royal HaskoningDHV is a Dutch engineering and project management consultancy with offices in 30 countries. Established in 1881, the company has been active in delivering projects for aviation, buildings, energy, industry, infrastructure, maritime, mining, rural and urban development and water industries in over 150 countries.
In 2013, the company signed an agreement with PT Bhakti Putra Bangsa (TIRASA), an Indonesian renewable energy developer, to collaborate in developing a total of 100 MW of small hydropower in Indonesia within the next five years. In 2014, the company started implementing its first stage of the cooperation, namely, the delivery of four mini hydropower plants along the Mewawu river in Central Java. The project consists of four cascaded run-of-river plants: 6 MW at Kerakan and Pandensari, 2.4 MW in Watupayang and 1.2 MW in Tempuran. The electricity from the hydropower plants will be sold under a FiT agreement of about US$ 0.04 for a period of 25 years. The US$ 30 million investment has a return on investment of seven years. The company also aims to provide a total installed capacity of 100 MW by 2018.
Astaldi Group
Astaldi Group is an Italian multinational construction company active in the fields of civil engineering, hydraulic engineering, electromechanical engineering and transportation.
In 2015, it was reported that the Astaldi Group was awarded two contracts for the first two phases of the Upper Cisokan Hydroelectric Power Plant Project on the Island of Java, in Indonesia, for a total value equalling US$ 234 million. With financing by the World Bank, the works are carried out in joint venture with South Korea’s Daelim (40% stake) and the local Wika (30%).
The secured contracts call for carrying out all the civil works related to the construction of two dams, the Lower Dam and Upper Dam, respectively 75 and 98 metres in height, for a total volume of 1 million m3 of roller-compacted concrete. An installed power of 1,040 MW is planned, complete with intake and conveyance systems, 6 kilometres of tunnels up to 10 metres in diameter, an
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underground power station, ventilation works and an electrical substation. The works are to be performed over 50 months, starting during the first months of 2016.35
Velcan
Velcan, the Luxembourgish company that develops, finances and operates hydropower concessions in emerging markets, is currently developing flagship projects in Indonesia.36 For instance, in addition to constructing the Suka Rame 7 MW hydropower plant it is also developing a 59 MW hydroelectric project in Sumatera, called Meureubo 2.
Velcan started the development of Meureubo 2 in 2011 with a 70% stake alongside PT PJB with a 25% stake. PT PJB is a fully-owned subsidiary of national utility PT-PLN and is responsible for the operations and maintenance of the power plant. PT-PPC, Velcan’s local partner for this project, owns the remaining 5% of the consortium.
Tractabel
Tractebel is an international company, with Belgian roots, providing worldwide life-cycle consultancy and engineering in power, nuclear, gas, industry and infrastructure. With over 100 years of experience in the fields of energy and of infrastructure projects, the company provides its services to national and international institutions and customers in public and private markets.
Since the opening of its representative office in Jakarta in 2012, and the set-up of PT Tractebel Engineering Indonesia in February 2016, Tractebel has been focusing on Indonesian projects in the hydropower, thermal power, power systems, power transmission and distribution, gas transportation and distribution and LNG sectors. The company’s Jakarta office ensures strong local presence and coordination of projects throughout entire assignments. The company is currently engaged in hydropower plant IPP development in Central Kalimantan for PT Indonesia Power. The project is planned for the period of 2017-2020.
35 http://www.astaldi.com/en/press-releases/astaldi-new-orders-indonesia-total-usd-234-million 36 http://www.velcan.lu/about-us/activities/activities-in-indonesia/
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3.8 Biomass
3.8.1 Market Overview
In recent years, diminishing non-renewable energy sources and an increasing need for more power generation has forced Indonesia to shift gears and refocus its attention on sectors, such as biomass. The country has good potential to produce energy from biomass with a quickly maturing market and steadily improving regulatory environment. As the country sets itself on a path to achieving the 23% renewable energy share in the energy mix by 2025, it is increasingly eyeing opportunities to accelerate the utilisation of biomass for power generation.
Figure 35: Biomass Potential in Indonesia (MWe) Source: Fan Way Machinery
Indonesia is currently the largest producer of biomass available for energy purposes in the South East Asian region.37 A tropical country with large forestry and agricultural sectors, it has abundant biomass resources. Agricultural residues, including rice husk, bagasse, rubber and waste from
37 Ministry of Foreign Affairs of Denmark (2017). Pre-feasibility Study of a Biomass. Link: http://um.dk/en/danida- en/business/contracts/short/contract-opportunitie/newsdisplaypage/?newsid=34e207c1-6519-4e6a-bc57-fa45bf74fcde
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the oil palm industry, and the residues from forestry activities, are among the potential resources for biomass-to-energy projects.
Figure 36: Biomass Sources in Indonesia Source: Penn Energy
It is estimated that Indonesia produces approximately 150 million tonnes of biomass each year, equivalent to 470 GJ of energy. According to the Danish Ministry of Foreign Affairs, approximately 15% of biomass resources come from forest sources and 85% from agriculture.38 In 2012, the Ministry of Agriculture has further reported an even higher potential of existing biomass resources. It is estimated the energy potential for estate crops at 614.6 GJ/year and 41.8 GJ/year for solid forest biomass.
38 Ministry of Foreign Affairs of Denmark (2017). Pre-feasibility Study of a Biomass. Link: http://um.dk/en/danida- en/business/contracts/short/contract-opportunitie/newsdisplaypage/?newsid=34e207c1-6519-4e6a-bc57-fa45bf74fcde
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The total potential for biomass-based electricity generation is reported to be at around 32,000 MW, which includes biomass derived from forestry, agriculture and estates, particularly the oil palm plantations.39
The present utilisation of biomass for energy generation, however, reaches only 10% of the total available potential. In 2015, electricity generated from biomass amounted to 1,740.4 MW, consisting of 114.3 MW connected to the grid and 1,626.1 MW operating via off-grid systems.40 The majority of the existing biogas energy facilities are not yet connected to the main grid and are used mostly for private own purposes. Sumatra, Kalimantan, Java-Bali-Madura system and Sulawesi are the areas with the highest biomass energy potential.
Java- Potential Bali- Nusa Total No. Sumatra Kalimantan Sulawesi Maluku Papua (MWe) Madu Tenggara (MWe) ra 1 Palm oil 8,812 3,384 60 - 323 - 75 12,654 2 Sugar cane 399 - 854 - 42 - - 1,295 3 Rubber 1,918 862 - - - - - 2,781 4 Coconut 53 10 37 7 38 19 14 177 5 Rise husk 2,255 642 5,353 405 1,111 22 20 9,808 6 Corn 408 30 954 85 251 4 1 1,733 7 Cassava 110 7 120 18 12 2 1 271 8 Wood 1,212 44 14 19 21 4 21 1,335 9 Cow dung 96 16 296 53 65 5 4 535 Total potential 15,283 4,995 7,688 587 1,863 56 136 30,589 Table 27: Biomass Energy Potential in Indonesia Source: Re4I (2017)
According to Frost & Sullivan Research, the biomass power market was valued at US$ 53 million in 2010, and it was projected to reach US$ 213 million by 2016, at a CAGR of 26.2%.
Some of the existing biomass power plants connected to the grid include the 6.5 MW MSW and 6 MW MSW biomass power plants in Bekasi, two 10 MW, one 9 MW and one 6 MW palm waste biomass power plants in North Sumatra, two 5 MW and two 2 MW palm waste biomass power
39 MEMR (2013). Presentation by DG of New and Renewable Energy and Energy Conservation. 40 www.ic.kmitl.ac.th/rcenee2014/.../The_Future_of_Biomass_Energy_in_Indonesia.pdf
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plants in Riau, 7 MW palm waste plant in Belitung, 5 MW and 2 MW palm waste biomass power plants in Bangka and Bali, respectively.
Additional biomass power plants are being developed across the country for private uses in agricultural and industrial sectors. However, there are no available estimates for the total number of off-grid, private biomass energy facilities.
Latest regulatory initiatives to accelerate the market growth
Following the succession of FiT changes (in 2012 and 2014) for biomass power production, the Ministry of Energy and Mineral Resources (MEMR) has in August 2016 introduced the latest revision of the regulation on biomass power generation (MEMR Regulation No. 21/2016), which is expected to provide additional incentives for private sector participation. The key features of the new regulation are:
Biomass and biogas power projects are to be awarded on the basis of a direct appointment process;
Feed-in Tariffs (FiTs) are available for both conventional IPP projects and projects which involve the sale of excess electricity to PLN;
Previous restrictions on the capacity of biomass and biogas power projects that can be developed by IPPs and benefit from the FiTs are removed;
Standard power purchase agreement (PPA) now needs to be issued by PLN, which will need to be signed within 30 days from award of the relevant project by MEMR;
The new regulation also simplifies requirements for IPPs wishing to sell all, or part, of the output of biomass and biogas power projects to PLN;
It specifies that only Indonesian entities are allowed to become a Developer and must have incorporated entities;
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It also introduces split FiTs for small (below 20 MW), medium (20 MW to 50 MW) and large projects (over 50 MW), thus, diversifying the range of profitable opportunities available in the country.
The new FiTs are in the upper range of FiTs applicable to similar projects across the region and, when applying the multiplying factor, the FiTs for projects in Indonesia’s outlying islands appear to be fairly competitive.
Feed-in Tariff (US$ cent/kWh)
20 MW to 50 Above 50 MW F Factor No. Location of biogas power plant Up to 20 MW capacity MW capacity capacity (location) Low Medium of High voltage High voltage voltage high voltage 1 Java 16,00 x F 13,50 x F 11,48 x F 10,80 x F 1,00
2 Sumatra 16,00 x F 13,50 x F 11,48 x F 10,80 x F 1,15
3 Sulawesi 16,00 x F 13,50 x F 11,48 x F 10,80 x F 1,25
4 Kalimantan 16,00 x F 13,50 x F 11,48 x F 10,80 x F 1,30
5 Bali, Bangka Belitung and Lombok 16,00 x F 13,50 x F 11,48 x F 10,80 x F 1,50
Riau, Nusa Tenggara and other 6 16,00 x F 13,50 x F 11,48 x F 10,80 x F 1,60 islands
7 Maluku and Papua 16,00 x F 13,50 x F 11,48 x F 10,80 x F 1,70 Table 28: Feed-inTariff for Purchase of Electricity by PLN from Biomass Power Plants Source: MEMR Regulation 21/2016
The introduction of the new regime points to additional efforts by the Government to boost the development of electricity generation via biomass in order to achieve its ambitious objective of generating 35 GW of electricity by 2020.
The state-owned utility company, the PLN, currently has an important role to play in the Indonesian biomass market. Under the new regulation, the project award process is based on direct appointment and PLN is responsible for reviewing and signing off on the feasibility study of any project in the country. The terms of the model Power Purchase Agreement (PPA) are also issued by the PLN.
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Local Players
Clean Power Indonesia (CPI)
Clean Power Indonesia is an Independent Power Producer that specialises in biomass gasification technology. The company is the recipient of Frost & Sullivan Indonesia Excellence Award 2015, 2016 and Sakalp Forum Award 2015 as recognition to its efforts in the renewable energy industry and rural electrification development.
In 2016, Charta Putra received a US$ 12 million grant from the Renewable Energy Grant for a Community programme to build a 700-kW biomass power plant in Mentawai District, West Sumatra. The power source will come from bamboo and will provide electricity to about 1,200 households, 35 local businesses and public facilities in villages of Modobag, Matototan and Saliguma. The community and PT Charta Indonesia established jointly the PT Kemakmuran Hijau Mentawai which will operate, maintain and sell electricity to the community in the village. The project is scheduled for completion in February 2018. The company has plans to build similar projects in 13 additional villages across the region.
PT Perhutani (Persero)
PT Perhutani is a state-owned forestry company based in Jakarta, Indonesia. The company manages 2.4 million hectares of forests area in Java and Madura islands, consisting of 1.7 million hectares of production forest and 0.7 million hectares of conservation forest. It manages its plantation forests based on sustainable forest management principles (FSC Standard).
Perhutani has five subsidiary companies (Inhutani I-V) which manage large industrial forest plantation areas outside of Java. Perhutani and its subsidiary companies produce large quantities of wood residues, stemming from conversion of low yielding tree crops to high yielding, from wood harvesting processes (thinnings and clear-fellings) and from wood industries. Every year, more than 2 million tonnes of biomass residues are produced from the Perhutani group’s business activities.
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In early 2017, the company decided to become a forest biomass-for-energy producer and an IPP (produce and sell electricity generated from forest biomass). The private role in the development of biomass power plant projects is driven by IPP schemes or excess power transactions. The overall aim of Pertuhani is to develop approximately 130,000 hectares of biomass plantations in Java as fuel stock for biomass-based power plants in Java.
PT Trenergy Biomasse Indoensia (TreBi)
Established in 2008, TreBi is a farm-product raw materials company focusing on the development of biomass supply for the export market. Based in Medan, Indonesia, Trebi operates in three different locations in Sumatra from where it exports mainly Palm Kernel Shell (PKS).
The company purchases PKS from local factories, trucks the products to the stocking area, stores products using its own equipment and exports it to other markets. With the target to increase the volume handled by the company and to diversify the product, TreBi is planning to open new stockpiles supporting the PKS operations and handle new commodities, in particular for the animal feeding market.
PT Cakrawala Persada Biomas
PT Cakrawala Persada Biomas is an Indonesian wood pellets manufacturer, based in Jakarta. The company produces high quality wood pellets from pure wood residues which are sourced from Plantation sources. The team has over 20 years of forestry industry experience. The supply of raw material for the annual production capacity of up to 250,000 tonnes is secured via long- term partnerships. The primary goal of PT Cakrawala Biomas is to become an international biomass energy producer providing high quality energy products.
The company is currently constructing its new production plant with a capacity of 180,000 tonnes annually of premium grade wood pellets and it is expanding into new locations. The Pellet Mill site is located in West Kalimantan.
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3.8.2 EU Entry Opportunities
As the Indonesian market for biomass energy products and technologies matures, the country offers many opportunities for European companies. Given the fact that the market is largely underutilised, early entry can bring significant long-term opportunities for European companies. The current, strong demand for business-matching in biomass ventures is also providing a golden opportunity for enterprises to enter this nascent market and create wealth from waste. The Indonesian biomass energy sector offers the following opportunities for experienced European players:
Biomass-to-energy projects
Export opportunities for biomass energy technologies
Retrofitting services
Biomass palletisation
Biomass-to-energy projects
Indonesia is seeking to explore greater utilisation of biomass conversion into energy, in line with its national renewable energy targets. To date, biomass contributes only around 3% of the nation’s overall renewable energy capacity. Moving forward, Indonesia is seeking to increase the share of biomass within the renewable energy mix and to optimise the waste utilisation. Three main biomass conversion technology platforms are currently being explored, namely, thermal, biological and chemical conversion. European companies, thus, may find avenues to offer their expertise in these energy conversion technologies.
Since the release of new regulation, the capacity of biomass and biogas projects is no longer limited as it was under Regulation No. 27/2014. Instead, the projects are now split between those with capacity below 20 MW, projects with capacity between 20 MW and 50 MW, and those above 50 MW. This opens up wider opportunities for European companies to develop a full range of biomass projects under favourable FiT conditions. European expertise in optimising energy extraction under projects of various sizes is likely to be in demand in the upcoming years.
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Sumatra, Jambi, East Kalimantan, Bangka-Belitung, South Sulawesi, Gorontalo, Bali and East Java are some of the potential areas that are sought by the investors for bioelectricity projects.
There are also significant opportunities for companies in R&D on combustion properties of new and hard-to-process feedstock; optimisation of combustion processes; technology supply and transfer through boilers, gasification and fermentations; investment in independent power producers; technology supply and R&D on pyrolysis oil production and upgrading; supply chain management for pre-treatment of biomass for the internal market; and research and consultancy on biomass-to-power value chain (including off-grid solutions).
Export opportunities for biomass energy technologies
Given the growing interest in Indonesia to develop greater capacities for biomass energy utilisation, it is likely that the demand for biomass energy turnkey solutions and equipment will also grow. This offers opportunities for biomass equipment manufacturers and suppliers to export their products to the Indonesian market. Some of the technologies in demand are: combustion and gasification technologies, boilers, turbines, engines, heat exchangers, generators and gas cleaning equipment.
Retrofitting services
The existing biomass energy facilities are mostly using old technologies as they are often cheaper to acquire. However, these technologies are not adequate enough to address the requirements for mill optimisation. This leaves large efficiency gaps, which can be utilised by experienced European companies with expertise in energy efficiency and retrofitting technology implementation. As the technology becomes more cost-effective, Indonesian clients are likely to be more open for evaluating retrofitting solutions.
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Biomass palletisation
The sector also offers opportunities for biomass palletisation. In response to the growing market for biomass as energy source for heat and power, an increasing number of companies is venturing into production of biomass pellets and briquettes for the export markets, such as Europe, Japan, South Korea and China. The availability of an international export market for pellets and export opportunities with the price of around US$ 125.54/tonne are driving this sub-sector demand.
Substitution of coal with biomass in the EU Member States, South Korea, Japan and China to meet carbon emission targets may be an additional driving force for biomass pellet products. In addition, this demand is also expected to nearly double in the next six years, from 29 million tonnes in 2015 to 53 million tonnes in 2023. Producers that can make efforts to lower the production costs and solve logistical issues may find lucrative opportunities in this market segment.
Urban biomass waste utilisation
While the main source of the local biomass matter comes from agricultural and forestry sectors, solid urban waste is largely under-utilised. All organic materials can be used to produce bio- energy, bio-agriculture and eco-products. Given the fact that this biomass market sub-sector requires more advanced technologies, European companies are well-positioned to compete with local players in Indonesia.
European Companies
Maris Projects B.V.
Maris Projects BV is a Dutch engineering company specialising in energy production from agricultural waste. It was founded in 1976 with expertise in processing waste to create value- added energy products. In the last few years, the company gained expertise in waste-to-biofuels and by-product processing.
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The company entered Indonesian market in 2012 via consortium, which consists of Indonesian and international organisations. The consortium was tasked with creating an integrated bio- energy generation facility that utilises waste products from commercial and smallholder oil palm farmers41 in Riau, Indonesia. The project goal was to produce 10-20 MW of energy from sustainable biomass sources. Maris Projects was in charge of engineering divisions to integrate the three forms of biomass – solid, gas and liquid – maximising the useable energy output.
In the same year, Maris Projects established a local affiliate, PT Maris Sustainable Indonesia, to support its activities in the country. Working through its affiliate, the company has research and some commercial projects in Indonesia. The company is particularly active in Palm Oil Mill Effluent (POME) treatment to biogas, algae production and bio-energy development.
Figure 37: Maris Projects Research to Investigate the Potential of Algae Biomass Source: Maris Projects B.V.
41 To qualify as a smallholder farmer in Indonesia, farmer plantations must be less than 25 hectares. On average, smallholders in Indonesia manage around 2 hectares per farming household.
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Engie Group
Engie Group (Engie) is a global energy player. It develops its businesses via three key business areas: power, natural gas and energy services. The company provides individuals, cities and businesses with solutions based on its expertise in four key sectors: renewable energy, energy efficiency, liquefied natural gas and digital technology.
In 2017, the company has signed three partnership deals to develop, co-finance, build, operate and maintain microgrid and other renewable energy projects in various parts of Indonesia. Among them, Engie has agreed with Sugar Group Companies to invest US$ 1 billion in the next five years to build 300 MW of PV and 200 MW of biomass-power plants in Sumatra and Eastern Indonesia. The biomass power plants with a total power generation capacity of 200 MW will use agricultural waste as well as land clearing material.
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3.9 Landfill Gas/ Sewage Treatment Gas / Biogas
3.9.1 Market Overview
Biogas technology has been deployed in Indonesia for quite some time now. However, the earlier developments were subjected more to waste control rather than electricity generation.
2 to 3 years ago, the Indonesian market for biogas power projects stagnated in response to falling carbon credit prices and uncertainty over the continuation of the Clean Development Mechanism
(CDM). The market value of carbon credits fell from approximately EUR 20/tCO2 in 2008 to
EUR 0.7/7CO2 in 2014, completely eliminating any tangible benefit from engaging in this scheme.
A number of biogas projects (especially using landfill gas) were discontinued following this price fall, as they were deemed economically unviable without the CDM revenue. However, the biogas market was kept afloat by opportunities in the palm oil industry. To meet the Roundtable of Sustainable Palm Oil (RSPO) criteria, palm oil mills have been obliged to cut emissions from mill effluents, with biogas power generation being one of the options.
More recently, biogas power generation potential has improved via a combination of incentive schemes, including new Feed-in Tariffs (FiTs) and tax relief grants, and the increasing availability of feedstock resources.
According to the Ministry of Energy and Mineral Resources (MEMR), the government plans to increase the electricity generating capacity of on-grid biogas plants up to 14.8 MW in the upcoming years, compared to 3.6 MW in 2016.42 The expected capacity is likely to come from 25 companies that have recently applied for permits for the installation of biogas plants. Biogas power plants via off-grid solutions are also likely to contribute greatly to the growing market size. According to Pike Research, the Indonesian biogas power generation market is expected to be in the leading position in South East Asia by 2022, with a total market size of EUR 3.65 billion.
42 http://www.thejakartapost.com/news/2016/03/24/ri-s-biogas-capacity-reach-148-megawatts-ministry.html
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MARKET SIZE OF THE INDUSTRY(2022)
Market Size (RM billion)
45
18 12 6,5 8,3
PHILIPPINE MALAYSIA THAILAND INDONESIA SOUTHEAST ASIA
Figure 38: Market Size of the Biogas Industry, 2022 Source: Pike Research
Biogas can be produced from many different sources, including organic materials, such as animal waste, household and municipal waste, organic waste from factories, and biomass. In Indonesia, however, agriculture, wastewater and urban waste sectors have the largest potential for biogas energy generation. These sectors are considered the most suitable for biogas power development in terms of their characteristics, feedstock availability as well as technical and economic specifications. The most common biogas feedstocks in these industries are Palm Oil Mill Effluent (POME), Cassava-Starch Mill Effluent, Bioethanol Mill Effluent, and animal and municipal waste. Many small-scale biogas plants in rural areas in Indonesia use farm manure and slurries as feedstock. On average, farmers with at least two cows can generate sufficient biogas to meet their daily basic cooking and lighting needs.
Biogas from agricultural waste
With over 11 million hectares of oil palm plantations and 850 oil mills, Indonesia is one of the world’s leading producers of palm oil. Until now, wastewater and waste products from palm oil production have not been consistently used for energy recovery. Digestion of empty fruit bunches is a more complex task and so these were left unused or incinerated for energy recovery. Unlike incineration, digestion in a biogas plant has the advantage of producing digestate that can significantly reduce the volume of artificial fertiliser used in the plantations.
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With the growing number of palm oil mills, Indonesia has seen a subsequent rise of vast wastewater lagoons, which release huge amounts of methane into the atmosphere.43 Small amount of this methane is currently being captured in several palm oil businesses - mainly the larger oil palm groups, especially those that are aspiring to Roundtable on Sustainable Palm Oil (RSPO) certification. These palm oil mills have started to commercialise liquid waste for power generation. According to the Indonesan Palm Oil Mill Board, approximately 10% of palm oil mills are equiped with biogas power plants.
According to national data, biogas from the liquid waste of the 850 palm oil mills in Indonesia could generate approximately 1,100 MW, but POME-to-energy projects are still limited when compared to the estimated potential. So far, the majority of the existing small plants (usually with 1-2 MW capacity) are operated to power households around the mills. The total installed capacity of palm biomass waste and POME-to-energy projects, both on-grid and off-grid, amounted to only 14 MW in 2014, which is under 2% of the total estimated potential.44
Figure 39: The first IPP Biogas Power Plant in Indonesia Source: AANE, 2013
The estimates of the total number of POME-to-energy projects currently range from 12 to 50, primarily due to the fact that some projects have been discontinued in the past and there is little available data to verify their status. Specific POME-to-energy facilities include the first-ever pilot
43 http://www.thejakartapost.com/news/2016/01/27/editorial-harnessing-palm-oil-waste.html 44 ESDM 2014
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project by Riau’s government, the 5 projects undertaken via the CIRCLE initiative,45 between 8 and 12 projects developed by Musim Mas, and a handful of projects of Asian Agri, Wilmar, Alternative Energy Corporation, and others. It is believed that some of these existing projects may not be working well due to operational issues. Additionally, only 5 to 7 of them are connected to the grid; most palm oil mills are located in remote areas that are not connected to the power grid.
The CIRCLE initiative has further identified 24 other projects with the potential for further development: 9 have completed feasibility studies; 11 are in pre-feasibility stages; and 4 have completed preliminary assessments. Some oil palm mill companies have also laid plans to upgrade their other existing facilities. For example, Asian Agri is targeting to build an additional 15 power plants with 2 MW capacity each by 2020. In May 2017, PLN has also signed five additional on-grid biogas plant Power Purchase Agreements with IPPs, with the total capacity of 71 MW.46
Recently, the government has undertaken several steps to stimulate investment in the biogas energy sector, including the revision of biogas Feed-in-Tariffs (FiTs), priority appointment process, tax investment credit, reductions and/or exemptions from customs tax, and simplified permit procedures. In 2016, MEMR Regulation No. 21/2016 on the purchase of electricity power from biomass and biogas power plants by PLN was also enacted, replacing the previous MEMR Regulation No. 27/2014. The new FiTs were priced in US$, and FiTs have been differentiated depending on the location of where the projects are being deployed. Under new regulations, palm oil mills can also have their licences revoked if they operate without methane capture.
In March 2017, the Director General of New Renewable Energy and Energy Conversion (EBTKE) for the Energy and Mineral Resources Ministry announced that it was planning a program that would impose mandatory conversion of palm waste to energy. The Indonesian Energy Ministry is currently deliberating the regulation with the Environment and Forestry Ministry.
45 The USAID-funded Capacity for Indonesian Reduction of Carbon in Land Use and Energy (CIRCLE) initiative helps the owners of palm oil mills produce renewable energy and improve the overall sustainability of their facilities. Winrock International implements the CIRCLE project in partnership with World Wide Fund for Nature (WWF) Indonesia. CIRCLE assists Indonesian palm oil mills with sustainability assistance, pre-feasibility studies, in-depth feasibility studies, technical assistance, and capacity building. 46 https://www.rambuenergy.com/2017/05/pln-signs-mou-to-develop-283-mw-of-renewable-energy/ & http://www.thejakartapost.com/news/2017/08/02/pln-seals-deal-with-53-renewable-developers.html
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European companies with connections to the Indonesian biogas market can expect to benefit from this development, as palm oil mills are already starting biogas operations before new government regulations kick in.
Feed-in Tariff (US$ cent/kWh)
20 MW to 50 Above 50 MW F Factor No. Location of biogas power plant Up to 20 MW capacity MW capacity capacity (location) Low Medium of High voltage High voltage voltage high voltage 1 Java 13,14 x F 10,64 x F 9,05 x F 8,51 x F 1,00 2 Sumatra 13,14 x F 10,64 x F 9,05 x F 8,51 x F 1,15 3 Sulawesi 13,14 x F 10,64 x F 9,05 x F 8,51 x F 1,25 4 Kalimantan 13,14 x F 10,64 x F 9,05 x F 8,51 x F 1,30 5 Bali, Bangka Belitung and Lombok 13,14 x F 10,64 x F 9,05 x F 8,51 x F 1,50
Riau, Nusa Tenggara and other 6 13,14 x F 10,64 x F 9,05 x F 8,51 x F 1,60 islands
7 Maluku and Papua 13,14 x F 10,64 x F 9,05 x F 8,51 x F 1,70 Table 29: Feed-inTariff for Purchase of Electricity by PLN from Biogas Power Plants Source: MEMR Regulation 21/2016
Biogas from municipal waste
Municipal waste management has also seen a number of initiatives to develop landfill gas power projects.
If land use change and forestry, and peat are excluded, waste contributes 28.3% of GHG emissions. In order to achieve 26% GHG emission reduction by 2020, Indonesia has developed a National Action Plan for GHG Emission Reduction. Under this plan, the waste sector has to reduce GHG emissions by up to 0.048 GtCO2e. The longer-term target for the sector is 0.078 GtCO2e, in order to achieve 41% GHG emission reduction by 2030.
According to the National Commission for Clean Development Mechanism (CDM), there were several landfill gas projects in Indonesia under the CDM scheme in areas Bali, South Sumatra, West Java and South Sulawesi. Unfortunately, all but two projects were discontinued since the CDM schemes, under which they were proposed, became unfeasible. Two landfills (Suwung in
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Bali and Bantargebang in Jakarta), however, are still producing electricity, with the total capacity of 14.5 MW.
Figure 40: Bantargebang Landfill Gas Plant Source: Acritas Energy
Recently, the government has introduced several policies from the presidential and ministerial levels down to the local authorities to accelerate the application of Waste-to-Energy (WtE) technologies.
In early 2016, the government issued the Presidential Decree No. 18/2016 to accelerate the development of WtE projects in 7 cities, including Jakarta, Tangerang, Bandung, Semarang, Surakarta, Surabaya, and Makassar. While previously the PPP projects in the waste-to-energy sector have faced difficulties due to complexity in the tendering process, this new regulation was expected to provide a shortcut for project development – mayors would be able to directly appoint developers for waste-to-energy projects.47
The regulation was annulled by the Supreme Court in January 2017 following a dispute with civic society organisations over health and environmental aspects of incinerators. The Government, however, is still pursuing the development of WtE projects via the utilisation of alternative technologies.
47 https://opportunities.export.great.gov.uk/opportunities/indonesia-waste-management-opportunities-in-7-indonesian-cities/
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The Government has also established a Waste Law, which allows waste management activities to be financed from the state/regional budgets. In addition, a Feed-in Tariff (FiT) for electricity generated from municipal waste has been established in 2015. Under the MEMR Regulation 44/2015, the PLN is obliged to purchase electricity from WtE facilities. The new FiT has also seen a 45% increase from the previous legislation:
Tariff (US Technology Capacity cents/kWh) Sanitary Landfill, Anaerobic Digestion, 16,55 Capacity up to 20 MW connected to high or mid-voltage or Similar Technology 20,16 Capacity up to 20 MW connected to low-voltage 18,77 Capacity up to 20 MW connected to high or mid-voltage 22,43 Capacity up to 20 MW connected to low-voltage Themochemical Technology 15,95 Capacity 20 MW up to 50 MW connected to high-voltage 13,14 Capacity over 50 MW connected to high-voltage Table 30: New FiT for Waste-to-Energy Technologies Source: MEMR Regulation 44/2015
Sewage treatment gas
There are currently no plans to accelerate sewage treatment gas energy development in Indonesia. Although some projects have evolved over the years, such as the 1.5 MW sewage gas cogeneration power plant by Ettes Power, neither the Government nor the private sector has expressed wider interest in expanding sewage gas treatment plants beyond some additional preliminary studies.
Figure 41: 1.5 MW Sewage Gas Cogeneration Power Plant Source: Ettes Power (2011)
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Local Players
Asian Agri
Asian Agri is one of Asia’s largest palm oil producers, with an annual production of 1 million tonnes of palm oil. The company is the pioneer of one of the largest and most successful community partnership schemes in Indonesia. Founded in 1979, Asian Agri manages 27 oil plantations and 20 mills in Sumatra, Indonesia. In 2015, Asian Agri announced plans to build 20 biogas power plants by 2020, which will be powered by POME. As of December 2015, it has successfully installed 5 biogas power plants and has laid out a roadmap to building an additional 15 by 2020. The existing power plants: two in Riau, two in North Sumatra and one in Jambi, are each capable of producing up to 2 MW of power from biogas resources.
Ecody
Ecody is a specialist company, focusing in methane capture technology and biogas power plant construction. Established in 2014, Ecody has obtained 6 biogas projects until 2016. Among its successful contracts, the company has designed and engineered a 1 MW biogas power plant in Pagar Merbau, North Sumatra, which was connected to the PLN grid. It supplied and installed the digester liner, cover, and internal piping system. The plant has obtained the Social License to Operate (SLO) certificate and now waits for commercial operation.
In addition, Ecody has been awarded the contract for a biogas power plant in Harapan Sawit Lestari, West Kalimantan, to retrofit the existing pond, supply and install the mechanical and civil works, and supervise during the commissioning and start-up stages. The 2 x 600 KW power plant is now in the commissioning and start-up stages. It has also conducted pre- and in-depth feasibility studies of 90 tbh Bumitama Gunajaya Abadi palm oil mill located in Central Kalimantan. The estimated potential for energy generation is 3 MW, which is likely to be connected to the PLN grid.
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Figure 42: PLT Biogas with Covered Lagoon Technology in Pagar Merbau Source: BTTP
Among its recent projects, the company is supplying and installing liner and cover for digester, internal and external HDPE pipe, and main valves for internal distribution lines for two projects, namely Biogas Power Plants in Satui and Jorong, South Kalimantan. Both power plants are expected to be connected to the PLN grid, once completed.
Sampoerna Agro Tbk
Sampoerna Agro is a national palm oil plantation company and palm oil manufacturer. Together with its subsidiaries, the company engages in the production of palm products, which are crude palm oil and palm kernel. The operational areas for the company are located in South Sumatra, Riau, West Kalimantan and Central Kalimantan. Additionally, the company has started upgrading its mills with the biogas power plant technologies to provide electricity for its mill operations and to surrounding villages. It has been successful in building two biogas power plants with 4 MW capacity. Biogas power plants will supply 29 villages in Pantai Timur with electricity. The power plants run on methane capture technology.
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PT Sumberdaya Sewatama
PT Sumberdaya Sewatama is an integrated power solution provider in Indonesia. It is a subsidiary of PT ABM Investama Tbk, an integrated energy company. Established in 1992, Sumberdaya Sewatama works primarily through its 4 main business lines: temporary power, operations and maintenance, energy efficiency services and long-term power solutions. These service lines make Sumberdaya Sewatama the only integrated power solutions provider in Indonesia. The company has entered the renewable energy sector via acquisitions of shares in existing gas and steam power plants (10 MW in South Sumatra), steam power plants (15 MW in Nanggroe Aceh Darussalam) and the development of water energy based projects (50 MW in South Sulawesi).
Sumberdaya Sewatama has also recently entered the biogas energy market by starting to develop biogas power plants in Central Kalimantan and South Kalimantan with a combined capacity of 5.4 MW. In 2016, it has also signed a Power Purchase Agreement (PPA) with PLN for Suka Damai Biogas Power Plant. The plant is expected to utilise POME produced by the palm oil mill of PT Eagle High Plantation Tbk.
PT SyRes Indonesia (SyRes)
PT SyRes Indonesia (SyRes) is an Indonesian renewable energy company, specialising in agro waste and hydro power development and project management. Among other projects, the company develops and implements projects which utilise waste for an alternative source of energy. One of its focuses is the usage of rice husk as feedstock for power generation. SyRes has installed and commissioned two Rice Husk power plants in Sulawesi and Java based on biomass gasification in 2013.
3.9.2 EU Entry Opportunities
Indonesia’s emerging biogas sector has the potential to grow significantly and is highly promising. Since the sector does not depend on subsidies, large players can draw their own roadmaps. Biogas is claimed to be already commercially viable when produced as landfill gas and fermentation of agricultural waste, and it is seen as a good option for rural energy development.
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Indonesia’s biogas market also offers an interesting investment climate and tax incentives for project development. One of the key concerns for biogas power developers has traditionally been the competition of alternative energy with traditional, often much cheaper and subsidised sources of energy. Concerns have often risen over the prospects of renewable energy from biogas being integrated into the national grid with competitive FiTs. The Government has recently established a new FiT regime that obliges Distribution Licensees (i.e. the PLN) to buy from the FiT Approval Holders, such as Biogas Energy Developers, the electricity produced from renewable sources. By guaranteeing access to the grid and setting a favourable tariff from renewable energy, the FiT mechanism ensures that renewable energy becomes a viable and sound long-term investment for companies with interest in biogas. In addition, the current scarcity of national players and European expertise in this field make for interesting opportunities. The key opportunities for European companies exist in the following avenues:
Biogas projects in the oil palm industry
Smaller-size biogas engine supply for other sectors
Supply and transfer of technology and R&D cooperation
Landfill gas management
R&D on utilisation of algae for biogas power plants
Biogas projects in the oil palm industry
The main biogas industry opportunities for European companies lie in the oil palm mills. Indonesia is the largest producer of palm oil with over 600 mills scattered across the country. If all of the oil palm mills were to implement POME-to-energy projects, the total investment requirements would be around US$ 25 billion.
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Figure 43: Market Potential & Project Sizing in Indonesia: Palm Oil Mil Industry in Indonesia, 2010 Source: AANE 2013
POME-to-energy technology implementation is one of the lower-hanging fruits from both the economic and government policy perspectives. The technology is increasingly understood and has been widely used in other contexts. Positive project economics and a legal framework for FiTs indicate the potential for solid financial returns. At the same time, the technology implementation rate in the industry is very low, meaning significant opportunities for market capture. With oil palm industry is obliged to capture methane gas, this can offer lucrative entry opportunities for European companies.
The government is also keen to reduce its carbon footprint by 26% in 2020. Converting POME into biogas would not only allow Indonesia to free up significant biomass resources for higher value-added uses, but would also contribute to the government’s renewable energy targets. As a result, cooperation with the government on joint projects may be available for exploration.
Technologies in demand in the POME-to-energy sector are likely to be cooling ponds, mixing ponds and anaerobic lagoon systems in the upstream side, and gas cleaning systems (desulphurisation units and dehumidity units), gas engines and generators, and biogas flaring systems in the downstream sector.
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Smaller-size biogas engine supply for other sectors
While palm mills will remain the largest biogas energy opportunity in the short term, other industries, including tapioca, cane sugar, fruit juice and agriculture present additional entry points via servicing smaller industry players, especially with engine size bands of 0.4 – 1 MWe.
Supply and transfer of technology and R&D cooperation
The added-value of potential European players would also lie in the supply and transfer of technology, knowledge and R&D cooperation, in areas of: State-of-the-art anaerobic digestion technology; co-fermentation technology; collaborative R&D in anaerobic digestion innovation; gas monitors for electric generation; vehicle engines for biogas fuel; turbines, blowers and storage equipment; waste and waste water treatment and fertiliser conversion technologies; research and monitoring of impacts of waste on air, soil, water and plant; solid waste to energy technologies; and waste management know-how. There is also a growing demand to cooperate on biogas purification for small-scale digesters and integration of biogas micro-grids.
In addition, spare parts and aftersales support may be a growing field with the increasing number of biogas projects in Indonesia.
Landfill gas management
Finally, further opportunities for European companies may exist in landfill gas management for municipalities; technology supply for landfill gas plants; and infrastructure development (piping, pumps, turbines) for urban biogas projects. In particular, the engine size bands 1-2 MW are in demand in the waste-to-energy sector.
The new Presidential Decree No. 18/2016 also offers immediate opportunities for developers and technology providers in WtE sector. The government currently seeks participation by companies providing waste-to-energy technologies, including those which utilise incineration, gasification and pyrolysis:
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Estimated Design Estimated No. Project Technology project Cost Status Capacity Output (US$)
Sunter Intermediate 1 Treatment Facility 1000 tpd Incinerator 10-12 MW 100 million PPP tender (bid evaluation) (Jakarta) Marunda Intermediate PT Jakarta Propertindo is 2 Treatment Facility 2500 tpd Incinerator 20-25 MW 231 milion appointed to carry out the (Jakarta) construction phase Cakung Intermediate 3 Treatment Facility 1500 tpd Incinerator 10-15 MW 139 million Preparation (PPP) (Jakarta) Duri Kosambi PT Jakarta Propertindo is 4 Intermediate Treatment 1500 tpd Incinerator 10-14 MW 139 million appointed to carry out the Facility (Jakarta) construction phase Batam Waste-to- Preparation (PPP) Batam City 5 1000 tpd Incinerator 12 MW 77 million Energy will commence re –PQ in 2016 Tangerang has received grant Tangerang Waste-to- 6 1000 tpd N/A N/A N/A from Korea Govt to develop WtE Energy project Nambo Solid Waste 525 tonnes Targeted contract signing is on 7 1500 tpd MBT to RDF 40 million Management RDF/day May 2016 Legok Nangka Waste- PPP tender will commence in 8 1500 tpd Gasification 10-12 MW 77 million to-Energy 2016 Bandung Waste-to- Contract signing is pending due 9 700 tpd Incinerator 7 MW 55 milion Energy to political reason Table 31: Potential Projects in WtE Sector Source: World Waste to Energy City Summit (2016). WtE Development in Indonesia
R&D on utilisation of algae for biogas power plants
One of the promising renewable energy resource at the end of commercialisation is the utilisation of algae as a bioenergy source. The algae can grow on water, even waste water, and therefore is seen as not competing with space for food crops. While algae can be used as a biodiesel, it can also be utilised in a fermenter for the production of biogas. Given Indonesia’s geography with over 15,000 islands, even if each island had just 2 installations of 1 MW, algae could contribute over 30,000 MW, or about half of the 64 GW of renewable energy resources required for 2050. Given this information, companies may seek potential partnership opportunities to activate this market.
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Some of the companies, such as Maris Projects P.V. is already investigating the potential of algae for biogas energy production, however, the space for other players is vast. As a result, European companies with expertise in utilisation of new biomass resources for energy production may find increasing opportunities in the algae R&D and commercial utilisation sectors.
European Companies
EnviTec Biogas AG
EnviTec is a Lohne-based biogas plant manufacturer. The company covers the entire value chain for the production of biogas, including the planning and turnkey construction of biogas plants and biogas upgrading plants as well as their commissioning. The company takes charge of biological and technical services on demand and also offers full plant and operational management. In addition, EnviTec operates its own biogas plants. In 2011, EnviTex Biogas expanded its business operations into the direct marketing of upgraded biomethane as well as marketing of green electricity and balancing energy. The company currently has presence in 14 countries.
In 2015, the company had the first opportunity to establish itself in the Indonesian biogas industry. EnviTec signed a cooperation agreement with the PT Trumpi Energi Indonesiaku for the implementation of a biogas plant in Indonesia with a total initial power of 4 MW. The agreement was the first step for EnviTec towards gaining a foothold in the promising Indonesian market. The plant will contribute the first 4 MW of a planned 100 MW to the green energy transition in Indonesia. The plant will be constructed at the PT Herfinta Palm & Plantation in northern Sumatra.
Maris Projects BV
Maris Projects BV is a Dutch engineering company specialising in energy production from agricultural waste. It was founded in 1976 with expertise in processing waste to create value- added energy products. In the last few years, the company gained expertise in waste-to-biofuels and by-product processing.
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The company entered the Indonesian market in 2012 via a consortium, which consists of Indonesian and international organisations. The consortium was tasked with creating an integrated bio-energy generation facility that utilises waste products from commercial and smallholder oil palm farmers in Riau, Indonesia. The project goal was to produce 10-20 MW of energy from sustainable biomass sources. Maris Projects was in charge of engineering divisions to integrate the three forms of biomass – solid, gas and liquid – maximising the useable energy output. The planned facility utilises custom biogas reactors and pond covers with internal paddle- wheels to maximise biogas production and capture from POME.
In the same year, Maris Projects established a local affiliate, PT Maris Sustainable Indonesia, to support its activities in the country. Working through its affiliate, the company has research and some commercial projects in Indonesia. The company is particularly active in POME treatment to biogas, algae production and bio-energy development.
Q2 Group
The Q2 Group of companies have their origins in Denmark. Q2 A/S was set up in 2006 to develop and build biogas and landfill gas plants worldwide. Q2 has entered the Indonesian market by successfully upgrading and improving existing landfill gas projects in four landfills in Bekasi, Palembang and Pontianak. The company has completed these projects under design and build schemes.
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3.10 Power Generation
3.10.1 Market Overview
For a large middle-income country with a growing economy, the future economic outlook of Indonesia depends largely on its ability to harness and manage energy sources optimally. If the economy continues to grow at its current rate, the Ministry of Energy and Mineral Resources (MEMR) estimates that domestic demand for energy will rise by around 7% annually, with electricity demand projected to nearly triple between 2010 and 2030.48 Renewable energy sources are expected to play an increasingly important role in filling the need for more power generation.
According to MEMR, the total power generating capacity (including captive and off-grid generation) was about 55.5 GW in 2015, of which 39,258 MW was owned by the state utility company PT PLN and the rest procured from contracted Independent Power Producers (IPPs).
Power Capacity: 55.5 GW Electricity Generation: 234 TWh
Others Others Diesel Diesel 5% 11% 3% 9% Coal 24% Hydro Hydro 9% 6% Coal 49%
Natural gas 28% Natural gas 56%
Figure 44: Installed Power Capacity and Electricity Generation, 2015 Source: MEMR & BPS (2015)
48 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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While the majority of Indonesia’s current primary energy supply still comes from traditional energy resources, such as oil, coal and gas, the government has put plans in place to increase the share of renewable power generation to 23% by 2025, and to 31% by 2050.
Figure 45: Current and Targeted Energy Mix in Indonesia Source: Asian Development Bank (2014)
The Government’s overall strategy on power generation is embedded in the Presidential Decree No. 5/2006 on National Energy Policy, which emphasises diversification, environmental sustainability and maximum use of domestic energy resources.
Facing the prospect of electricity shortages over the medium term, the PLN has recently introduced a series of Fast Track Programmes (FTPs) to accelerate power generation. While the mandate of the first FTP (FTP-I) focused exclusively on bringing coal-fired plants online, the FTP- II has put in place the plans for increases in geothermal power (4,000 MW), hydropower (1,753 MW), coal gasification (64 MW), and gas (280 MW), in addition to a bulk of coal power (3,000 MW). So far, only 5,707 MW out of the planned 9,975 MW under FTP-I have been delivered. FTP-II is also facing severe delays.
In its RUPTL 2015-2024, the government has further introduced a third phase (FTP-III), which aims to add an additional 35 GW of power by 2019, with increasingly visible share of renewables in the power generation mix. In combination, the three FTPs aim to bring 42.9 GW of generation online between 2015 and 2019.
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Additional power capacity 2015-2019: 42.9 GW
Hydro (incl. micro) 3%
Solar and others Coal 3% 60% Geothermal 3%
Gas PP/ Gas turbines Natural gas 10% (CCGT) 21%
Figure 46: Fast Track Programmes (FTP): Additional Capacity by Plant Type, 2015-2019 Source: MEMR (2015)
Many of the projects involved in the latest stage of power generation programme are still in their procurement or planning stages. As of June 2016, 8.2 GW (22% of the planned 35 GW) were under construction, 9.8 GW (27%) were approaching financial closure, 10.4 GW (28%) were in the procurement stage, and 8.1 GW (22%) in the planning phase.49
While the PLN aims to add additional 18,027 MW under the Fast Track Programmes, nearly 25 GW are expected to come from the participation of IPPs.
Year 2015 2016 2017 2018 2019 Total PLN 2,658 2,348 4,830 3,777 4,414 18,027 IPP 1,471 1,357 1,720 5,461 14,905 24,914 Total 4,129 3,705 6,550 9,238 19,319 42,941 Table 32: Indonesia’s Generation Expansion Needs, 2015-2019 (MW of Capacity Additions) Source: RUPTL 2015-2024
To meet its mandate under the FTPs, PLN estimates it will need approximately US$ 40.1 billion between 2015 and 2019 to cover its costs for generation, transmission and substations, and distribution of power. An additional US$ 43.4 billion needs to come from the private sector to
49 PLN (2016)
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cover IPP investments over the same period in order for Indonesia to reach its goals under the FTPs.
Item 2015 2016 2017 2018 2019 Total %
Investment requirements from IPPs Generation (IPP) 3.1 7.5 11.5 11.5 9.8 43.4 52 Investment requirements from PT PLN Generation (PT PLN) 2.6 3.6 3.9 3.1 2.4 15.6 19 Transmission and Substations 3.8 4.0 3.6 3.4 2.2 17.1 20 Distribution 1.5 1.4 1.5 1.5 1.5 7.4 9 Subtotal PT PLN 7.9 9.0 9.0 8.0 6.1 40.1 48 Total 11.0 16.5 20.5 19.6 15.9 83.5 100 Table 33: Base Cost Investment Requirements for PT PLN’s Network, 2015-2019 (US$ billion) Source: PT PLN (2015). Program Pembangunan Pemangkit 25 GW & Transmisi
Most recently, the PLN has further revised the power generation projections in its Electricity Supply Business Plan (RUPTL) 2016-2025 update, which aims to raise the power generation capacity to 137 GW by 2025, and 430 GW by 2050, compared to 55.5 GW in 2015.50 The use of coal resources is also expected to decrease while the share of renewable energy sources is projected to grow further.
Figure 47: Projections of Electricity Generation in RUPTL, 2016-2025 Source: PLN (2016)
50 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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Given the delays on the delivery of projects under the Fast Track Programmes and the need for greater private sector involvement, the government has recently taken steps to shorten approval processes in order to accelerate the realisation of the programme and facilitate private investment. Supporting regulations include MEMR Regulation No. 3/2015 on the pricing benchmark for the IPPs and excess power, Presidential Regulation No. 30/2015 on the implementation of land acquisition for public purposes, and the Presidential Regulation No. 4/2016 on the acceleration of electric power infrastructure construction.
Key power generation systems in Indonesia
The islands of Java, Madura and Bali account for almost 80% of Indonesia’s total power generation and consumption, and service needs of around 60% of the total population (approximately 140 million people). Demand on the Java-Madura-Bali grid is currently about 32 GW.51
Sumatra has the second-largest power generation system in Indonesia. Its installed capacity is expected to increase to 14 GW by 2022 from its 6 GW in 2013. Peak demand in 2020 is estimated to reach 8.5 GW, allowing for surplus to be exported. These estimates have spurred the PLN to plan for Sumatra-Java high-voltage direct current (HVDC) link, capable of handling 3,000 MW, and for HVDC 600 MW link to Peninsular Malaysia.
Kalimantan is the third-largest demand centre and holds an abundance of fossil fuel and renewable energy resources. The Kalimantan system currently provides 1,819 MW of power, of which about 1,356 MW is diesel and fossil fuel-fired units and the rest comes from renewable energy sources.52
The remaining generating capacity is spread across 600 isolated systems, where electricity demand is much lower. However, given the national plans to increase the electrification ratio from
51 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map 52 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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84.4% in 2014 to 96.6% in 2019, the demand for electricity, and, in turn, power generation is expected to increase in these areas.
Figure 48: Electrification Ratio in Indonesia (2014) Source: MEMR & BPS (2015)
Significant investments for power generation improvements are also being planned for Sulawesi and, to a smaller extent, Papua and West Timor.53
Distribution of generated power
The state-owned PT PLN holds a de facto monopoly over distribution of generated power. In 2014, PLN operated about 925,300 circuit-kilometres of distribution lines and 46,800 megavolt- amperes of transformer capacity. The network has recently begun to deteriorate due to lack of upkeep. It is reported that several areas – particularly those with high load densities, such as Jakarta, Bandung and Surabaya, are overloaded and unreliable.
53 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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Policies to improve access to electricity around the country and to increase power generating capacities are currently tightening pressure on the country’s already stretched distribution capacity, requiring urgent and extensive network investment to ensure that additional generation capacity translates into more and better-quality supply to consumers. The estimated expenditure for network expansion and upgrades is about US$ 15 billion per year. However, the de facto monopoly of PLN over the distribution lines is hindering the potential investments from the private sector.54
Key stakeholders in Indonesia’s power generation sector
The primary governmental body responsible for governing the Indonesian energy sector is MEMR. MEMR comprises several directorates with their own specific responsibilities within the sector, in particular, the directorates general for oil and gas; electricity; and new and renewable energy and energy conservation. In addition to its legal responsibilities, MEMR also manages relevant activities of the state-owned utilities and energy service companies, and conducts research relevant to Indonesia’s mandated energy goals.55
Other relevant government ministries and agencies include the Ministry of Finance (MOF), the State Ministry of National Development Planning (BAPPENAS), the Ministry of State-Owned Enterprises, the Ministry of Environment and Forestry, and others, which are involved in various areas of the energy generation sector.
Since the passing of the Law on Local Government No. 22/1999, revised as Law on Local Government No. 32/2004, local governments now play a greater role in administration of energy provision and power generation. A consequence of political decentralisation has been the confusion and even conflict over jurisdiction of the various levels of government. Local governments now effectively control the development of energy resources and the issuing of permits for infrastructure projects. Delays and difficulties in land acquisition and procurement of the various necessary permissions have interrupted the implementation of many projects,
54 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map 55 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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including ones of national priority. The national government is now focused on rectifying this situation through the efforts of the Committee for Acceleration of Priority Infrastructure Delivery, housed within the Coordinating Ministry of Economic Affairs.
State-owned enterprises also play a key role in the Indonesian energy sector. They function as corporations but are simultaneously charged with mandates to work towards the goals and needs of the state. Some of the state-owned enterprises in the power generation sub-sector are the PLN, PT Pertamina, PT Perusahaan Gas Negara, PT Pertamina Geothermal Energy, and PT Geo Dipa Energi.
The table below maps out the involvement of these different ministries and agencies and their operational levels:
New and Renewable Coal Oil & Gas Electricity Energy MEMR; DG Minerba, CMEA, BAPPENAS, CMEA, BAPPENAS, CMEA, BAPENNAS, Policy CMEA, BAPPENAS, MOF, MOEF, MOI, MOT, MOF, MOEF, MOI, MOF, MOEF, MOI MOT, Making MOF, MOEF, MOI, MOT, MSOE MOPWH MSOE BKPM National Energy Council (DEN) SKK MIGAS, BPH Licensing DG Minerba NA DG Electricity MIGAS, DG MIGAS Local Government Local Government Local Government Local Government Contract NA SKK MIGAS (Upstream) NA NA Making DG MIGAS (Upstream and Technical), BPH DG EBTKE, DG Regulator DG Minerba DG Electricity MIGAS (Downstream and Electricity, DG MIGAS Business) SOEs, PSCs, Local SOEs (PT Pertamina, Local Companies, SOE (PT PLN), Captive Companies, PGN), PSCs Operation Cooepratives, Power, Cooperatives, Cooperatives, (International and Local Communities Communiites Communities Companies)
BAPPENAS = State Ministry of National Development Planning, BKPM = Indonesia Investment Coordinating Board, BPH MIGAS = Regulatory Agency for Upstream Oil and Gas, CMEA = Coordinating Ministry of Economic Affairs, DG = Directorate general, EBTKE = New and Renewable Energy and Energy Conservation, MIGAS = Oil and Gas, Minerba = Minerals and Coal, MEMR = Ministry of Energy and Mineral Resources, MOEF = Ministry of Environment and Forestry, MOF = Ministry of Finance, MOI = Ministry of Industry, MOPW = Ministry of Public Works and Housing, MOT = Ministry of Trade, NA = not applicable, PGN = State Gas Company, PT PLN = State Electricity Company, PSC = production sharing contract, SKK MIGAs = Special Task Force for Upstream Oil and Gas Business Activities, SOE = state-owned enterprise
Table 34: Institutional Mapping of Indonesian Energy Sector Source: Asian Development Bank (2014). Energy Sector White Paper
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Local Players
PT Pertamina
PT Pertamina is an Indonesian state-owned oil and gas corporation based in Jakarta. Created in 1968, the company is the second-largest crude oil producer in Indonesia, behind the US-based Chevron Pacific Indonesia. It provides exploration, drilling, transmission, and production of oil, gas and geothermal energy products. It also manages renewable energy projects. In addition, Pertamina is developing Coal Bed Methane, in order to support energy diversification and increase the government’s national gas supply.
In 2013, the company decided to expand its business line into the building of power plants in order to become an independent power producer with the ability to supply up to 5 GW of electricity to the state electricity company PLN. The same year, the company started its feasibility studies for a 120 MW plant in Bantar Gebang. Being in diversification mode, Pertamina has also expanded its business lines into the fields of shale gas, biomass, solar power, hydropower, wind power and geothermal power.
In January 2017, Pertamina announced a US$ 1.8 billion deal with state electric utility PLN to build a 1760 MW gas-fired power plant, floating storage and regasification unit (FSRU) in West Java, Indonesia. The two parties have signed a Power Purchase Agreement (PPA), through which PLN will buy electricity from the plant for 25 years, following its planned completion in 2021. Pertamina holds a 40% stake in the joint venture that will develop the project, Jawa Satu Power, while Japanese trading houses Marubeni and Sojitz own 40% and 20%, respectively. The power plant, once completed, will be one of the largest gas-fired plants in Asia. Gas will be supplied from the FSRU.
PT Medco Power
PT Medco Power owns and operates gas-fired plants in Batam Island and Palembang. The company develops and operates small-to-medium size independent power projects across the country; and provides power project services with business activities, including operation and
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maintenance power plant services, as well as project engineering, procurement and construction (EPC). The company was founded in 2004 and it is based in Jakarta, Indonesia.
The company has also ventured into geothermal power plant development when it won contract to work on the Sarulla Geothermal Power Plant in Tapanuli Utara district, North Sumatra province. In March 2017, the first unit of 330 MW Sarulla geothermal power plant has commenced commercial operation.
Figure 49: First Unit of 330 MW Sarulla Geothermal Power Plant Source: Power Info Today The company, in consortium with Ratchaburi Electricity Generating Holding of Thailand, has also started the construction of a gas power plant in Pekanbaru, Riau, which, when completed, will have the total installed capacity of 250 MW. The company now owns 11 power generation facilities across Indonesia.
PT Indonesia Power
PT Indonesia Power was founded in 1995 as a subsidiary of PLN, a state-owned electricity company. The company owns and operates power plants in various energy sectors and offers power generation services. Indonesia Power produces power through coal, hydro, geothermal, natural gas, oil power plants. It also holds operational units in combined cycle power plants. The company occupies over 35% of the power generation market in Indonesia.
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PT PLN
The State Electricity Corporation (PT PLN) is a key agency in the energy sector in Indonesia. It is the only state-owned power utility company in the country and the country’s only fully integrated power utility firm. PT PLN is the major provider of all public electricity and electricity infrastructure in Indonesia, including power generation, transmission, distribution and retail sales of electricity. It holds primary responsibility for achieving the government’s accelerated generation targets through the Fast Track programmes (FTPs). Since the passage of the new electricity law in 2009 (Law 30/2009), PT PLN no longer holds a legal monopoly over electricity generation, transmission and distribution, but it has a right of first refusal over any activity in the sub-sector, and this often serves as an effective deterrent for private enterprises in many cases.56
3.10.2 EU Entry Opportunities
Given the increasing energy demands in Indonesia, the power generation market is booming. The government is planning to increase Indonesia’s generating capacity to 137 GW by 2025, and 430 GW by 2050, from its current state of 55 GW. Participation of private sector is crucial for the success of the government’s plans. Therefore, there are significant opportunities for European companies to enter the Indonesian power generation market. Although the state-owned utility, PLN, continues to hold de facto monopoly over power generation, the limited resources and capacities for expansion are pushing the PLN to open up the sector for IPPs. The cooperation with the PLN, therefore, is easing and new avenues for domestic and international power generation developers are opening up in power development projects. Among the most promising entry points are:
Development of new power generation projects
Provision of turnkey solutions for new power plant projects
Replacement, upgrading and retrofitting market opportunities
Smaller-scale, off-grid power generation solutions
56 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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Development of new power generation projects
Under the new Fast Track Programmes and the PLN RUPTL 2016-2025 plan, Indonesia expects to significantly expand its power generating capacity in the upcoming years. While the state- owned PLN aims to develop around 18 GW of additional power, nearly 25 GW are expected to come from the IPPs. It is estimated that around US$ 43.4 billion need to come from the private sector to cover IPP investments in order for Indonesia to reach its power generation goals. As a result, there are ample opportunities for European companies with expertise in power plant development to enter the Indonesian market.
Taking into consideration the National Energy Policy, which emphasises diversification, environmental sustainability and maximum use of domestic energy resources, companies may find opportunities for power generation projects in both traditional and NRE (New and Renewable Energy) sectors.
Provision of equipment and turnkey solutions for new power plant projects
In addition to directly engaging in power plant development through IPP tenders, the expanding number of projects also opens up opportunities for turnkey solutions providers and distributors. New power generating projects require various parts and equipment, which can be provided by European companies. Energy efficient, resource-saving technologies, including turbines, substations, transmission, engines, pipes, transformers, distribution equipment, and other power generation equipment parts, are likely to be in demand. These opportunities lie either in the sale and implementation of turnkey systems in existing infrastructure, or in project development for the expanding Indonesian power generation network.
Replacement, upgrading and retrofitting market opportunities
The replacement market in Indonesia is also growing as there is a constant requirement for replacement parts and services for the ageing power generation infrastructure. The continuous maintenance, upgrading and expansion of existing power plant systems to improve power
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generation efficiency, the optimisation of power generation management and provision, and the efforts to abate pollution via more optimal solutions are driving the growth of opportunities.
While the government plans to generate more power via new projects, it is also equally interested in opportunities to optimise the existing power plant portfolio. The government’s energy conservation and energy efficiency goals together with concerns over GHG emissions point to the growing opportunities for European companies. There are currently over 922 listed power plants in Indonesia, which can potentially benefit from European expertise in power generation optimisation.
Smaller-scale, off-grid power generation solutions
While current power generation capacities are concentrated in three key networks, namely, the Java-Madura-Bali, Sumatra and Kalimantan networks. The remaining generating capacity is spread across 600 isolated systems where electricity demand has been traditionally much lower. However, with the national plans to increase the electrification ratio to 96.6% by 2019, the demand for electricity, and, in turn, power generation in these locations is expected to rise. In 2016, the Indonesian government has also issued a new framework policy to incentivise the electrification of remote areas. Minister Regulation ESDM No. 38/2016 provides a regulatory framework for private companies to develop independent microgrid utilities in remote and underserved locations. Under Regulation 38/2016 a developer now can theoretically combine a group of villages and communities into a bundled packet and apply for the issuance of a license to own and operate an independent utility concession. As a result, companies may find opportunities to enter the Indonesian power generation market via provision of solutions for remote, off-grid or isolated power systems.
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European Companies
Siemens AG
Siemens is a global technology leader which is active in more than 200 countries. The company focuses on the areas of electrification, automation and digitalisation. One of the world’s largest producers of energy-efficient, resource-saving technologies, Siemens is No. 1 in offshore wind turbine construction, a leading supplier of gas and steam turbines for power generation, a major provider of power transmission solutions and a pioneer in infrastructure solutions as well as automation, drive and software solutions for the industry. With approximately 1500 employees in Indonesia, Siemens generated sales of EUR 263 million in fiscal 2015.
In April 2016, the company signed two Memorandums of Understanding (MoU) with the state power company PLN to develop 500 MW of distributed power generation capacities as well as the Indonesian transmission and distribution grid.
Siemens has been actively engaged in supporting Indonesia’s infrastructure with innovative technologies since 1855. Several projects like the Jawa Power’s Paiton II Plant in East Java or the Simangkuk project at the Sumatra grid support Indonesia’s energy supply.
Wärtsilä
Wärtsilä is a Finnish corporation which manufactures and services power sources and other equipment in the marine and energy markets. Wärtsilä has three main businesses: Energy Solutions focusing on the energy market; Marine Solutions focusing on the marine market; and Services, responsible for supporting both markets.
The company has secured its foothold in Indonesia in 2017, when the company (as part of a consortium with PT PP) was awarded a contract to build five power plants, which will have a total capacity of 255 MW. The plants are being built for Indonesian state utility PLN and the consortium will be responsible for the complete engineering, procurement and construction operations.
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The consortium will also operate and maintain these facilities for five years before handing over the control to PLN.
The five plants are covered by two separate orders. One order comprises four modular “gas cube” power plants, totalling 115 MW, in Ternabe, Nabire, Bontang and Flores. The second order is for a 140 MW power plant in Bengkanai, Central Kalimantan. All five plants will include Wärtsilä 34DF engines capable of running on multiple fuels, such as liquid fuel and natural gas. The four gas cube power plants are scheduled to be operational later this year, or early 2018, and the Bangkanai plant is expected to be operational in late 2018.
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3.11 Energy Efficiency & Carbon Services
3.11.1 Market Overview
Indonesia is a country with a clear need for energy efficiency services. Between 2004 and 2014, the primary energy consumption has increased by more than 5% every year. The national utility, on the other hand, has been struggling to supply the increasing demand for electricity, resulting in burnouts and production losses at industrial plants.
Currently, Indonesia’s income elasticity of energy demand and energy intensity is higher than in other ASEAN countries. The high levels of energy intensity are the result of several key factors. For many years, Indonesia was a strong oil-producing country and subsidised petroleum products and electricity. This inevitably engendered an inefficient pattern of energy use. Other factors, such as a relatively high share of biomass and the rapid growth of energy-intensive industrial activities, particularly in petrochemical, fertilisers and cement industries, have increased Indonesia’s energy intensity.
A country with a large potential for energy efficiency solutions, Indonesia has established some of the most ambitious targets in the region in order to accelerate more efficient energy use. The 2011 update on the 2005 National Energy Conservation Masterplan has identified an energy savings potential of 17% by 2025. According to the Ministry of Energy and Mineral Resources (MEMR), the potential savings per sector are distributed as follows:
Energy Consumption Per Sector Potential of Energy Target of Energy Conservation Sector Year 2013 (Million BOE) Conservation Sectoral (2025) Industry 335 (42%) 10 – 30% 17% Transport 324 (39%) 15 – 35% 20% Household 100 (12%) 15 – 30% 15% Commercial 36 (4%) 10 – 30% 15% Others (Agriculture, 23 (3%) 25% - Construction, Mining) Table 35: Potential Energy Savings per Sector by 2025 Source: Draft National Energy Conservation Master Plan (RIKEN), 2013
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In early 2015, the Government has also launched a national campaign, called Potong 10% (Cut 10%), which aims to reduce energy use by 10% before the end of 2019. It is also targeting a decrease in energy intensity by 1% per year until 2025 and aims to significantly improve energy elasticity over the same period.57
The Climate Investment Fund estimates that the energy efficiency opportunity in Indonesia is worth approximately US$ 5 billion. The Asian Development Bank has further suggested that the energy efficiency retrofit requirements may amount to US$ 4 billion, including US$ 1 billion in electrical equipment, US$ 1 billion in coal-fired systems, US$ 0.9 billion in diesel-fired plants and US$ 1 billion to finance the building retrofit requirements of shopping malls, office buildings and hotels.58
Looking at the opportunities in transport, residential and manufacturing sectors, ReEx Capital Asia has further estimated that Indonesia has the second largest market for energy efficiency services and technologies in the South East Asian region.59 It has approximated that the industrial and commercial sectors alone can offer an investment potential of US$ 1.4 billion (US$ 0.8 billion in the industrial and US$ 0.6 billion in the commercial sectors).
End-users and energy efficiency potential
Energy use in the transport sector has grown more quickly than in any other end-user sector, doubling over the last ten years. However, improvements in energy intensity have been more modest than in either the residential or manufacturing sectors. To date, efforts to improve energy efficiency performance of the transport sector have not received enough legislative support. As a
57 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map 58 Low Carbon Support Programme & Ministry of Finance of Indonesia (2015). A Coherent Fiscal Policy Framework for Promoting Renewable Energies and Energy Efficiency in Indonesia. 59 The market potential for energy efficiency ranking: 1. Malaysia, 2. Indonesia, 3. Thailand, 4. Singapore, 5. Vietnam, 6. Philippines. Source: ReEx Capital Asia (2011). South East Asia Energy Efficiency Market Report 2011 & Global Business Guide (accessed in September 2017). Indonesia: Joint Ventures / Export Distribution. http://www.gbgindonesia.com/en/manufacturing/directory/pura_mayungan/products/energy_efficiency_consultancy.php
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result, the IEA has ranked Indonesia 23rd out of 36 surveyed countries in terms of energy efficiency, placing it lower than countries such as India and a host of European nations.60
In the manufacturing sector, iron, steel, cement, ceramic, glass and textile industries are all heavy energy consumers with potential for substantial improvements in energy utilisation. Collectively, the industrial sector accounts for almost a third of energy consumption in Indonesia, but consumes energy inefficiently when compared to international benchmarks. Conversion efficiency at the power plant level has also remained almost constant for more than 20 years.61
There are also gains to be made in the residential and commercial sectors. Some estimates report that these two end-users may require the largest percentage reductions from business-as-usual energy consumption in order to reach energy efficiency targets. However, energy prices in Indonesia currently provide few incentives for these customers to improve their energy efficiency. Customers are also often unaware of the opportunities to improve their energy use by utilising more efficient appliances and may have limited resources to undertake energy efficiency improvements.
Figure 50: Indonesian Final Energy Use by Sector, 2000 and 2015 Source: IEA (2017). World Energy Balances
60 Low Carbon Support Programme & Ministry of Finance of Indonesia (2015). A Coherent Fiscal Policy Framework for Promoting Renewable Energies and Energy Efficiency in Indonesia. 61 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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Government initiatives to accelerate energy efficiency
In recent years, the Government, together with international partners, has introduced several initiatives which are expected to further drive Indonesia towards reaching its energy efficiency targets. For example, the MEMR has embarked on a concerted effort to roll out energy efficiency regulations, implementation rules and standards, including the Regulation No. 70/2009 on Energy Efficiency. The Asian Development Bank has also approved the loans programme which aims to fund energy efficiency projects in Indonesia.
The Government has further developed specifications and procurement guidelines for upgrading municipal street lighting systems to those based on light-emitting diode technologies. It is also in the process of preparing a nationally appropriate mitigation action plan and registering it with the UNFCCC so that GHG emissions reductions from future municipal programmes would receive GHG emissions reductions credit.62
The Indonesian Government has initially proposed setting up a revolving fund for energy efficiency, but the launch of the fund has been delayed due to uncertainties related to demand, administration and utilisation of such financing mechanisms.63
Finally, Indonesia has made progress on non-fiscal policies, such as standards and labelling in order to encourage the uptake of energy efficient appliances. For example, in 2011 it began developing the energy efficient labelling for Compact Fluorescent Lamps as well as refrigerators, air conditioners, electronic ballasts, electric fans, rice cookers and motorcycles. There are plans to accelerate this programme to cover a wide range of other appliances.64 However, manufacturers are still reluctant to implement these labelling regulations due to difficulties in finding accredited testing laboratories.
62 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map. [Indonesia has traditionally been an energy-surplus country. The Indonesian population is still used to overconsumption as a result of decades of cheap fossil fuel based power and electricity generation. As a result, energy conservation is still not among the top priorities for significant segments of Indonesians and the demand for energy efficiency services needs further push. The delay of the revolving fund has been related to further investigation of the demand for energy efficiency services, bureaucratic considerations of how the fund would be used and which channels would be available for interested parties. The government is currently evaluating the available options for opening up the revolving fund]. 63 ADB (2015). Summary of Indonesia’s Energy Sector Assessment. 64 Low Carbon Support Programme & Ministry of Finance of Indonesia (2015). A Coherent Fiscal Policy Framework for Promoting Renewable Energies and Energy Efficiency in Indonesia.
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Vehicle energy efficiency testing is currently limited to requirements for low-cost green car initiatives. In general, the transport sector remains largely unaddressed, with room for policy-side action. The situation, however, is not exclusive to Indonesia and reflects the general trends in the South East Asian region.
Figure 51: Policies and standards on transport energy efficiency across the South East Asian region Source: Energy Research Institute Network (2016). Energy Efficiency Policy Update
Local Players
PT Hexamitra Daya Prima
PT Hexamitra Daya Prima is an Indonesian privately-owned company specialising in solutions for energy security challenges. Hexamitra conducts initial studies and formulates solutions for improving energy efficiency and energy security in Indonesia. Its solutions are available for private sector, government and non-profit organisations.
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Hexamitra performs technical and economical comparisons for adoption of LED technology on lighting in order to improve energy efficiency in light usage across Indonesia. The company also conducts planning, product supply, installation and maintenance services. Their solutions are available for hotels, hospitals, shopping centres, malls government buildings and facilities as well as factory sites and office buildings.
PT Pura Mayungan
PT Pura Mayungan was established in 1975 as a joint venture of two companies with experience in the electrical component and switchboard manufacturing industry in Indonesia. Over the decades the company has evolved to become the leading integrated solution provider in the design, manufacture, marketing and distribution of Medium Voltage (MV) and Low Voltage (LV) switchboards and electrical panel components in Indonesia. In 2007, the company established its Business Energy Efficiency Solution arm, which provides consultancy and audits to support clients in achieving the ISO 50001 certification. Pura Mayungan was among the first Indonesian companies to gain the ISO 50001 certification itself.
The company carries out energy audits, covering every aspect of plants’ operations, processes and products as well as electrical and thermal energy, and the study of generators and utility equipment, such as fans, pumps and air conditioners.
In Indonesia, Pura Mayungan has served many of the country’s leading local and multinational companies in a broad range of industry sectors to achieve optimal energy efficiency results. The company works with clients in the long term to continually provide support, assistance and human resources training on the best energy efficient processes.
Synergy Efficiency Solutions (SES)
Synergy Efficiency Solutions (SES) is an Indonesian energy efficiency company with offices in Jakarta and Bali. Established in 2008, SES specialises in building performance simulation, green building certification, energy audits, Energy Service Company (ESCO) financing and lighting optimisations.
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In the few short years it has operated, the company has become a leader in South East Asia’s market for energy efficiency. The company’s services were contracted by a number of clients, including the Nagan Raya 11 MW coal-fired power plant, Indonesia Convention Exhibition (ICE), Universitas Multimedia Nusantra and Surabaya’s Adi Husada Hospital.
SES provided Nagan Raya 11 MW coal-fired power plant a Level 1 Energy audit on all of their energy-consuming equipment. These optimisations increased Nagan Raya’s production to 12 MW (thus increasing net profits by more than US$ 514,924 per year) and caused a 14% reduction in coal consumption. It was also contacted as the lead energy efficiency consultant for the Indonesia Convention Exhibition – the largest convention centre in South East Asia. Together with Australia’s COX Architects, SES designed a building with the reduction in initial investment costs by US$ 11 million. SES also helped Universitas Multimedia Nusantara win the Indonesian Ministry of Energy 2013 award for the Most Energy Efficient building in Indonesia and it has designed an ESCO (Energy Savings Company) financial support to carry out a Level 1 Energy Efficiency Assessment of Surabaya’s Adi Husada Hospital with 15% energy savings on the 1st retrofit and 45% energy savings on the 2nd retrofit. It was Indonesia’s first full ESCO.
3.11.2 EU Entry Opportunities
Various market studies demonstrate the ample opportunity for cost-effective energy efficiency investment in Indonesia. European companies may find success in providing technologies and services across several areas:
Export opportunities for energy efficient technologies
Improvements for thermal plant efficiency
Energy efficiency monitoring and auditing
Optimisation of energy efficient transport systems
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Export opportunities for energy efficient technologies
European companies may find demand for energy efficient technologies and export opportunities in 4 main areas:
Industrial manufacturing sector (covering both energy supply and energy demand): The technologies in demand are likely to be combined heat and power solutions, including the retrofit of equipment needed for heat and power generation, lighting, ventilation and air conditioning, and technologies facilitating process improvements.
Building technologies: The products in demand are expected to be the energy efficient chillers, energy efficient cooling systems, energy efficient lighting, such as LEDs and ballast improvement equipment, energy efficient shading and ventilation, double-glazing, insulation, and solar heating.
Machinery: Companies may find opportunities to export variable speed drives, automated motors, heat recovery systems, insulation equipment, energy usage monitoring systems, emission capturing systems, such as filters and catalytic converters, energy efficient coolers and gas turbines, and energy efficient boilers.
Transport: Export opportunities exist for solutions, which improve public transport systems and offer smart-grid technologies.
Improvements for thermal plant efficiency
There is considerable supply-side efficiency potential in Indonesia. Despite some efforts, there has been minimal overall improvement in the operational efficiency of the state-owned utility, PLN, thermal plants since 1990. These plants, however, are generally acknowledged to be inefficient energy consumers. As the government is aiming for ambitious GHG emissions reductions through the implementation of renewable energy technologies and energy efficiency programmes, companies with expertise in power plant efficiency optimisation can find lucrative opportunities in Indonesia.
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Energy efficiency monitoring and auditing
Indonesia also lacks experienced energy managers and energy auditors in order to move energy efficiency further. Companies which can provide capacity-building initiatives to develop a domestic skillset may find avenues for entering the Indonesian energy efficiency market. To date, only 96 energy managers and 54 energy auditors have been accredited in the country. In addition, the lack of qualified professionals may offer opportunities for European energy efficiency consultancies to offer their own auditing and energy efficiency consulting services and/or may prove a good entry point for exporting and implementing energy efficiency technologies.65
Optimisation of energy efficient transport systems
Indonesia also suffers from some of the most traffic congested cities in the world and high energy consumption is expected to grow in the future. There are a series of measures, and subsequent opportunities, that would promote greater energy efficiency in the transport sector. These include the development of intelligent transport systems, application of traffic implementation control, application of parking management, and rejuvenation of public transport fleets, among others. European companies with expertise in traffic management and optimisation can find opportunities to assist the Indonesian government in transforming the transport sector within the energy efficiency guidelines. Both technical and financial assistance may be needed and these may be two avenues to enter this market. Companies wishing to offer their services and investment in the optimisation of energy efficient transport systems should engage the government, as urban development projects fall within the government’s jurisdiction.
65 The EU’s 25 July 2017 proposal for legal text provisions on energy and raw materials in the EU-Indonesia FTA, Article Y.2 “Standards, Technical Regulations and Conformity Assessments”, proposes the promotion of cooperation between regulators and/or standardization bodies in both territories on energy efficiency and renewable energy. It proposes the development of common standards and convergence or harmonization of applied standards on energy efficiency; joint analysis, methodologies and approaches, to assist and facilitate the development of relevant tests and measurement standards for energy efficiency; the promotion of standards on energy efficiency, including product design and labelling, and, where appropriate, through existing international cooperation initiatives; and the exchange of information and best practices. As a result, the European companies may gradually find it easier to participate in the Indonesian energy efficiency market.
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European Companies
ABB
ABB is a Swedish-Swiss multinational headquartered in Zurich, and is a global leader in power and automation technologies that enable utility, industry, and transport and infrastructure customers to improve performance while lowering environmental impacts. In 2014, the company opened its new production facility in Cibitung, West Java, to double ABB’s miniature circuit breaker (MCB) production capacity within the region, to meet the growing demands for energy efficiency. The company sees substantial growth opportunities for the low voltage business in Indonesia.
AQYLON
Founded in 2009, the French AQYLON is a global leader in the design and manufacturing of Organic Rankine Cycle (ORC) turbines, which transforms heat into electricity and thermal power from renewable sources (biomass, geothermal, solar), or from waste heat created by industrial processes, engines or gas turbines. Since its founding, the company has focused primarily on delivering its solutions for Renewable Energy and Energy Efficiency markets. The company offers a wide range of Engineering Services, including Turbomachine Design, Energy Efficiency Consulting and Project Engineering Management.
AQYLON opened its office in Jakarta in March 2017, following the signing of a 3 MW biomass plant contract where it installed its ORC turbines. After its first direct sale of a biomass power plant that uses the Empty Fruit Bunch (EFB) as fuel to power the boiler, the company is currently developing several biomass and waste-to-energy projects under a Power Purchase Agreement (PPA) scheme.
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3.12 Biofuel
3.12.1 Market Overview
Indonesia is the world’s 15th largest motor vehicle market and national demand for transport fuel is growing rapidly. Since 2006, Indonesia has been increasing its biofuel blend targets as well as providing biofuel subsidies to producers, mainly to reduce the country’s dependence on oil imports, but also to support the domestic agricultural economy and to mitigate climate change. According to the government strategy, biofuels are expected to meet at least 5% of energy use by 2025.66 The National Medium-term Development Plan (RPJMN – Rencana Pembangunan Jangka Menengah Nasional) 2015-2019 aims to produce 4.3-10 thousand kilolitres of biodiesel and 0.34-0.93 thousand kilolitres of bioethanol by 2020.67
The Indonesian biofuels policy is governed by a number of regulations and decrees. The most significant is the biofuel blending mandate first introduced in 2008 by the Ministry of Energy and Mineral Resources (MEMR). It has since been revised several times, most recently in early 2016 with a mandate for 20% blending (B20) in diesel for 2016 and a targeted 30% by 2025; power plant sectors were obliged to blend 30% (B30).
Total liquid biofuel use per year is projected to increase to 25 billion litres by 2030, compared to 1.35 billion litres blended in the first half of 2016.68 Further, the Minister of Transport announced in late 2015 that the government will require all airlines to use biofuels from 2018 onwards.69 Today, biodiesel in Indonesia is produced from palm oil, a crop for which the government recently renewed a moratorium to prevent additional plantations.
66 ICCT (2016). Biofuels policy in Indonesia. Link: http://www.theicct.org/sites/default/files/publications/Indonesia%20Biofuels%20Policy_ICCT_08082016.pdf 67 MEMR Ministerial Regulation No. 25/2013 68 International Energy Agency (2015) Indonesia 69 Global Indonesian Voices (2015). Pushing for aviation biofuel. Link: http://www.globalindonesianvoices.com/23247/pushing-for-aviation- biofuel/
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Biodiesel
Indonesia’s biofuels program is centred on palm oil-based biodiesel and the development of Indonesia’s on-road domestic market. Although the current EU anti-dumping duties have contributed to a decline in Indonesian exports since 2015,70 biodiesel policy is not expected to change as a result of policy changes. China has evolved as the primary market for Indonesian biodiesel exports at about 55% of total exports in 2014, boosted by China’s elimination of biodiesel import taxes.
MEMR data states that 2016 biodiesel consumption reached 3.008 billion litres, while 2017 consumption is expected to drop to 2.8 billion litres based on MEMR reports of slightly lower demand. Trade data states that Indonesia’s 2016 exports reached 478 million litres.71 The share of biodiesel in all diesel fuel expressed in volume terms is estimated to grow to 8% by 2025.72
Ethanol
There is no fuel ethanol production in Indonesia, although there are 14 ethanol plants in Indonesia producing non-fuel ethanol for the medical industry, cosmetics and export. Indonesian ethanol production is molasses based, as it is the most readily available ethanol feedstock in Indonesia, which has more than 60 sugarcane mills.
There are ambitious targets to reach 20% ethanol blending in industry, power and transport set for 2025. Yet, due to the relative lack of ethanol infrastructure, feedback supply gaps and the general focus on diesel, the Government of Indonesia is unlikely to pursue ethanol blending.
70 In November 2013, the EU imposed tariffs of 8.8% to 20.5% for Indonesian biodiesel producers, which would apply for five years. The duties were set to curb competition for European biodiesel producers. Indonesia, which uses palm oil to make biodiesel, has submitted a complaint case, which is still pending at the WTO. 71 USDA Global Agricultural Service (2017). Indonesia biofuels annual report 2017. Link: https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Biofuels%20Annual_Jakarta_Indonesia_6-20-2017.pdf 72 FAO (2016). Agricultural Outlook 2016-2025. Link: http://www.fao.org/3/a-BO103e.pdf
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Challenges for biofuel development in Indonesia
The biofuel development, especially via palm oil plantations, experiences additional challenges. The growth of Indonesia’s domestic palm oil industry is coming at enormous environmental and social cost. The expansion of the industry is resulting in massive land clearing of mostly carbon- dense forests, meaning that biodiesel based on palm oil is in fact associated with rising greenhouse gas emissions. Lost forests are contributing to massive losses in biodiversity, and burning in palm oil plantations creates thick regional haze and pollution. Conflicts frequently arise over land use between local people and corporations seeking to build palm oil plantations. Weak law enforcement in the forestry and plantations sectors indicates that this damage will continue.73
Local Players
PT Pertamina (Persero)
Indonesia’s largest state-owned oil company, Pertamina, is the country’s leading integrated energy company. It is present throughout the value chain of the energy sector, including the exploration and production, refining, manufacturing and marketing of oil products and petrochemicals; and the development of biofuels, geothermal power and other sustainable alternative energy sources.
In 2015, Pertamina announced plans to invest approximately US$ 480 million to produce bio-aviation turbine fuel (avtur/jet fuel), as well as build a refinery, with a production capacity of 260 million litres per year.74
Sinar Mas Agro Resources and Technology
Sinar Mas Agro Resources and Technology, a part of the Sinar Mas Group, is the country’s largest palm oil plantation group holding plantation concessions totalling 139,300 hectares and operating 16 crude palm oil mills. Their plantations are located in Sumatra Utara, Jambi, Bangka,
73 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map 74 Jakarta Post (2017). Pertamina to construct bioavtur plant. Link: http://www.thejakartapost.com/news/2015/08/13/pertamina-construct- bioavtur-plant-2017.html
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Kalimantan Tengah, Kalimantan Timur and Kalimantan Selatan, while its processing plants are located in Surabaya, Medan, Tarjun and Bekasi.
The company’s first biodiesel plant began operating in 2016 with an installed capacity of 300,000 tonnes per annum. Its second plant, the Marunda biodiesel plant started operations in 2017, also with a capacity of 300,000 tonnes of biodiesel per annum.
In 2007, Sinar Mas Agro signed a deal with China National Offshore Oil Corporation (CNOOC) and Hong Kong Energy Holdings to develop biofuel projects worth US$ 5.5 billion in two remote provinces. The three companies intended to plant 1 million hectares of oil palm, sugarcane and cassava over the next eight years in Kalimantan and Papua to generate bioethanol from the latter two crops and palm oil, according to a Sinar Mas statement.75 As of 2015, the plan was halted after palm oil prices augmented.76
PT Astra Agro Lestari Terbuka (AALI)
AALI is one of the largest oil palm plantations in Indonesia, and has been operating for 35 years in both the upstream and downstream businesses. By the end of 2015, the company has been managing oil palm plantations covering a total of 297,862 hectares, comprising about 80% nucleus and 20% plasma plantations, spreading over Sumatra, Kalimantan, and Sulawesi. Combining its upstream and downstream refineries, the company’s refining capacity reached 3,000 tonnes of CPO a day, equal to 900,000 tonnes a year.77
3.12.2 EU Entry Opportunities
The biofuel market in Indonesia provides several entry points for European companies. Some of the existing channels for entering the market are:
Biofuel production
75 Rambu Energy (2017). Sinar Mas Agro expects new biodiesel plant to start operating in Q2. Link: https://www.rambuenergy.com/2017/02/sinar-mas-agro-expects-new-biodiesel-plant-to-start-operating-in-q2/ 76 Asia Nikkei (2015). Conglomerate wants favourable policies for new refineries. Link: https://asia.nikkei.com/Business/Companies/Conglomerate-wants-favorable-policies-for-new-refineries 77 Sikuritas Sinarmas (016). El Nino – a blessing in disguise. Link: http://www.sinarmassekuritas.co.id/download/research/AALI%20- %20Initiating%20Coverage.pdf
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Research & Development (R&D) into innovative and second-generation biofuels
Biofuel development for aviation sector
Biofuel production
Several opportunities are presented on the supply side for European companies for consulting and engineering services for design, construction and management of biofuel plants as well as supply of technology, machinery and equipment for biofuel processing. Technical knowledge and technology for biofuel processing, storage, handling, transportation and distribution are some of the key needs in the biofuel production sector.
The recent example of Finnish investment in the first commercial-sized biofuel pellet production plant in Indonesia, through finance (FinnFunds) and management consultancy (Dovre Group) which further provided opportunity for the Swedish company CellMark to trade in renewable energy with countries such as South Korea and Japan, attest to the favourable conditions for foreign business and innovation in biofuels production, consultancy and trade. European companies with expertise, machinery, packaging and transport related to biofuel or biofuel pellets made from organic matter or biomass will continue to find market opportunities in Indonesia, as well as the capacity for commercial-sized production for international trade (more information on this below under “European Companies”).
Research & Development (R&D) into innovative and second-generation biofuels
R&D into innovative and second-generation biofuels also present particular opportunities, for instance from woody crops. Woody crops on surplus and marginal agricultural land could be used for the production of advanced biofuels. Given the rapid increase in liquid biofuel demand and the relatively limited potential for sustainable energy crops, advanced biofuels from woody crops might present an opportunity towards meeting blending targets while ensuring the sustainability of the bioenergy feedstock supply chain.
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Biofuel development for aviation sector
Other opportunities for European companies are available through the aviation sector. Following the new mandatory blending target from 2018, European companies may see an increased demand for supply of technology, equipment and consulting.
European Companies
FirmTec
The Dutch company FirmTec is a specialist in vegetable oil processing systems. FirmTec’s main areas of specialisation include the processing of alternative residual oil and fats.
In 2014, it was reported that FirmTec will deliver the first ever container-sized plant capable of producing 100% green biodiesel to the Indonesian company, Waterland. Developed using a patented method by the Fraunhofer Institute in Germany, the plant aims to produce biodiesel with the aid of enzymes and ethanol, using oil from the Camelina sativa plant.78 The worldwide patent on this method was bought by Waterland, which also produces its own ethanol. As the demand for sustainable energy continues to rise in Indonesia, more of these plants are expected to be built. The Indonesian government is providing assistance for the rapid implementation of this type of biodiesel.
Repsol
Repsol is an integrated global energy company based in Madrid, Spain. It carries out upstream and downstream activities throughout the entire world. As a vertically integrated company, Repsol operates in all areas of the oil and gas industry, including exploration and production, refining, distribution and marketing, petrochemicals, power generation and trading.
78 Camelina Sativa is a genus within the flowering plant family Brassicaceae. Camelina oil is an edible oil that comes from seeds of Camelina Sativa, commonly known as false flax, which can be used as a biofuel.
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In 2017, Repsol signed a partnership agreement with Indonesian company Pertamina consisting of Research and Development (R&D) in upstream digital technology, development of Enhanced Oil Recovery (EOR) technology, second generation biofuels and R&D management.79 The biofuel cooperation is focused on the provision of raw materials, process selection, laboratory testing of facility tests to meet energy policy targets, improvement of fuel quality and utilisation of available raw materials.
Finnish Fund for Industrial Cooperation Ltd (Finnfund)
Finnfund is a Finnish development finance company that promotes sustainable development by providing long-term risk capital for private projects in developing countries.
In 2013, Finnfund inaugurated the first commercial-scale pellet production plant in Indonesia. Named the SaraRasa Bioindo and located in Riau province on the Island of Sumatra, the project was launched in 2012 with finance from Finnfund in partnership with the Singaporean-based renewable energy producer SaraRasa Biomass Pte. Ltd, Dovre Group (a Finnish management consulting company) and a local Private Equity company.
The plant produces industrial grade pellets using waste biomass sourced from the local food industry to power plants. It has been projected to have an annual production capacity of approximately 50,000 tonnes and to be one of the largest producers of pellets in South East Asia.80
In 2015, SaraRasa Bioindo announced it had signed a wood pellet off-take agreement with a Swedish company (CellMark Energy) specialised in renewable energy production and logistics worth a minimum US$ 1.5 million. Cellmark Energy was to purchase a majority portion of the
79 Katadata (2017). Pertamina cooperates with Repsol. Link: http://katadata.co.id/berita/2017/07/18/pertamina-gandeng-repsol-studi- peningkatan-cadangan-dan-produksi-migas 80 Finnfund (2013). Sararasa starts renewable fuel production in Indonesia. Link: https://www.finnfund.fi/ajankohtaista/uutiset13/en_GB/SaraRasa_renewable_energy_Indonesia/
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wood pellets produced by the plant and the end users of the pellets were to be in South Korea and Japan.81
Green Fuels
This UK-based company is a leading supplier (both manufacturing and commissioning) of biodiesel processing equipment. In 2013, it was commissioned by the international NGO Caritas Switzerland for a turnkey biodiesel facility in Bali. As a community-scale biodiesel production, Green Fuels provided the FuelMatic GSX 3 (figure 52) small-scale equipment, which recycles cooking oil into biodiesel. Green Fuels also trained local professionals to run the bio-refinery.82
Figure 52: The installed FuelMatic GSX 3 equipment Source: Green Fuels
81 Cellmark (2016). Cellmark signs wood pellet off-take agreement with Sararasa. Link: https://www.cellmark.com/2016/01/21/cellmark-signs- wood-pellet-off-take-agreement-with-sararasa/ 82 Green Fuels (2013). Bali biodiesel. Link: http://greenfuels.co.uk/blog/2013/01/bali-biodiesel/
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3.13 Cogeneration Technology
3.13.1 Market Overview
The theory of cogeneration (cogen) is not new to Indonesia as cogeneration technology has matured over the years and equipment of various capacities and designs have been readily available in the market. The technology has been applied in some of the major industries, such as power generation, sugar, rice, palm oil, and paper and pulp, although the process has been often described as outdated and limited to major industry players.
What is new, however, is the renewed interest in more advanced cogeneration technologies and a wider stakeholder intent to explore the applicability of cogeneration in smaller industry entities. This shift is primarily associated with the recent changes in government policies regarding the role of private sector participation in the power generation sector, the new targets for energy efficiency and greater availability of cost-effective cogeneration solutions. These developments have recently given the right thrust towards revitalisation of the cogeneration concept as a viable option for energy optimisation.
Figure 53: 2x100 MW Tarahan Coal Fired Cogeneration Plant Source: jel.com
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Currently, the share of cogeneration in the total installed power capacity in Indonesia is around 7.3%.83 While the exact figures are not compiled in the country, several sources have previously identified 25 to 32 cogeneration plants in Indonesia with a total installed capacity of 1,200 MW to 1,827 MW (excluding combined cycle plants developed by IPPs).84 In the past decade, 37 new projects with an aggregate capacity of 537 MW have also been identified in the country. More than 80% of these are likely to be implemented by power utilities, chemicals, pulp and paper, palm oil, rice and sugar industries.
With the renewed industry interest for greater applicability of cogeneration in new power projects and for retrofitting of old equipment (many of the existing cogeneration facilities are between 20 and 50 years old and are in need of repair85), research by Frost and Sullivan suggests that the market for cogen technologies is likely to continue to grow (see ‘5.3 Useful Statistics’ for more information on key exporters and importers of cogeneration equipment). The growth is expected to be driven primarily by the increasing adoption of cogeneration systems in the biomass sub- sector. Currently, pulp and paper mills are the largest users of cogeneration, followed by petrochemical and textile industries.
ANNUAL CAPACITY ADDITIONS (MW)
Annual capacity additions (MW)
86 77 68 43 47 50 33
2010 2011 2012 2013 2014 2015 2016
Figure 54: Annual Cogeneration Capacity Additions Source: Frost & Sullivan Research
83 The total power generation in Indonesia is around 55 GW. Around 39 GW has been installed by the state-owned PLN. The remaining consists largely of captive power for the industrial use. Diesel generators account for approximately 60% of captive power capacity, while cogeneration plants provide approximately 25%. Indonesia Energypedia (2017). Indonesia Energy Situation. Link: https://energypedia.info/wiki/Indonesia_Energy_Situation 84 Front & Sullivan (2005). Cogeneration in Southeast Asia – Poised for Growth?; Wargadalam, V. J. (2004).Cogeneration in Indonesia: Current situation and prospects; European Commission (2006).Ex-post Evaluation of the COGEN 3 Programme. 85 Persson, B.E. Business prospects in South East Asia for European cogeneration equipment using biomass as fuels.
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So far, the technology has been limited to major industries mainly because the past generation technologies are often only cost-effective for bigger power and heating generation capacities.86 With the arrival of more modern technologies, smaller industries are now showing interest in small-scale cogeneration.87 It is important to note, however, that modern biomass cogeneration technologies are sometimes also subject to economies of scale, such that the cost per unit of energy becomes prohibitive below a particular processing plant size.
Figure 55: MWM TCG 2032 Gas Engines in Power Plant at Indonesian Industrial Site Panbil Source: MWM
For example, the engineering companies that market cogeneration technologies, report that rice mills, processing less than 10,000m3/year, cannot benefit from modern biomass cogeneration technology. Smaller processing plants, on the other hand, are eyeing opportunities to combine resources and jointly invest in biomass cogeneration plants. Larger independently-run plants have also shown interest to cooperate with smaller plants to increase cogeneration utility. The majority of mill operators are still considering biomass cogeneration for own uses, rather than electricity production for grids.
86 AC-ACEAN COGEN Programme Phase III (2005). Cogeneration Development in ASEAN. 87 Aldowe, R. & Prasetyo, B. (2014). Indonesia: Microturbine cogeneration technology application project
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The emerging interest in new (mostly biomass) cogeneration technologies is now driven by wood, sugar, palm oil and rice industries. Due to limited policy on cogeneration, potential smaller industries in agricultural and commercial sectors are yet to show greater affinity for cogeneration. Opportunities for urban-based cogen solutions or trigeneration systems are compelling, but are still far from being commercially viable options for Indonesia.
More recently, subsidy reduction for diesel in 2014 has also made gas cogeneration, for the first time, cheaper than diesel – an option completely neglected in Indonesia until then. Several initiatives to explore gas cogeneration have evolved since. For example, GE has been involved in setting up several 5-10 MW gas cogeneration pilot projects serving several Bali hotels, an airport, a seaport and a Jakarta shopping mall.88
Figure 56: 1.5 MW Sewage Gas Cogeneration Power Plant Source: Ettes Power (2011)
Presently, Indonesia does not have an active policy, legislation, or support programme for cogeneration. Support has been generally indirect via energy efficiency and biomass utilisation measures. Neither roadmap nor directive, similar to those in the US, the EU and other parts of the world, are available. Many smaller industries with potential for adoption of cogeneration
88 Decentralised Energy (2014). Indonesia targets on-site power growth. Link: http://www.decentralized-energy.com/articles/print/volume- 15/issue-4/features/indonesia-targets-on-site-power-growth.html
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technologies are also not aware of the benefits of cogeneration in terms of cost savings and low levels of incremental investment. In addition, energy operation remains not the core business of many potential users, thus, limiting the scope of adoption of cogen technologies. These reasons are still slowing the rate of cogeneration adoption and market penetration in Indonesia.89
Local Players
PT Pupuk Indonesia (Persero)
PT Pupuk Indonesia (Persero), together with its subsidiaries, manufactures and sells fertilisers in Indonesia and internationally. It also provides engineering, procurement and construction services for environment, infrastructure, mineral, geothermal, refinery/petrochemical, and gas industries; and plant support services as well as electricity and steam generation services. One of its projects is the Gresik Gas Cogeneration Plant (GGCP).
The project was initiated due to the rising demand for electricity and steam from PT Petrokimia Gresik as it is currently developing its newest production facility, the Amurea II plant. The use of gas-based technology is supported by the availability of local gas supply at an economical price. The future GGCP will be capable of producing 160 tonnes of steam per hour coming from a boiler package (with a capacity of 100 tonnes per hour (TPH)) and one heat recovery steam generation boiler (capacity 60 TPH). One gas turbine power generator of 22 MW will be installed to meet the electricity needs of PT Petrokimia Gresik. The project was scheduled to commence in late 2015, and projected to be operational by the end of 2017.
Navigat Group
Navigat Group is Indonesia’s leading distributed power plant developer, owner and operator with 265 MW of installed capacity in Indonesia. In addition to its activities in Indonesia, the company also operates in other South East Asian markets, such as Thailand and Myanmar. Navigat is also the second largest global distributor of General Electric Jenbacher power equipment having sold over 1,000 MW of units in South East Asia. The top holding company of Navigat is incorporated
89 Persson, B.E. Business prospects in South East Asia for European cogeneration equipment using biomass as fuels.
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in Singapore, but the company’s headquarters are in Jakarta. The company’s main focus is the distributed gas to power market in South East Asia, and it typically pursues power projects of 5 to 100 MW in size. Through its two major divisions, Navigat Energy (GE Jenbacher gas engine equipment sales and service) and MAXPower (IPP, BOOT and rental projects), Navigat has the ability to exploit distributed power opportunities along the value chain from equipment sales to services, construction management, project development and asset ownership.
In Indonesia, it is one of the pioneers to provide and execute Cogeneration (CHP) solutions for major shopping malls, textile factories, palm oil mills, and others. For example, in 2011, the company installed CHP plant technology in Bali and Bekasi waste-to-energy sites, each with the capacity of 2 MW.
3.13.2 EU Entry Opportunities
The cogeneration market in Indonesia offers multiple opportunities for European companies. As the country starts exploring options for optimising facilities with retrofitting solutions for old cogeneration technologies and install new ones in emerging cogeneration industries, potential for cogen systems remains high. The sector offers particularly lucrative opportunities for suppliers of equipment for the industrial-scale renewable energy and cogeneration plants. Suppliers are likely to find growth opportunities for gas turbines, steam turbines and generators in the range of 4 to 20 MW. There is also likely to be an equally attractive opportunity for heat recovery steam generators (HRSG) in the range of 8 to 40 tonnes/hour (TPH). Some of the most promising entry points for providing cogen technologies lie in the following sectors:
Cogeneration technologies for wood industry
Cogeneration technologies for sugar industry
Cogeneration technologies for palm oil industry
Cogeneration technologies for rice industry
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Cogeneration technologies for wood industry
Although there are over 400 sawmills producing wood residues (ranging from 10,000 to 50,000 m3/year), very little has been used to generate electricity to date. Most sawmills generate power with diesel generators. Plywood factories are also using wood wastes to generate process heat, but most do not generate power. The ASEAN COGEN programme has previously supported the development of a 5.5 MW waste wood power plant at T Siak Riaya Timber in Pekanbaru, Sumatra. Earlier feasibility studies and demonstration projects have also shown favourable returns on investment for biomass cogeneration. With the elimination of diesel subsidies in Indonesia, many of these mills are beginning to reconsider cogeneration options.90
Cogeneration technologies for sugar industry
At present, there are 56 sugar mills in operation in Indonesia. Cogeneration in most sugar mills is still limited to outdated equipment using conventional steam thermal technology. However, most of them have a large potential to produce excess electricity from bagasse. Three co-generation plants utilising bagasse with a combined total capacity of 25 MW are planned in Java (18 MW), Sumatra (6 MW) and Sulawesi (1 MW). Another 12 bagasse projects are planned with a total combined capacity of 104 MW. These plants are to be located in Sumatra (38 MW), Sulawesi (13 MW), Kalimantan (4 MW), and Java (29 MW). Around 100 MW of projects (mostly biomass and bagasse cogeneration) have been identified for power generation supply to the grid.91 Total annual power generation potential from sugar industries via cogeneration is estimated at 3,500 MW.92
The Government of Indonesia has also an active policy to relocate sugar cane fields from East Java to Kalimantan, Sumatra and Sulawesi. Setting up mill to process the newly developed sugar cane plantations outside Java offers an immediate opportunity to install new cogeneration
90 IBP, Inc. (2015). Indonesia: Energy Policy, Laws and Regulations Handbook. 91 IBP, Inc. (2015). Indonesia: Energy Policy, Laws and Regulations Handbook. 92 Renewable Energy World (2009). Biopower in Asia: growth in Cogeneration and Power Production. Link: http://www.renewableenergyworld.com/articles/print/volume-12/issue-4/bioenergy/biopower-in-asia-growth-in-cogeneration-and-power- production.html
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systems, some in locations that currently depend heavily on diesel generators for power supply. In these areas, financial rates of return for investments in cogeneration are expected to be high.
Cogeneration technologies for palm oil industry
While the palm oil industry is under close examination for the environmental impact, the palm oil industries have good potential for high-pressure modern cogeneration plants at above 5,000 GWh.93 Like sugar mills, palm oil mills have traditionally been designed to cover their own energy needs by utilising low pressure boilers and back pressure turbo-generators. Some mills in the industry are eyeing opportunities to upgrade, or have already upgraded, their technology. For example, in the Palm Oil Factory in Dumai, Riau province, around 20% of the generated steam from palm kernel shells is already used for heating of bleached palm oil and 80% for electricity generation of 3 MW. Additional opportunities for retrofitting, upgrading and installing cogeneration technologies are likely to be available for experienced European companies.
Cogeneration technologies for rice industry
The growing interest for rice husk power plant projects is also visible across Indonesia. The rice industries have good potential for medium and high-pressure modern power plants and the annual power generation under high-pressure modes of up to 7,500 GWh.94 It is estimated that around 15% of the total available electricity from biomass wastes could be generated by utilising rice waste. A bulk of this capacity would come from Java. Significant additional capacities could come from Sumatra, Sulawesi, and Kalimantan where the majority of rice mills are located. In contrast to sugar and palm oil mills, there are only very few installations of cogeneration systems in rice mills. But the industry sector has growing interest in cogeneration potential.
In addition, given the fact that the quality of biomass as fuel is not homogenous, certain types of biomass impose challenging technical problems. The quality of biomass as fuel is not
93 Renewable Energy World (2009). Biopower in Asia: growth in Cogeneration and Power Production. Link: http://www.renewableenergyworld.com/articles/print/volume-12/issue-4/bioenergy/biopower-in-asia-growth-in-cogeneration-and-power- production.html 94 Renewable Energy World (2009). Biopower in Asia: Growth in Cogeneration and Power Production. Link: http://www.renewableenergyworld.com/articles/print/volume-12/issue-4/bioenergy/biopower-in-asia-growth-in-cogeneration-and-power- production.html
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homogenous. Some properties impose challenging technical problems. Rice husk, for example, has low char reactivity. The heat value is rather low (due to high moisture and/or high ash) and the ash properties are problematic (low ash fusion) which cause combustion-related problems such as slagging, fouling and corrosion. These circumstances provide European industry with a competitive advantage due to its experience burning demanding fuels at high boiler efficiencies based on efficient cycles with advanced live steam data. The major advantages of European equipment are related to high overall efficiency, high availability, reliability and durability, environmental friendliness (low emissions), high automation levels and low service demand. As a result, European companies are well positioned to reap the benefits of cogeneration market in the rice industry.
European Companies
Caterpillar Energy Solutions GmbH
Caterpillar Energy Solutions GmbH (Caterpillar) is a German mechanical engineering company, based in Mannheim. For many years it was known as Motoren-Werke Mannheim (MWM). However, in 2010 the company was acquired by Caterpillar Group and in 2013 it has changed its name to the current Caterpillar Energy Solutions. In 2009 the company was the third-largest producer by revenue of gas and diesel engines. Today, the company offers mainly gas engines for cogeneration units and biogas plants with an output between 400 and 4,300 kilowatts.
Figure 57: The 14 Containerised MWM TCG 2020 V20 Natural Gas Gensets of the Rawa Minyak CHP Plant Source: MWM
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In 2017, the company announced that it has successfully installed 14 MWM TCG 2020 V20 gas engines as a cogeneration solution in Rawa Minyak CHP plant in Riau province. The development of the CHP plant was commissioned by the state-owned utility PLN and developed by PT Wijaya Karya Tbk together with the Indonesian MWM partner PT Euroasiatic Jaya.
AQYLON
Founded in 2009, the French company AQYLON is a global leader in the design and manufacturing of Organic Rankine Cycle (ORC) turbines, which transforms heat into electricity and thermal power from renewable sources (biomass, geothermal, solar), or from waste heat created by industrial processes, engines or gas turbines. Since its founding, the company has focused primarily on delivering its solutions for renewable energy and energy efficiency markets. The company offers a wide range of Engineering Services, including Turbomachine Design, Energy Efficiency Consulting and Project Engineering Management.
AQYLON opened its office in Jakarta in March 2017, following the increase in projects and the recent signing of a 3 MW biomass plant contract where it installed its ORC turbines. After its first direct sale of the biomass power plant burning waste from Empty Fruit Bunch, the company is currently developing several biomass and waste-to-energy projects under the PPA scheme.
Aprovis Energy Systems GmbH (Aprovis)
Aprovis in a German specialist in exhaust heat recovery for the combined heat and power business. Founded in 2000, Aprovis has installed its units across the globe. Aprovis Energy Systems GmbH produces around 3,000 units per year with a thermal output starting at 10 kWhth up to 16 MWth.95 Its applications of cogeneration range from very large industrial processes through to individual households and the tertiary sector, including with capacities of less than 1 kW up to hundreds of Megawatts. The company entered the Indonesian market via its representative, PT Karya Energi Indonesia, which sells its units in the domestic market.
95 http://www.cogeneurope.eu/aprovis-energy-systems-joins-cogen-europe_680.html 16 MWth is equivalent to 16,000 kWth
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3.14 Carbon Capture and Storage
3.14.1 Market Overview
In addition to its abundant resources and power generation capacities, Indonesia struggles with high levels of emissions of greenhouse gasses (GHG). The GHG emissions come primarily from land use change and forestry activities, energy generation, peak fires, waste, agriculture and industry. According to the World Bank, per capita emissions of carbon dioxide (CO2) were estimated to be around 2.3 metric tonnes in 2011, 0.7 metric tonnes higher than the average for 96 lower middle-income countries. The energy-related CO2 emissions are projected to rise to over 800 million tonnes by 2030, more than doubling over the period of 20 years.
Figure 58: Business-as-usual Emissions Projections up to 2030 Source: Ministry of Finance (2009). Economic and Fiscal Policy Strategies for Climate Change Mitigation in Indonesia
Carbon capture and storage (CCS) is an emerging technology that could help Indonesia to limit its GHG emissions from the energy and industrial sectors while also increasing Indonesia’s national energy security.
96 Asian Development Bank (July 2016). Indonesia: Energy Sector Assessment, Strategy and Road Map
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With abundant geological CO2 storage capacities, largely based in depleted oil and gas reservoirs, saline aquifers and coal seams, Indonesia is in a privileged position to play an active role in CCS development. It is currently the only South East Asian nation to have taken initial steps to explore the possibility of large-scale application of CCS.
The Ministry of Energy and Mineral Resources (MEMR) and the Environmental Ministry have been the most active government agencies to push for wider CCS exploration, however, the progress has been relatively slow so far. However, the relevance of CCS technologies for Indonesia have been recognised in some legislative documents. In late 2011, for example, the President of Indonesia approved a decree making a commitment to reduce Indonesia’s emissions by 26% below unchecked levels by 2020. The 2007 National Action Plan Addressing Climate Change has specifically recognised CCS as an important mitigation technology for the power, oil and gas and industry sectors, although there is no specific roadmap for the technology in Indonesia.97
The applicability of CCS in Indonesia was also recognised earlier than in many other countries via activities of the Indonesian R&D centre for oil and gas technology (LEMIGAS) and its research partnerships with private sector and other governments. Via its own research initiatives and short- term collaborations with the other stakeholders, it has conducted some exploratory projects on CCS application in the country. Its projects have focused on both the technical and non-technical aspects, such as CCS regulation. For example, between 2003 and 2005, LEMIGAS has investigated the potential of CO2EOR in conjunction with CO2 storage in East Kalimantan and South Sumatra. It has also collaborated with a number of international partners to explore CCS technology and its potential uses in Indonesia. Some of its partnerships included:
2005: Sojitz Corporation and Mitsubishi to conduct a study on the potential for CCS
2007: Total to investigate CO2 emissions and the possibility of CO2 storage in East Kalimantan
2008: Shell to undertake early scoping work into a potential CCS project
97 Ministry of Environment (2007). National Action Plan Addressing Climate Change. https://theredddesk.org/sites/default/files/indonesia_national_action_plan_addressing_climate_change.pdf
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2009: Joint study with the British Embassy in Jakarta, Kementerian Lingkungan Hidup, Shell International, PT PLN (Persero) and the World Energy Council to investigate two regions with the most potential for CCS – East Kalimantan and Sumatra
2010: Memorandum of Understanding signed with the Japanese CCS Corporation, the Indonesian Renewable Energy Society (METI), and Korea Institute of Geoscience and Mineral Resources (KIGAM) to explore the application of CCS technologies in Indonesia
Most recently, in 2016, the country has launched the Gundih CCS pilot project, located in central
Java Province, which aims to use CO2 captured from the Gundih gas field, and inject around 30 tonnes per day over a two-year period (with a total injection of around 20,000 tonnes) into an uneconomic oil and gas reservoir.
Design and construction of the surface facilities for CO2 injection is planned to commence the implementation stage by the end of 2018, or early 2019. The feasibility study is undertaken by the Bandung Institute of Technology, with the funding from the Asian Development Bank, and the Japan International Cooperation Agency (JICA). The Gundih project aims to transfer resources, technological knowledge, necessary equipment and training in order to pave the way for full-scale CCS operations in the South East Asian country.
Figure 59: CCS Gundih Pilot Project Status since 2012
Source: Wahyudi, E. (2017). Timelapse microgravity data acquisition in baseline stage of CO2 injection Gundih pilot project
While the Gundih project is spurring more interest in the exploration of CCS technologies in Indonesia, the lack of enabling conditions for large-scale CCS market still hinders greater engagement from the private sector. A key barrier to CCS in Indonesia, as in many other
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countries, is the lack of regulation. At present, the use of CCS is not included in Electricity Supply Business Plan (RUPTL) 2016-2025 and no legislation or laws on CCS are available. Several existing regulations under the oil and gas sectors, however, may in the future serve as a pathway to a more robust legislative environment. 98
Local Players
As the field of CCS is very nascent in Indonesia, there are currently no local companies engaged in CCS activities. The local market has not developed enough to provide scalable opportunities for local players to find bankable opportunities in the application of CCS technologies. The most important local player is currently the Indonesian R&D centre for oil and gas technology (LEMIGAS), which engages in pilot R&D projects in Indonesia.
3.14.2 EU Entry Opportunities
The Government of Indonesia has been increasingly vocal with concerns about climate change and its impact on the developing world. It has pledged to reduce GHG emissions by 26% in 2020 and has stated that this target would increase to 41%, if international financing was available.
Current government efforts, including energy mix improvements and the switch to less carbon- intensive fuels and renewable sources, are considered insufficient to achieve CO2 emissions abatement targets for 2020. As the country speeds up its development and increases power generating capacity, it is likely to acquire an opportunity to deploy CCS and avoid higher retrofit costs down the line, offering opportunities for European companies to engage the government at the early stages and incentivise the usage of CCS for new power generation projects.
Those interested in the Indonesian CCS market should mark Indonesia’s expressed priority for enhancing and sustaining energy security and access to the population. Consequently, without international financial support, Indonesia may only be interested in CCS if it contributes to energy
98 For example, the Ministerial Regulation No. 13/2007 sets out requirements and procedures for waste treatment in upstream oil and gas and geothermal activities using injection methods into the subsurface. It is considered as the most suitable regulation to CCS, particularly on storage aspects.
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provision or energy security objectives. Companies looking to enter the CCS market in Indonesia should target their initiatives to address energy security goals.
In the short to medium term, several opportunities are available for interested European companies. Some of the most promising short-to-medium term opportunities are:
Demonstration of CCS technologies via pilot projects
CCS technology provision for oil and gas upstream sector
Partnerships with international organisations
Companies interested to take a proactive role and to strategically position themselves in the yet nascent CCS market may also take notice of ample storage and resource availability, which could provide lucrative CCS market opportunities in the long-term. The most promising areas for the application of CCS technologies in the longer-term are:
CCS application for depleted oil and gas reservoirs, coal seams and saline formations
Retrofitting opportunity for combined biogas and CCS technologies
Demonstration of CCS technologies via pilot projects
While the market for CCS technologies is very new to Indonesia, the country currently has no scalable commercial projects to tap into. However, the Gundih pilot project demonstrates Indonesia’s willingness to move from pilot studies to demonstration stages, and then to commercial-scale applications. European companies may find opportunities to collaborate with local stakeholders to develop demonstrations of CCS technologies. Indonesia’s Roadmap for CCS Pilot Project in Indonesia, 2012-2018 (LEMIGAS) also indicates that the country is ready to open up opportunities for such initiatives and to collaborate with domestic and international partners. These initiatives would be limited, however, to cooperation with the government agencies on pre-feasibility and feasibility studies and small-scale demonstrations of the CCS potential.
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CCS technology provision for oil and gas upstream sector
The most suitable near-term deployment of CCS in Indonesia is likely to be in the oil and gas upstream sectors. CCS technologies can capture the CO2 for storage in depleted oil and gas reservoirs that may be used for Enhanced Oil Recovery (EOR) and Enhanced Gas Recovery (EGR) projects and in saline formations, to meet economic development and energy security goals. Such projects would be similar in nature to existing projects in Sleipner, Snohvit and In Salah. This is particularly the case for the large Natuna gas field which has 70% of the region’s
CO2. It is unlikely that this field will be able to develop further without deploying CCS to deal with the resulting emissions. This offers opportunities for European companies to offer their services and knowledge in the development of affordable, efficient and effective CCS technology.
Partnerships with international organisations
Indonesia has also expressed interest in working with international governments and organisations to develop the deployment capabilities of CCS. Companies looking to enter the Indonesian market may consider partnering with international organisations for co-financed pilot projects, before an existing commercially viable market for CCS can be fully verified and developed. The Indonesian research and development centre LEMIGAS has already partnered with the British embassy, World Bank and the Asian Development Bank in addition to the private sector in the past to conduct research on CCS application in the country. Companies may find additional opportunities via such partnerships, where the funding and risk is divided between partnering stakeholders.
CCS application for depleted oil and gas reservoirs, coal seams and saline formations
For opportunities in the longer-term, LEMIGAS studies have identified the following sedimentary basins for most promising CO2 storage opportunities in Indonesia in the near future. These CO2 storage locations are considered as the most economically feasible for longer-term deployment of CCS technologies due to good reservoir characterisation, geological stability, existing infrastructure and low population density. The locations are primarily the depleted oil and gas reservoirs, coal seams and saline aquifers, and they offer abundant storage capacity.
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No. Basin Name Region Suitability Score (1-0)
1 Kutai East Kalimantan 0.913 2 Tarakan East Kalimantan 0.777 2 South Sumatra South Sumatra 0.756 4 Seram Maluku 0.735 5 North West java West Java 0.723 6 Barito Central-South Kalimantan 0.722 7 Central Sumatra Riau 0.715 8 North Sumatra North Sumatra 0.702 9 Salawati Papua 0.690 10 North East Java East Java 0.683
Table 36: Most Suitable Sedimentary Basins for CO2 Storage in Indonesia Source: LEMIGAS
Figure 60: CO2 Storage Capacity Estimates in Depleted Oil and Gas Fields Source: LEMIGAS For example, a long exploration and production history in Indonesia has left a legacy of many depleted oil and gas fields that could be used for potential CO2 storage in the longer-term. Mostly located in Sumatra, Kalimantan and Java, these areas can store more than 600 Mt of CO2 and offer significant CCS opportunities.
Indonesia also has vast coal bed methane resources, which approximate to 453 trillion cubic feet
(Tcf). With higher affinity to CO2 than CH4, coal seams offer more secure trapping mechanism and these resources can be found in all of the main islands of Indonesia. As a result, they offer
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good opportunities for CCS technology application in the longer-term, once the market for CCS has fully developed from pilot studies to demonstration and commercial application stages.
While there has been no detailed study to identify saline aquifer storage opportunities, some
99 estimations point to a theoretical 7.7 GtCO2 storage capacity. With its wide distribution and size, saline aquifer is yet another resource with potential for widespread CCS application. Preliminary studies indicate the greatest potential in Natuna and South Sumatra basins.
Together, these geological formations are considered as potential sites for wider application of CCS technology in Indonesia, including both offshore and onshore future developments. They contain significant storage capacity and, therefore, ample opportunities for CCS deployment in the longer-term.
STORAGE CAPACITY (GTCO2)
Theoretical Effective
7,7
2,7 0,9
SALINE FORMATIONS C O A L S E A M S DEPLETED OIL AND GAS RESERVOIRS (103 FIELDS) Figure 61: CO2 Storage Capacity in Geological Formations Source: LEMIGAS
Retrofitting opportunity for combined biogas and CCS technologies
Combining CCS with biomass energies may also offer potential opportunities in the future. While the biomass industries are too immature at the moment and the scale of the industry is too small for CO2 supply, or retrofitting technologies, future reduction technologies may require negative emissions, which can be addressed by combining biomass with CCS. Those companies that are seeking to gain a strategic foothold in the Indonesian CCS market may consider initiatives to collaborate with local biomass energy players in order to secure future retrofitting opportunities.
99 GtCO2 refers to the Gigatons CO2. A gigaon is equal to 1 billion tons.
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European Companies
Currently, there are no European companies engaged in CCS technology development or commercialisation in Indonesia. Some interest in cooperation on pilot studies and further research on CCS potential in the country has been shown over the years from American and Japanese Companies.
Figure 62: CCS Milestones in Indonesia & Cooperation over the Years Source: LEMIGAS (2012). The Latest Status of Carbon Capture and Storage (CCS) in Indonesia
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3.15 Electric Vehicles
3.15.1 Market Overview
Indonesia is urbanising and its population is increasing, as are the sales of motor vehicles.100 These trends are converging to cause crippling congestion and pollution in the Indonesian cities. The government is considering transport to be one of the seven emission reduction areas under its commitment to reduce greenhouse gas (GHG) emissions by 26% by 2020 (or up to 41% with international support), as against projected business-as-usual scenarios.101 To catch up with the global campaign to go green, Indonesia is evaluating zero-emission electric cars and other electric vehicles (EVs) as viable options. Amongst its aims is the increase of the share of electric vehicles in the transport mix of up to 30% by 2050.
Development of electric cars in Indonesia
Although Indonesia has initiated the development of electric cars, progress has been very slow so far, without any unified stance or urgency in terms of national policy.102 The government has set targets to mitigate transport emissions, but the overall approach has focused more on alternative fuels, such as natural gas and biofuels for transport, rather than on demand-side management or improved system efficiency. As a result, the electric car market is close to non- existent in Indonesia.103
Several domestic initiatives have been initiated over the years, mostly limited to the on-going research at several universities to develop domestic EVs.104 For example, the University of Indonesia (UI), in collaboration with the government and investors, launched four electric vehicle prototypes in July 2016, including one commercial vehicle, two city cars and a bus.
100 International Energy Agency (2015) Indonesia 101 Transport accounts for more than 50% of oil consumption and 30% of energy-related emissions, and it is growing at a faster rate than any other demand sector. 102 OECD (January 2015). Domestic incentive measures for environmental goods with possible trade implications: electric vehicles and batteries 103 Asian Sedan (2014). Hybrid and Electric Car market in Indonesia. Link: http://asiansedan.blogspot.co.uk/2014/04/hybrid-and-electric-car- market-in.html#.WaScYHeGOAw 104 GE SEAN Reports (June 2017). From Tuk-Tuks and Jeepneys to EVs – ASEAN nations prepare for an electric car future. Link: http://gereportsasean.com/post/161883580105/from-tuk-tuks-and-jeepneys-to-evs-asean-nations
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Aside from the efforts at the UI, the government appointed other top universities and research institutes to develop electric vehicles as well. They include the Bandung Institute of Technology, Gadjah Mada University, November 10 Institute, Electronics Polytechnic Surabaya (PENS), Sabelas Maret University (UNS), the Ministry of Technology Research and Higher Education (Riset Dikti), University of Cikarang, and the Indonesian Institute of Sciences (LIPI).105
Although some institutes, such as Sepuluh November Institute of Technology (ITS),106 have progressed a long way on the path to creating sustainable models, none of the prototypes have reached the level of production to date. Compared to other ASEAN countries where electric cars already exist, Indonesia is lagging far behind.
Figure 63: Domestic Research Initiatives to Develop Prototype EVs Achmadi Mesin 5.0 (top left), Pindad PIEV (top right), EC Electric Car (lower left) & SmarT EV.3 (lower left) Source: Association of Indonesian Electric Vehicle Developer
105 Globe Asia (January 2017). E-mobility – the future of motoring. Link: http://www.globeasia.com/technology/e-mobility-the-future-of-motoring/ & The Jakarta Post (January 2017). University of Cikarang plans to develop electric vehicles. Link: http://www.thejakartapost.com/youth/2017/01/04/university-in-cikarang-plans-to-develop-electric-vehicles.html 106 ITS notes that it has progressed significantly towards creating sustainable EV model and, except for battery, it is ready to develop electric vehicles. According to ITS, main components, such as electric motor, the transmission power control modules and the charging systems can be produced by university, while other general parts, such as tyres, bolts, wheels, lighting system and seats can be manufactured by the existing industries.
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According to Gusti Muhammad Hatta, Minister for Research and Technology, there are nine stages of development that Indonesia has to pass before electric cars can be mass-produced. Until now, Indonesia has passed only six levels, up to the development of prototypes and testing, while the three remaining stages – laboratory and field testing and readiness for production – have yet to be achieved. Although Mohammad Nasir, the Minister of Research, Technology and Higher Education, noted in 2017 that Indonesia will begin mass production of electric cars by 2020, the Ministry of Industry is less clear about the timelines.107 In its Roadmap for Automotive Industry it also identifies that conventional cars will still dominate the market until at least 2025.108
Challenges for commercialisation of electric cars
The Indonesian electric car market is also paved with challenges. E-mobility faces risks from the market, technical capabilities, policies and infrastructure.
For example, commercial companies find it difficult to enter the Indonesian EV market as there is not enough data on the market. Although different types of hybrid and electric vehicles are in circulation, the numbers are too low to determine the market size and composition, making it extremely difficult for companies to weigh their risks and opportunities.109
Lack of infrastructure to support wider electric vehicle adoption is also hampering growth of the sector. Around 40 companies incorporated in the Association of Indonesian Automotive Industries (Gaikindo) could produce electric cars for consumers.110 But the willingness to develop commercial electric cars is often contingent on the availability of supporting infrastructures. Currently, neither charging stations nor EV component manufacturing facilities are widely
107 Xinhuan Net (2017). Indonesia to kick off mass production of electric vehicles in 2020. Link: http://news.xinhuanet.com/english/2017- 08/03/c_136497266.htm & MetroTV News (2016). Indonesia not ready for electric car. Link: http://en.metrotvnews.com/read/2016/01/22/473296/indonesia-not-ready-for-electric-car 108 Asian Sedan (2014). Hybrid and Electric Car Market in Indonesia. Link: http://asiansedan.blogspot.co.uk/2014/04/hybrid-and-electric-car- market-in.html#.WaScYHeGOAw 109 The Jakarta Post (February 2016). South Korean firms eye shipyards, electric cars, seeking business partners. Link: http://marintecindonesia.com/south-korean-firms-eye-shipyards-electric-cars-seek-business-partners/ 110 Antara News (2015). Car industry interested in developing Indonesian electric car. Link: http://www.antaranews.com/en/news/100091/car- industry-interested-in-developing-indonesian-electric-car
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available across Indonesia. PLN has built only 2 charging stations for electric cars in 2013 and this number increased only marginally since then.111
The question whether Indonesians can afford electric cars also remains unanswered. Current fiscal and taxation policies are likely to inflate the price of such products to around US$ 150,000 per unit. Tesla’s Model X, introduced in 2017 to the Indonesian market, had a staggering price tag of US$ 200,000. Therefore, even if electric cars become more available across the Indonesian market, there is little information whether there would be enough domestic appetite for such cars. It is more likely that such cars would be contained within the luxury car market segment.
Government initiatives to accelerate electric car market
While the development of the electric car market has been stagnant until recently, the government is starting to provide additional incentives for EVs in the country. In mid-2017, the government announced plans to accelerate the expansion of attractive regulations and policies to improve the environment for EVs.112 The representatives from the Ministry of Finance, the Ministry of Industry and the Ministry of Energy and Mineral Resources (MEMR) are now tasked with the drafting of a Presidential Regulation to support the development of electric vehicles, which is likely to be released by the end of the year.
The key pillar of the new policy is to introduce tax breaks for low-carbon emission cars, with the goal of reducing emissions by 29% by 2030. There are plans to make the tax exemption under the “Low Carbon Emission Vehicle” programme, which would replace the Low Cost Green Car (LCGC) initiative113 currently in place. The government aims to push low-carbon emissions cars by stages, starting with hybrids before moving into the electric cars segment.
111 The Jakarta Post (February 2016). South Korean firms eye shipyards, electric cars, seeking business partners. Link: http://marintecindonesia.com/south-korean-firms-eye-shipyards-electric-cars-seek-business-partners/ 112 The Jakarta Post (July 2017). RI prepares regulation to make way for electric cars. Link: https://www.pressreader.com/indonesia/the-jakarta- post/20170720/281913068166664 113 Indonesia's "low-cost green car" category is a government initiative to make small, fuel-efficient vehicles affordable for low-income people. The LCGC is a type of vehicle category that meets certain requirements, such as a basic price of 95 million rupiah ($7,275) or less, high fuel economy of 20km or more per liter, and an engine displacement of 1,200cc or less for a gasoline-fueled car.
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The MEMR also plans to instruct the state electricity company PLN to establish a small battery shop in each of the 6,000 existing gas stations across the country. Furthermore, the government is looking to introduce quotas for domestic production, but the actual percentage is still under consideration, largely due to a lack of established part makers in the country that can provide electric and other types of green cars.114
Finally, the government is expected to consider attracting industries, such as battery and software manufacturing, which are essential for electric car production. To accelerate these efforts, measures under consideration include introducing tax breaks and subsidies to EV-related industries.115
While Indonesia has announced generous incentives for companies developing EVs, the impacts of these on the market trends are yet to be seen.
Electric vehicles (EVs) for public transport
Although the development of electric cars has been slow, Indonesia has seen some initiatives that create space for electric vehicles (EVs) in the Indonesian market. For example, Chinese BYD Company Ltd, the world’s largest battery electric bus maker, created a partnership with PT Steady Safe Tbk, one of the biggest public transit operators in Jakarta, to supply BYD fully electric buses to the TransJakarta BRT System. BYT electric buses started operating in the Indonesian BRT system in 2015. The governor Basuki Tjahaja Purnama highlighted his hopes to replace all internal combustion buses and taxis with electrified vehicles, meaning EV potential for Indonesia.
114 Nikkei Asian Review (August 2017). Indonesia to introduce tax breaks for low-carbon cars. Link: https://asia.nikkei.com/Politics- Economy/Policy-Politics/Indonesia-to-introduce-tax-breaks-for-low-carbon-cars 115 Nikkei Asian Review (August 2017). Indonesia to introduce tax breaks for low-carbon cars. Link: https://asia.nikkei.com/Politics- Economy/Policy-Politics/Indonesia-to-introduce-tax-breaks-for-low-carbon-cars
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Figure 64: BYD Fully Electric Bus in Indonesia Source: BYD
Electric two and three-wheelers (2/3Ws)
While electric car development and commercialisation is still stagnating in Indonesia, the country offers a promising market for electric scooters and two- and three-wheelers (2/3Ws). Local small- scale assemblies for low cost EVs as well as the market for electric scooters is already available in Indonesia.116
Figure 65: The Travellers on Motorbikes on Jalan Raya Bekasi km 22, Cakung, Jakarta Source: Antara News
116 United Nations Centre for Regional Development (2014). E-mobility as the next generation solutions for clean air and sustainable transport in Asia.
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Nowhere else in the world is the concentration of 2/3Ws as high as in South East Asia. Some 6 million motorcycles are sold annually in Indonesia, making it one of the biggest markets in the world.117 After China and India, Indonesia is the third largest market in the world for petrol scooters and that strength is expected to carry over into the electric scooter market.118
Average annual Average Annual Motorcycles % Country/ Region Year Other Vehicles growth* Other Growth* and Mopeds Motorcycles Vehicles Motorcycles China 2009 62,136,896 95,805,176 60.7% 30.9% 10.4% India 2009 21,200,140 82,402,105 79.5% 10.7% 12.1% Indonesia 2009 18,281,437 52,433,132 74.1% 22.6% 20.9% Vietnam 2007 1,146,312 21,779,919 95.0% ND ND Thailand 2006 8,923,447 15,674,941 63.7% 6.8% 2.6% Taiwan 2009 6,718,746 14,604,330 68.5% 2.3% 3.3% Malaysia 2008 9,030,292 8,487,451 48.5% 7.1% 7.5% Pakistan 2009 2,170,430 3,383,493 60.9% 10.4% 13.0% Philippines 2009 2,990,743 3,200,968 51.7% 2.0% 23.5% Sri Lanka 2009 951,362 2,339,916 71.1% ND 8.0% Table 37: Top Ten Largest Markets for 2/2Ws in Asia and their Growth Source: World Road Statistics (2010) via International Council on Clean Transportation (2011)
Sales projections for electric scooters by Pike Research also indicate that Indonesia is one of the largest electric two-wheel vehicle markets in the region.
Figure 66: Electric Two-Wheel Vehicles Sales by Country in Asia Pacific (except for China), 2012-2018 Source: Pike Research
117 Nikkei Asian review (August 2017). Local maker kicks off Indonesia’s electric scooter market. Link: https://asia.nikkei.com/Business/Trends/Local-maker-kicks-off-Indonesia-s-electric-scooter-market?page=2 118 Vmoto (2013). Company News. Link: http://www.vmoto.com/news/detail.aspx?ID=71
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Demand for electric 2/3Ws is expected to grow in the upcoming years due to widening concerns about the environment and the relatively low cost of such EVs. As the Indonesian Government is also considering tightening environmental standards for motorbikes in response to worsening air pollution, it is likely that more customers will opt for electric alternatives.
Most electric 2/3Ws in Indonesia are assembled locally, but vehicle parts are imported, mostly from China as completely knocked down units.119
Although there are some concerns that 2/3Ws would increase electricity demand in the country, experiences from the Chinese market (around 200 million electric 2-wheelers deployed) show that due to significant increase in efficiency (6-9 times when compared to the internal combustion engine equivalent), the increased electricity demand and associated emissions would be more than offset via efficiency gains. Preliminary analysis by the International Energy Agency (IEA) shows that around one to two power plants would be needed to power all 65 million two-wheelers of Indonesia, assuming they all converted to all-electric configurations.120
Several local and international companies are already competing for the market share of electric 2/3Ws in the country.
Local Players
Established in 2000, PT Triangle Motorindo is an Indonesian motorbike manufacturer and the sole brand holder of VIAR Motors. The company is aiming to become one of the largest motorcycle manufacturers in Indonesia. With its 20-hectare factory in Semarang, Central Java, PT Triangle Motorindo continues to expand its production and distribution of VIAR motorcycles across Indonesia. Currently, the company has a production capacity of up to 1,000 units per day (25,000 units per month), making it one of the largest automotive factories in the country. The company has a network of over 700 motorcycle dealers that sell VIAR motorcycles, mainly
119 Erie News Now (August 2017). Electric Three-Wheeler – Market Drivers and Opportunity Assessment by Technavio 120 International Energy Agency (2015). Indonesia
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in smaller cities. Despite its capacities, it has struggled to make a dent in the Japanese manufacturers’ market share of over 90%, primarily due to the sales network being weak in larger cities, such as Jakarta.
In 2016, VIAR Motor Indonesia announced its plans to collaborate with UGM in the development of electric motorcycles. Within the next 5 years, PT Triangle Motorindo together with Gadjah Mada University (UGM) will conduct research and development for electric motorcycles, Viar Pulse and Q1, mainly in engine, controller, battery management system and battery technologies. According to Prof. Dr. Suratman of UGM, “this cooperation could eventually push the national automotive industry to have more local components”. In 2017, it has introduced the country’s first street-legal electric scooter, Viar Q1, to the domestic market.
Figure 67: Viar Q1 Model on Display in Bilai Kartini, Jakarta Source: tomotifzone.com
The company developed the scooter with German auto parts maker, Robert Bosch, and an Indonesian university (UGM). Bosch supplies the motor and other key components for the scooter Viar Q1. It can travel up to 70 km on a single charge at a maximum speed of 60kph. When plugged into a household electrical outlet, the scooter can be fully charged in five to seven hours. Viar Q1 is priced at around 16 million Indonesian rupiah (US$ 1,200), close to price tags of the top-selling models of Honda Motor and Yamaha Motor. Sales of the Q1 remain tiny – several dozen per
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month. The company aims to improve its marketing by creating more electric scooter models through a partnership with Bosch and other companies.
Garansindo Group
The Indonesian Garansindo Group was established in 2001 as a service-focused company. Over time, it evolved by adding various business divisions, including distribution and, most recently, automotive manufacturing. In 2014 the company signed the contract with Zero Motorcycles (producer of electric motor vehicles in the US) and was appointed as a Sole General Distributor for Indonesia for its electric motorcycles.
In 2015, the company expanded its electric two-wheeler distribution network by signing an agreement with Italjet, a premium electric bike producer from Italy. Finally, in March of 2017, the company’s collaboration with the Institute of Technology (ITS) has resulted in the release of the Indonesian-made electric bike, Garasindo Electric Scooter ITS (Gesits), which started limited production in April 2017. The ITS workshop in Surabaya will produce 300 vehicles: 100 of the standard edition and another 200 of the special edition ordered by the Bali administration. Some institutions have already pre-ordered it, such as PT Telcom, which has asked for 5,000 units and the Bali administration, which has ordered 22,000 units.
PT Great Asia Link
Great Asia Link is electric car company and single distributor of DCP automotive assembly in Surabaya, Indonesia. The company is the first commercial electric car company in Indonesia with the national brand ELVI. Its core business goal is the electric car distribution with total capacity of around 20,000 cars/year, together with electric car spare part distribution and electric car dealerships & workshops. With the spread of the business group network in 34 provinces, the company’s aim is to become the electric vehicle pioneer in Indonesia.
The company started operating its factory in 2017 and plans to release the first vehicles by the end of the year. The car ELVI will be sold at around RP 75-150 million (EUR 4,717 – 9,434) and it will be using 40% local components with the rest imported from abroad.
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3.15.2 EU Entry Opportunities
The ambitious blending mandates for ethanol (20%) and biodiesel (30%) for 2025 onwards currently dominate the Indonesian outlook for renewables in transport. However, electric vehicles and two- and three-wheelers provide some opportunities that may offer entry points for European companies:
Provision of electric 2/3Ws for domestic market
Export opportunities for EV components and knocked down EV models
Research & Development (R&D) collaboration on EVs
Infrastructure development
Provision of electric 2/3Ws for domestic market
The potential by 2030 for 6% of the vehicle stock and 20% of all motorcycles and scooters to be electric has been identified by International Renewable Energy Agency, based on the expectation of a rapid continued increase in vehicle penetration.121 Vmoto, an Australian motorcycle manufacturer, has also noted that the motorcycle market in Indonesia still offers enormous room for growth, as the ratio of motorcycle owners to residents is one unit per seven people, making Indonesia’s ratio much lower than those of neighbouring countries. In remote areas and islands, electric vehicles and electric two- and three-wheelers are good solutions given the relatively short travelling distances. In larger cities, electric mobility can play an important role in mitigating air pollution.
Market sales projections from Pikes Research for the period 2012-2018 also indicate that the Indonesian electric scooter market will become the third largest in Asia Pacific after China and India. This represents a significant sales opportunity for European-styled quality products in the growing market of electric 2/3Ws.
121 Remap (March 2017). Renewable Energy Prospects: Indonesia
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Export opportunities for EV components and knocked down EV models
While several initiatives tried to develop feasible EV models, among the identified obstacles for the development were the inefficient battery charging time and battery capacity. There are significant opportunities for European manufacturers to export these parts to Indonesia or collaborate in knowledge transfer and R&D initiatives. In particular, two main technologies are used in the e-motorcycle and e-scooter market: lead-acid and lithium ion batteries. Lead-acid batteries will be the primary technology used in Indonesia’s electric two-wheeler vehicle markets and the demand for quality products is expected to rise.
Indonesia also charges relatively high import tariffs on most vehicles under the HS 8703 Harmonised Trade System, including all-electric vehicles, but a relatively low (10%) import tariff on “complete knocked down” (i.e. unassembled) vehicles. As a result, companies wishing to enter the Indonesian EV market should consider the import tactics of knocked down production lines in order to minimise costs.
Research & Development (R&D) collaboration on EVs
The electric car market in Indonesia is close to non-existent, but the government is keen to support initiatives that could activate the Indonesian electric car market. While the immaturity of the market, including lack of infrastructure, poses many challenges, it also opens up opportunities for European companies to get involved in all stages of the electric car market development: from research and development of electric car prototypes, to prototype testing, infrastructure projects and commercialisation of EVs. All aspects of support, such as regulation, charging stations and tool production components must also be in place before the market takes off. European expertise and support in these fields may also offer them a chance to become one of the earliest players in the market.
To maximise the potential of localisation benefits, the domestic industry should be involved early on. For example, incentivising local industry with the production of electric vehicles, motorcycles and scooters for the local market could be an effective way to achieve faster market growth as well as greater opportunities for international players. Several initiatives are available in Indonesia
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to research and develop feasible EV prototypes for commercial use and for cooperation with research institutes. European companies could provide technical support via collaboration with these local initiatives.
Infrastructure development
To accelerate the uptake of electric vehicles and electric two- and three-wheelers, Indonesia needs infrastructure investments, such as charging infrastructure for electric vehicles and electric two- and three-wheelers at large parking lots in cities. This could be one of the entry points for European companies, as the development of such infrastructure is typically contracted out to the private sector. However, greater supportive policies need to be in place in Indonesia (e.g. tax incentives to reduce the cost of electric vehicles) to kick-start the market.
European Companies
Clean Motion
Clean Motion is a Swedish electric vehicle maker. In May 2013, Clean Motion announced its interest to enter the Indonesian market with its Zbee electric three-wheeler.
Figure 68: Zbee Model by Clean Motion Source: Clean Motion
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The company targets to replace the numerous Bajaj auto rickshaws in Jakarta. The Zbee model was showcased in Indonesia in August 2013. Clean Motion’s three-wheeler is powered by a 4 KW electric motor that consumes 40 Wh of electricity per km. On a full charge, the Zbee can travel up to 50 km. The 3 seater weighs a mere 270 kg. It has a top speed of 45 kph and it has been priced at IDR 80 million (EUR 4,800).
In order to arrive at a competitive pricing, Clean Motion has established a local manufacturing partnership with PT Lundin Industry. The production of the first 100 units commenced in September 2013. Apart from Indonesia, Clean Motion aims to reach other Asian markets as well.
Italjet Moto Srl (Italjet)
Italjet Moto Srl (Italjet) is an Italian manufacturer of motorcycles, headquartered in Bologna, Italy. Since its founding in 1959, the company has produced more than 150 models of motorbikes for domestic and international markets.
The company has first entered the Indonesian electric vehicle market via participation in the 23rd Indonesia International Motor Show (IIMS) in 2015, where it displayed its Italjet Ascot e-bike.
Figure 69: An Italjet Ascot e-bike at the 23rd Indonesia International Motor Show Source: Electric Bike Insider
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In the same year, the company signed an agreement with the Indonesian Garasindo Group, appointing it as the sole distributor of its electric two-wheeler.
Robert Bosch GmbH (Bosch)
Robert Bosch GmbH (Bosch) is a German multinational engineering and electronics company headquartered in Gerlingen, Germany. It is the world’s largest supplier of automotive components measured by 2011 revenues. Bosch’s core products are automotive components, including brakes, controls, electric drives, electronics, fuel systems, generators, starter motors and steering systems; industrial products, such as drives and controls, packaging technology and consumer goods; and building products, including household appliances, power tools, security systems and thermotechnology.
Bosch has been present in Indonesia since 1919. In 2008, the company established its subsidiary PT Robert Bosch in Jakarta with branch offices in Surabaya, Medan, Balikpapan, Semarang and Bali. The company has also opened a technical centre for power tools division in Jakarta. The company has recently partnered with a domestic motorbike manufacturer, PT Triangle Motorindo, to introduce the country’s first street-legal electric scooter to the market. Bosch was responsible for supplying the motor and other key components for the scooter.
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4. Regulations
4.1 Import Procedures
EU companies looking to appoint a local distributor should ensure that their prospective partners understand the complexity and modus operandi of doing business in Indonesia, and have the appropriate licenses to import goods into the country. Importing goods into Indonesia requires the appropriate documentation and verification from the Directorate-General of Customs and Excise (DGCE). A physical inspection of the goods may also be required. All imported goods must be, additionally, declared to the Customs Authority via the requisite Import Declaration Form.
Import License
In order to bring in goods into Indonesia, the Indonesian importer needs to have the following:
Import Identification Number (API)
The Importer Identification Number or Angka Pengenal Importir (API) constitutes identification that importers must possess in order to import goods, which is used by the government as an instrument to regulate orderly importation for the purpose of implementing the foreign trade policy in the field of imports. There are 4 types of APIs:
API for General Importer (Importir Umum, API-U), which should be obtained by a trading company;
API for Producer Importer (Importir Produsen, API-P), which should be obtained by an industrial company importing raw materials and capital goods for its own use;
API for Limited Importer (Importir Terbatas, API-T), which should be obtained by a foreign or domestic investment company; and
API for Special Importer (Importir Khusus, API-K), which should be obtained by a Production Sharing Contract (PSC) company and also companies that import certain commodities such as rice, electronic products, sugar, corn, soybeans, toys, footwear and textiles.
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An API can be obtained from the Ministry of Trade, except for API-T, which should be obtained from the Indonesian Investment Coordinating Board (BKPM). The API is valid for five years and can be extended.
Customs Identification Number (NIK)
In order to get a Customs Identification Number (NIK), the importer should firstly conduct a User ID registration through www.beacukai.go.id to sign in and do the Custom Registration on the same website by following the steps. There are several documents that need to be prepared in order to do the Custom Registration, including the Taxpayer Identification Number (NPWP), the Certificate of Business Domicile (Surat Keterangan Domisili); the Import Identification Number (API), among others
Import Process
Imported products in Indonesia are classified into three categories, namely Free Import, Controlled/Restricted, and Prohibited. Equipment that are used in the energy sector are classified under the first category. Such products can go through the standard import process in Indonesia, assuming the local importer possesses the necessary licenses, and documentations.
The importer has to complete and submit the Import Declaration Form (PIB), compute the customs duty and import taxes, and make a payment to the depository bank.
The PIB and its attachments, such as commercial invoice, packing list, bill of lading/ airway bill, the receipt of payment of import duty and import related taxes (also known as ‘SSPCP’, or Surat Setoran Pabean, Cukai dan Pajak Dalam Ranka Impor), the insurance policy, and the power of attorney (should the custom declaration be submitted by the broker) are submitted to the Customs Authority for approval.
The customs declaration will determine which customs inspection channel the products should go through. A physical inspection of the goods may be required. The imported goods can be released from the customs area after approval by the Customs Authority.
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Trade Samples
Prior to the transaction process, the buyer may request for trade samples. To import trade samples, the Indonesian importer is not obliged to possess an API. However, the importer needs to do the custom declaration process in order to receive the goods. In order to declare the trade samples, several documents need to be prepared by the importer:
The statement letter: a letter to show that the goods are new and will not be traded;
The Taxpayer Identification Number (NPWP) / Driving License / Indonesian Identity Card;
Other additional documents (Trading License, Industrial Patents, Industrial Enterprise License, Company Registration Certificate, Bill of Lading).
Import Duties
Import duty and taxes are due when importing goods into Indonesia whether by a private individual or a commercial entity. The valuation method is CIF (Cost, Insurance and Freight), which means that the import duty and taxes payable are calculated on the complete shipping value, which includes the cost of the imported goods, freight, and insurance. VAT is levied on imports at a standard rate of 10%, or at a reduced rate between 0% and 5% calculated on the sum of the CIF value and duty. However, sales tax can vary and be applicable based on units of measure.
Import duties in Indonesia vary between 0% and 170%. However, most imported items will attract duties in the range of 0% to 15%. Companies importing goods into Indonesia must obtain an Importer Identification Number from the Ministry of Trade or the Investment Coordinating Board.
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4.2 Government Tenders
Indonesia’s National Public Procurement Agency (LKPP) plays an important role as the regulator of procurement for infrastructure projects in the public-private procurement (PPP) framework. In order to achieve service excellence, an Electronic-Based Procurement Service (LPSE) was established as part of the LKPP. As of September 2016, approximately 700 LPSEs have been formed, and they have been implemented in 344 government agencies spread in 31 provinces.
All parties are allowed to participate in the procurement tender, including foreign companies. According to a recent Presidential Regulation, in order to create more opportunities and to protect domestic suppliers, there are certain limits within which foreign companies are able to participate in the procurement tender. Foreign companies are able to participate in the national procurement only if the project value is over IDR 100 billion (EUR 6.8 million) for construction projects, over IDR 20 billion (EUR 1.4 million) for other procurement projects and over IDR 10 billion (EUR 680,728) for consultancy. However, according to the Indonesian Constitution Article 5 No.25, the foreign companies that can participate in the procurement process are those that are located outside Indonesian territory. As for those foreign companies that already operate in Indonesia, should the company have 100% foreign ownership (or in other words those companies that are fully owned by foreign parties), this company cannot participate in the procurement process.
All the companies, including the foreign companies that fulfil the requirements mentioned above, that want to participate in the Indonesian national procurement process, have to firstly get their company registered by the Electronic-Based Procurement Service (LPSE) as the procurement partner. The registration process could be conducted through https://lpse.lkpp.go.id/eproc4/publik/mendaftaremail for email registration, where the applicant will be guided to follow several registration steps informed by email. In order to complete the registration, there are several documents needs to be prepared by the applicant, including:
Copy of Indonesian Identity Card (KTP) or passport of the person in charge of the company;
Copy of the Taxpayer Identification Number (NPWP);
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Copy of the Trading License (SIUP);
Copy of the Company Registration Certificate (TDP);
The registration form.
4.3 Regulations and Agencies Related to Green Energy Technologies
As a strategic sector, energy continues to be heavily regulated by the government in Indonesia. The responsible ministry in charge of regulating the energy sector is the Ministry of Energy and Mineral Resources (MEMR). The government controls the price of electricity, as well as directly setting the domestic price of fuels and electricity. Perusahaan Listrik Negara (PLN) remains the only state-owned enterprise responsible for the transmission and distribution of electricity in Indonesia. PLN no longer has the legal monopoly to generate, transmit and distribute electricity since the passing of a new regulation in 2009 (Law 30/2009). Even so, it is accorded with the right of first refusal of activities in the energy sector, effectively preventing private enterprise participation. Other state-owned enterprises also continue to dominate the industry, including Pertamina in oil and gas production and exports, Perusahaan Gas Negara (PGN) in natural gas transportation and distribution, and Pertamina Geothermal Energy (PGE) and Geothermal Nusantara (formerly known as Geo Dipa Energi, GDE)122 in geothermal energy.123 124
Recent developments unfolding in the past few years indicate strong commitment of the Indonesian government towards the use of renewable energy in terms of targets and policies. Under its Nationally Determined Contribution (NDC) ratified in 2015 through the Paris Agreement, the country targets to reduce greenhouse gas emissions by 29% by 2030, up from 26% by 2020 pledged in its initial Intended Nationally Determined Contribution (INDC).125 The unconditional target however is increased to 41% subject to international support availability through bilateral cooperation on technology development and transfer, technical cooperation, capacity building,
122 http://www.thejakartapost.com/news/2017/06/19/geo-dipa-energi-changes-name.html 123 https://www.adb.org/sites/default/files/publication/178039/ino-paper-09-2015.pdf 124 www.irena.org/DocumentDownloads/.../IRENA_REmap_Indonesia_report_2017.pdf 125 Draft of the Intended Nationally Determined Contribution, Republic of Indonesia
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payment for performance mechanisms and access to financial resources.126 Commitment towards NDC has led to coordination among the government institutions and the newly established Directorate General of Climate Change under the Ministry of Environment and Forestry, to implement the formulated climate change mitigation and adaptation activities in Indonesia. Few regulations were put in place, such as Regulation No. 21/2008. This addresses emission regulations, which among others require emissions monitoring systems to be installed at thermal power plants and an emission inventory to be prepared. There are also targets set on the use of renewable energy and the power sector. The following table contains details of the more updated regulations related to renewable energy and the targets set by the government.
Sector Target Current Policy Framework & Regulation Instruments Overall Targets Renewable energy in Total 23% Government Primary Energy Supply (TPES) Regulation No. excluding traditional uses of 79/2014 bioenergy Renewable energy in power 25% Draft RUKN 2015- generation 2034 (plan, no regulation) Power Sector Targets Large hydropower 18.3 Regulation allows for power purchase MEMR No. GW through direct selection or direct 03/2015 appointment without the minister’s approval as long as the tariff does not exceed the levelised base cost at the power plant’s busbar. Small hydropower 3.0 Different feed-in-tariff for projects up to 250 MEMR No. GW kW (low voltage) and 10 MW (medium 19/2015 voltage) for 20 years. Rates vary for years 1-8 and 9-20, and between locations (60% premium for Papua, for example). Tariff range is indexed at US$ 0.12-0.144/kWh for the first 8 years and US$ 0.075- 0.09/kWh for years 9-20. Bioenergy power 5.5 Feed-in tariffs in the range of about US$ MEMR No. GW 0.108- 0.272/kWh depending on location, 21/2016 (biomass voltage (low/ medium) and type of and biogas) and MEMR No.
126 www.irena.org/DocumentDownloads/.../IRENA_REmap_Indonesia_report_2017.pdf
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Sector Target Current Policy Framework & Regulation Instruments bioenergy (biomass, biogas, municipal 44/2015 (municipal solid waste). waste) Acceleration of municipal solid waste Presidential power plants are done for seven specific Decree No. cities and include, as an example, ease of 18/2016 (municipal permitting and the use of government solid waste) funds to pay for the feasibility studies. Geothermal power 7.1 Direct geothermal within conservation MEMR No. GW forests only allowed when used for nature 17/2014 tourism activities. For indirect geothermal Republic of (power) need permit from Ministry of Indonesia Law No. Forestry if location is in forest areas. Tariff 21/2014 range of US$ 0.122-0.296/kWh dependent on year of commercial operation and area in which project is located. Solar PV 6.4 Feed-in tariff for 250 MW of capacity, with MEMR No. GW 150 MW in Java and the remaining 100 19/2016 MW spread over other locations. Feed-in tariffs range from US$ 0.145/kWh in Java to US$ 0.25/kWh in Papua for 20 years. Wind 1.8 Not covered by specific regulation at the GW moment, although a feed-in tariff is under discussion. Current projects directly negotiated with PLN. Ocean power 3.1 Not covered by specific regulation. GW Ethanol Transportation 20% 2% blending mandate in transportation MEMR No. Blending (PSO), 5% in non-PSO transportation for 12/2015 2016. Industry 20% 5% blending mandate for 2016. MEMR No. 12/2015 Biodiesel Transportation 30% 20% blending mandate for 2016. MEMR No. Blending 12/2015 Industry 30% 20% blending mandate for 2016. MEMR No. 12/2015 Electricity 30% 30% blending mandate for 2016. MEMR No. 12/2015 Aviation blending 3% Alternative biofuel for aircraft, 2% blending MEMR No. (2020) mandate for 2018. 12/2015 Table 38: Targets, Policies and Regulation for Renewable Energy in Indonesia Source: IRENA, March 2017 (Renewable Energy Prospects: Indonesia)
On 30 January 2017 the government announced Regulation 12 of 2017 (Regulation 12/2017) which applies to a broad range of renewable energy sources imposing new lower maximum feed in tariffs and new contracting regime. This is done to attract more investment into the renewable
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energy industry in the country, but some experts were of the opinion that the regulation may hinder instead of stimulating more investment, as it empowers PLN to have more control over procurement.127 A summary of what is covered under Regulation 12/2017 is provided in the following table.128
Items Descriptions Reference Key features • This regulation sets out guidance for PLN regarding the purchase of Articles 3 electricity from IPPs that utilise renewable energy, i.e. solar photovoltaic & 4 (PV), hydro, biogas, biomass, wind, geothermal, and municipal WtE power projects. • PLN “must-run” renewable energy power plants up to 10MW (i.e. PLN must evacuate and pay for all power produced). Solar PV & • The purchase of electricity from solar PV and wind power is done by PLN Articles 5 Wind Power through an open tender system based on the capacity quota. The capacity & 6 quota is specified in PLN’s Plan (Rencana Usaha Penyediaan Tenaga Listrik – “RUPTL”) with a minimum total package of 15 MW which can be spread across several locations. Hydropower • Hydro ≤10 MW should operate at a minimum capacity factor of 65%. Article 7 • Hydro >10 MW should operate with a capacity factor aligned with system requirements. Biomass & • Biomass and biogas projects can only be done by IPPs that have Articles 8 Biogas sufficient feedstock for the whole operational period. & 9 Waste-to- • The municipal WtE technologies that are subject to this regulation include: Article 10 energy (WtE) (a) sanitary landfill, (b) anaerobic digestion, and (c) the use of heat/thermal by using thermochemical technology. • In addition, IPPs may get additional facilities and incentives according to current existing regulations. Geothermal • The purchase of electricity through geothermal can only be done by IPPs Article 11 that have working areas (Wilayah Kerja Panas Bumi – WKP) with "proven reserves" after exploration. Tariff for • Generally, the tariff for renewable electricity is determined through Articles 5, Renewable negotiations between IPPs and PLN by benchmarking to the regional BPP 6, 7, 8, 9, Electricity where the project is installed. For details for each technology please see 10 & 11 the following tariff table (Table 39). BOOT • The BOOT business scheme is applied to geothermal and hydropower Articles 7 Scheme projects. & 11 Local • In the procurement process for IPPs, PLN will prioritise an IPP that uses Article 13 Components local components (Tingkat Komponen Dalam Negeri – TKDN) as stated in prevailing regulations.
127 http://www.shearman.com/en/newsinsights/publications/2017/05/a-step-forward-or-a-step-back 128 https://www.pwc.com/id/en/publications/assets/.../2017/eum-newsflash-2017-61.pdf
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Items Descriptions Reference Others • PLN is obliged to: (a) transparently inform the public about the regional Article 14 power systems that are ready to utilise the renewable electricity; (b) inform the regional BPP only to IPPs intending to utilise and develop renewable projects. • The electricity purchase process and pricing for any Business Entities that Article 17 have already been: (a) designated the winner of Solar PV Capacity Quota, or the party managing water for hydro power plants, or as the developer of Biomass, Biogas or WtE projects, or as the winner of a tender of WKP; and, (b) has had the PPA signed, shall comply with the provisions set out in the signed PPA and previous regulations. • The electricity purchase process and pricing for any Business Entities that Article 18 have already been: (a) designated the party managing water for hydro power plants, or as the developer of Biomass, Biogas or WtE projects; and, (b) has not had the PPA signed, shall comply with the provisions set out in MEMR 12/2017. • The electricity purchase process and pricing for (a) any geothermal IPP Article 19 that has been declared as the auction winner of a WKP and has not entered into PPA with PLN; and (b) any SOEs that have been assigned as a geothermal business provider, shall comply with previous regulations. • The electricity purchase process and the price of steam/electricity for the Article 20 holders of Geothermal Concessions who have entered into steam sale and purchase agreements and/or PPAs which have been verified and/or are in the process of verification by the Finance and Development Supervisory Board, shall comply with previous regulations. • Exemption from the provisions in Articles 17-20 may be granted to IPPs Article 21 and PLN if they agree to comply with the provisions on the electricity purchase process implementation and price set out in MEMR Regulation No. 12/2017. • Following MEMR Regulation No.12/2017, the process of implementation Article 22 of, and purchase of electricity from, WtE projects under the WtE Development Acceleration Programme shall be carried out in accordance with previous regulations. • This regulation explicitly supersedes the benchmark price for the Article 23 purchase of electricity from hydropower as stated in MEMR Regulation No. 03/2015, and supersedes any contradictory clauses in MEMR Regulation No. 17/2014 on Geothermal power purchase, No. 19/2015 on Mini-hydro power purchase, No. 44/2015 on Municipal Solid Waste power purchase, No. 19/2016 on Solar PV power purchase, and No. 21/2016 on Biomass power purchase.
Table 39 Summary of Regulation 12/2017 Source: PwC Indonesia (Energy, Utilities & Mining Newsflash)
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Tariff Determination of Renewable Energy Renewable Tariff Determination Method of Energy Regional Av. BPP > Regional BPP ≤ Procurement Type National Av. BPP National BPP Open tender Solar PV & based on At maximum The regional BPP Wind Power quota 85% regional BPP capacity Benchmark At maximum The regional BPP Price 85% regional BPP Hydropower Direct Determined by following the direct selection process Selection Benchmark At maximum Price A maximum of the regional BPP 85% regional BPP Biomass & (≤ 10 MW) Biogas Direct Selection Determined by the following direct selection process (> 10 MW) Including Java, Sumatera, Bali, or other power Waste-to- Benchmark At maximum system regions, the tariff is based on mutual energy Price 100% regional BPP agreement of both parties (IPPs and PLN) Including Java, Sumatera, Bali, or other power Benchmark At maximum Geothermal system regions, the tariff is based on mutual Price 100% regional BPP agreement of both parties (IPPs and PLN) Table 40: Tariff Determination of Renewable Energy Source: Source: PwC Indonesia (Energy, Utilities & Mining Newsflash) Note: Av. = Average. BPP = Biaya Pokok Pembangkitan (Costs of Generation)
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5. Annex
5.1 List of Useful Contacts
The Ministry of Trade, Republic of Indonesia M. I. Ridwan Rais Road, No. 5 Jakarta Pusat 10110 Tel: +62 21 3858 171 Email: [email protected] Website: www.kemendag.go.id
The Ministry of Industry, Republic of Indonesia Gedung Kementerian Perindustrian Jl. Jend. Gatot Subroto Kav. 52-53 Jakarta Selatan 12950 Tel: +62 21 5255 509 ext 2666 Email: [email protected] Website: www.kemenperin.go.id
The Ministry of Energy and Mineral Resources (MEMR) Jl. Medan Merdeka Selatan No. 18 Jakarta Pusat 10110 Tel: 021 3804242 Website: www.esdm.go.id/en
National Energy Council (DEN) Gedung Badan Diklat ESDM Lantai 4 Jl. Jenderal Gatot Subroto Kav. 49 Jakarta Selatan 12950 Tel: 021-52921621 Email: [email protected] Website: www.den.go.id
Directorate General of Taxes Primary Building, 16th Floor Kantor Pusat Direktorat Jenderal Pajak Jalan Gatot Subroto, Kavling 40-42, Jakarta 12190, Pos code 124 Tel: +62 21 525 0208 / 525 1509 Fax: +62 21 584 792 Email: [email protected] Website: www.pajak.go.id Indonesian Investment Coordinating Board (BKPM)
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Jl. Jend. Gatot Subroto No. 44, Jakarta 12190 P.O. Box 3186, Indonesia Tel: +62 21 5252 008 ext.1132 Fax: +62 21 520 2050 Email: [email protected] Website: www.bkpm.go.id
Indonesian National Importer Association (GINSI) Wisma Kosgoro Lt. 8 Jl. MH. Thamrin No. 53 Jakarta 10350 - Indonesia Tel: +62 21 3983 2510 / 3983 2511 / 39832534 Fax: +62 21 3983 2499, 3983 2504 Email: [email protected] Website: www.ginsi-imports.com
Indonesian Chamber of Commerce (KADIN) Menara KADIN Indonesia Jl.HR.Rasuna Said No.2-3, Kuningan Timur Jakarta 12950 Tel: +62 21 5790 4062 Email: [email protected] Website: www.kadin-indonesia.or.id
Indonesian Central Bureau of Statistics (BPS) Jl.Dr.Sutomo 6-8, Jakarta 10710 Tel: +62 21 384 1195 / 384 2506 / 381 0291 Fax: +62 21 385 7046 Email: [email protected] Website: www.bps.go.id
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5.2 Starting a Business in Indonesia
Why Indonesia?
Indonesia is a country with high economic potential and it is also the largest economy in South East Asia. The growth of an urban middle class is a key factor behind the high economic potential of the country.
Indonesia is the country with the 4th largest population in the world, and more than 53% people live in urban areas with a modern lifestyle and increasing purchasing power. Aside from the country’s high economic potential, the fact that Indonesia is well recognised as a highly trade- driven consumptive society has been an important factor which encourages foreign investors to conduct business in Indonesia.
Finding a Distributor in Indonesia
The company could find some information regarding the potential distribution partner in Indonesia through the Indonesian Ministry of Trade. However, in order to find a qualified and suitable distribution partner, it is recommended that the company uses an agency that fully understands the market and the distribution in Indonesia.
The European Chamber of Commerce Indonesia (www.eurocham.id) offers support to European businesses in Indonesia. One of the services it offers is EU Asia Business Link (www.ealink.eu), a one-stop-shop where European SMEs and business organisations can find key information and relevant links to develop business in Asia. EALink is a useful platform providing European business support organisations in Asia with extra visibility among their target audiences in the EU. The EU Asia Business Link (EALink) is a project funded by the European Union and implemented by a consortium composed of GOPA.com and EUROCHAMBRES, the Brussels- based Association of European Chambers of Commerce and Industry.
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Registering your business
Prior to starting the registration process, the investor should be aware that there are some share ownership limitations for foreign companies that plan to establish a company/business in Indonesia as well as a negative investment list of the restricted or prohibited industries for foreign companies in Indonesia.
To establish a limited liability company with foreign ownership (known in Indonesia as PT PMA), a foreign investor must submit an application to the Capital Investment Co-ordinating Board to obtain a principle licence. Once the principle licence is issued by the Capital Investment Co-ordinating Board, the founding shareholders or their proxies need to execute the deed of establishment containing the PT PMA's articles of association, which must be signed before a notary public and filed with the Ministry of Law and Human Rights for its approval. The filing process is handled by the notary. Once the Ministry of Law and Human Rights approves the articles of association, the PT PMA must then register with the Ministry of Trade. The establishment of a PT PMA may take six to eight weeks.
The step-by-step formation process of a PT PMA is as follows:
Reserve the PT's name with the Ministry of Law and Human Rights. This reservation is usually handled by a notary. The PT PMA's name must be in the Indonesian language. Other statutory requirements for the company's name are found in Government Regulation No. 43 of 2011 regarding the procedure for the submission and usage of name of a PT.
Execute and obtain approval for the PT PMA's articles of association. Filing is done by the notary public electronically. The notary completes the electronic form prescribed by the Ministry of Law and Human Rights with the required information and supporting documents and submits them to the ministry, at the latest, 60 days after the date the deed of establishment containing the articles of association is executed. The articles of association are prepared in notarial deed form in the Indonesian language. Within a maximum of 14 days after the complete application letter and supporting documents are received by the Ministry of Law and
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Human Rights, the ministry will electronically issue its signed decision to approve the company as a legal entity.
Obtain a certificate of domicile.
Obtain a taxpayer registration number and a taxable entrepreneur registration number.
Register the PT PMA with the Ministry of Law and Human Rights. The application to register the PT with the Ministry of Law and Human Rights is submitted by a notary as the proxy for the founding shareholders.
Register the articles of association with the Ministry of Trade. Following the Ministry of Law and Human Rights' approval of the PT's articles of association, the PT must be registered in the company registry at the relevant regional office of the Ministry of Trade within three months of starting business. A company registration certificate will be issued on filing and is valid for five years. The first Ministry of Trade registration is handled by a notary.
Publish the articles of association in the state gazette. Following the Ministry of Law and Human Rights' approval and Ministry of Trade registration, the articles of association must be submitted to the state printing office for publication in the supplement to the state gazette. This step is traditionally handled by a notary. Article 30 of Law No. 40 of 2007 regarding limited liability companies (Company Law) requires the Ministry of Law and Human Rights to announce the deed of establishment of the PT along with the ministry's approval in the supplement to the state gazette within 14 days of that approval.
Company constitution
A limited liability company must have Articles of Association as required by Law No. 40 of 2007 regarding limited liability companies (Company Law). While the Company Law does not provide model articles of association it enumerates the minimum contents that must be incorporated in the articles of association. These include:
The name and domicile of the company.
The purposes, objectives and business activities of the company.
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The period of incorporation of the company.
The amount of authorised capital, issued capital and paid-up capital.
The number of shares, shares classification, if any, including the number of shares for each classification, the rights attached to each share and the nominal value of each share.
The name of the title or position and the number of members of the board of directors and board of commissioners.
The determination of the place and procedures for holding a general meeting of shareholders.
The procedures for the appointment, replacement and dismissal of members of the board of directors and board of commissioners.
The procedure for profit utilisation and the distribution of dividends.
The articles of association of a limited liability company are available by request at the Ministry of Law and Human Rights. Shareholders’ agreements are commonly used in addition to the articles of association.
Business Locations in Indonesia
As the capital city, Jakarta had an estimated total population of over 10 million in 2015. Jakarta is also the centre of many economic and commercial activities in Indonesia, and many companies place and centralise their business (offices) in Jakarta. There are several business centres in Jakarta, and most of them are located in the Golden Triangle of Jakarta, especially in Central Business District (CBD) in Sudirman. However, plenty of other companies and SMEs located their business in several big cities in Indonesia, like Surabaya, Bandung, Medan, Semarang, Makassar, Batam, etc.
As for industrial activities, currently there are many companies that are located and centralised in industrial areas, which are privately managed. According to the Presidential Regulation No.24 in 2009, an industrial estate is a place where the industrial activities are centralised, with facilities managed by the industrial estate companies, which have the necessary industrial estate business
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permit. The Indonesian Ministry of Industry has recently released a statement explaining that the Ministry will focus on the development of industrial estates, currently 74 in industrial Indonesia, reaching the total size of around 30,000 Ha.
Name of company managing the area Size (HA) Location Bhumyamca Sekawan 11.30 South Jakarta Jakarta Industrial Estate 438.75 East Jakarta Kawasan Berikat Nusantara 594.00 North Jakarta Cakung Remaja Development 43.00 North Jakarta Krakatau Industrial Estate 550.00 Cilegon Jababeka Tbk 1,800 Cilegon Modem Cikande Industrial Estate 1,050.00 Serang Mustika Lodan 662.00 Serang Berlian Sarana Utama 100.00 Serang Buana Eka Ganda 250.00 Serang Bumi Cahya Mandiri 100.00 Serang Cahaya Bajatama Indonesia 250.00 Serang Cikande Industrial Estate 200.00 Serang Cipta Perintis Mandiri 200.00 Serang Eterindo Wahanatama 25.00 Serang Intibangun Adi Pratama 250.00 Serang Intisarana Pertiwi Putra 200.00 Serang Kartawi Adyaland 150.00 Serang Krakatau Bandar Samudra 25.00 Serang Langgeng Sahabat 500.00 Serang Margasari Kalimas 200.00 Serang Modern Persada Kreasi 400.00 Serang Nikomas Gemilang 165.00 Serang Pancapuri Indoperkasa 500.00 Serang Pancatama Gotong Royong 100.00 Serang Samada Perdana 150.00 Serang Sri Agung Utama Raya 250.00 Serang The Asia Industrial Estate 200.00 Serang Bekasi Fajar Industrial Estate 200.00 Bekasi East Jakarta Industrial Park 320.00 Bekasi Gobel Dharma Nusantara 54.00 Bekasi Hyundai Inti Development 200.00 Bekasi
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Name of company managing the area Size (HA) Location Jababeka Tbk. 1,570.00 Bekasi Indonesia-China Integrated Industrial 200.00 Bekasi Estate Lippo Cikarang Tbk 1,000 Bekasi Megalopolis Manunggal Ind. Dev. 1,000 Bekasi Patria Manunggal Jaya 220.00 Bekasi Puradelta Lestari 1,000 Bekasi Tegar Primajaya 430.00 Bekasi Alindatamasakti Brother Corp. 400.00 Bekasi Amcol Propertindo Imv. 230.00 Bekasi Bekasi Matra Real Estate 500.00 Bekasi Cikarang Hijau Indah 230.00 Bekasi Gerbang Teknologi Cikarang 300.00 Bekasi Great Jakarta Inti Development 12.50 Bekasi Indocargomas Persada 230.00 Bekasi Jatiwangi Utama 220.00 Bekasi Kawasan Darma Industri 18.00 Bekasi Kreasi Intan 300.00 Bekasi Sarana Panca Utama 250.00 Bekasi YKK Indonesia Ziper Co Ltd. 0.00 Bekasi Daya Kencanasia 210.00 Karawang Indotaisei Indah Development 700.00 Karawang Kawasan Industri Kujang Cikampek 140.00 Karawang Maligi Permata Industrial Estate 1,100.00 Karawang Mitra Karawangjaya 430.00 Karawang Suryacipta Swadaya 1,400.00 Karawang Aneka Inti Sejahtera 500.00 Karawang Bintang Puspita Dwikarya 400.00 Karawang Canggih Bersaudara Muliajaya 300.00 Karawang Hab & Sons 358.00 Karawang Karawang Jabar Industrial Estate 506.00 Karawang Karawang Tatabina Industrial Estate 314.00 Karawang Mandalapratama Permai 300.00 Karawang Persadanusa Makmurindo 300.00 Karawang Pertiwi Lestari 7,100.00 Karawang Pradidhana Anugerah 250.00 Karawang
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Name of company managing the area Size (HA) Location Rasindo Perkasa 100.00 Karawang Sejatibuana Jayadharma 200.00 Karawang Sitiswadaya Permai 500.00 Karawang Sumber Air Mas Pratama 500.00 Karawang Table 41: Major Industrial Areas in Indonesia
Apart from the Jakarta area, there are some other big cities with industrial estates located all over Indonesia. According to the Master Plan of National Industrial Development 2015 – 2035, Indonesia set the target of building at least 36 new industrial estates with total area of 50,000 Ha, while for the period of 2014-2019, the Ministry of Industry set the target to build 14 industrial estates outside Java, which includes seven industrial estates in East Indonesia and the rest of it in West Indonesia.
Supporting Government Agencies
A representative office can be established depending upon the line of business and the necessary licenses issued by the related government department. Representative offices are set up primarily for marketing, market research, or as buying or selling agents. The related government ministries are:
Ministry of Industry & Trade - for bilateral trade
Ministry of Public Work - for consultant or contractor
Ministry of Finance - for banking
Ministry of Trading - for trading
Investment Board (BKPM) - regional representative
There are several Indonesian Government Agencies that support international trading activities. As a main Government Agencies aimed for investment management in Indonesia, BKPM (Indonesia Investment Coordinating Board) is one of the supporting Government Agencies that could be of help in the establishment of business in Indonesia for foreign companies, as
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BKPM is mandated to boost domestic and foreign direct investment through creating a conducive investment climate.
The Indonesian Chamber of Commerce (KADIN) is an organisation which communicates, represents, informs and facilitates the relationship between Indonesian businesses and the Indonesian Government, as well as between Indonesian businesses and foreign companies. KADIN will be of help for information regarding trading, industry and services in all kinds of economic activities.
Another one is the Indonesian Trade Promotion Centre (ITPC) located in several countries in Europe, like ITPC Barcelona, ITPC Lyon, ITPC Budapest, ITPC Milan and ITPC Hamburg. From ITPCs located in those representative countries, foreign companies can gain useful information regarding the establishment of a business in Indonesia.
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5.3 Useful Statistics
Exporters Imported value Imported value Imported value Imported value Imported value in 2012 in 2013 in 2014 in 2015 in 2016 World 28,517 37,178 59,540 41,542 32,012 Japan 14,289 18,051 17,853 15,393 10,723 United States of America 383 1,829 3,138 2,763 5,929 Singapore 5,606 7,064 27,787 13,702 4,271 Canada 1,749 2,574 2,875 2,866 3,422 China 2,149 2,509 2,591 2,133 2,397 Hong Kong, China 461 461 602 1,208 1,823 Korea, Republic of 610 1,879 1,764 1,454 1,501 Germany 1,190 92 765 239 798 United Kingdom 91 49 147 673 313 Table 42: Imports of Photosensitive semiconductor devices, incl. photovoltaic cells Source: Trade Map Unit: US Dollar thousand
Importers Exported value Exported value Exported value Exported value Exported value in 2012 in 2013 in 2014 in 2015 in 2016 World 126,128 123,905 144,274 89,335 70,485 Hong Kong, China 32,335 30,080 49,848 31,079 33,120 Japan 53,409 56,886 53,271 38,600 23,034 Germany 3,924 5,118 8,274 5,004 4,071 Singapore 3,795 3,626 4,114 5,889 3,689 China 25,735 14,098 16,335 3,863 2,938 Taipei, Chinese 2,254 3,956 2,993 2,388 2,287 United States of America 1,335 1,129 1,032 571 725 Korea, Republic of 173 472 393 408 387 Philippines 2,323 8,254 7,849 1,446 170
Table 43: Exports of Photosensitive semiconductor devices, incl. photovoltaic cells Source: Trade Map Unit: US Dollar thousand
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Exporters Imported value Imported value Imported value Imported value Imported value in 2012 in 2013 in 2014 in 2015 in 2016 World 30,046 34,012 28,099 34,010 42,525 Norway 469 1,523 10 2,800 22,511 Japan 3,310 1,807 1,585 1,810 4,710 United States of America 3,439 5,744 4,482 7,377 3,351 Singapore 7,683 4,480 8,200 7,419 2,516 United Kingdom 1,295 904 362 824 2,065 China 2,350 2,053 1,461 1,504 1,336 Germany 2,509 2,227 3,123 2,114 1,285 Australia 2,751 3,866 2,685 1,045 994 Sweden 321 291 804 500 689 Table 44: Imports of Parts of non-electrical engines and motors, n.e.s.(Wind Turbine Blades) Source: Trade Map Unit: US Dollar thousand
Importers Exported value Exported value Exported value Exported value Exported value in 2012 in 2013 in 2014 in 2015 in 2016 World 9,279 8,223 3,688 1,388 2,709 Singapore 3,390 3,724 1,146 562 2,092 Japan - 672 24 57 155 Egypt - - - 40 78 Taipei, Chinese 6 - 3 - 70 Australia 2,141 520 119 231 55 Malaysia 121 1,409 546 - 52 United Arab Emirates 112 86 267 85 50 Russian Federation 28 10 36 - 47 United States of America 2,504 1,063 149 95 32
Table 45: Exports of Parts of non-electrical engines and motors, n.e.s.(Wind Turbine Blades) Source: Trade Map Unit: US Dollar thousand
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Exporters Imported Imported Imported Imported Imported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 2,548 1,409 191 652 154 Singapore - 4 2 5 139 China 28 83 38 6 11 Hong Kong, China - - - 3 4 Australia - - 3 2 - Belgium - - - 2 - Japan 46 140 17 - - Taipei, Chinese - 15 - - - India 660 - - - - Spain 1,800 - - - - Table 46: Imports of Generating sets, wind-powered Source: Trade Map Unit: US Dollar thousand
Importers Exported Exported Exported Exported Exported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 0 0 25 6 26 Korea, Republic of 0 0 19 6 26 Thailand 0 0 6 0 0 United States of America 0 0 0 0 0 Table 47: Exports of Generating sets, wind-powered Source: Trade Map Unit: US Dollar thousand
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Exporters Imported Imported Imported Imported Imported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 152,629 77,457 198,439 56,665 83,663 China 43,089 14,217 87,831 7,146 32,690 Japan 60,820 4,145 11,216 9,170 27,770 Finland - - - 2 9,042 Israel - - - - 8,653 Spain - 1,309 1,000 354 2,145 Malaysia 785 232 178 906 1,259 India 1,693 3,009 958 6,094 926 Singapore 3,447 15,944 2,932 1,579 293 Korea, Republic of 13 65 2,648 10,462 284 Table 48: Imports of Generating sets (excluding wind-powered and powered by spark-ignition internal combustion piston engine) - Wave/Tidal power converter Source: Trade Map Unit: US Dollar thousand
Importers Exported value Exported value Exported value Exported value Exported value in 2012 in 2013 in 2014 in 2015 in 2016 World 723 491 2,262 1,063 1,797 United States of America 67 - - - 1,233 Benin - - - - 301 Singapore 585 433 1,195 348 171 Malaysia - 1 47 18 36 Brunei Darussalam - - - - 22 Philippines - - - - 20 Hong Kong, China 30 - 1 - 8 Timor-Leste - 17 14 96 4 Cameroon - - - - 1 Table 49: Exports of Generating sets (excluding wind-powered and powered by spark-ignition internal combustion piston engine) - Wave/Tidal power converter Source: Trade Map Unit: US Dollar thousand
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Exporters Imported Imported Imported Imported Imported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 200,316 161,934 105,152 200,006 161,581 Israel 0 0 0 28,409 52,473 China 25,907 31,368 23,290 43,634 24,984 Japan 19,520 10,467 7,713 5,414 16,727 Thailand 16,200 1,871 3,191 8,109 13,551 Malaysia 16,027 17,176 12,714 11,022 12,270 Singapore 9,905 5,542 8,134 7,654 9,107 Korea, Republic of 12,003 35,944 9,741 42,083 7,237 United States of America 74,900 24,902 15,260 5,692 7,155 United Kingdom 1,396 1,249 1,164 282 3,452 Table 50: Imports of Heat-exchange units (excluding instantaneous heaters, storage water heaters, boilers and equipment) Source: Trade Map Unit: US Dollar thousand
Importers Exported Exported Exported Exported Exported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 13,366 11,696 4,794 3,589 1,223 Japan 50 23 33 0 379 United States of America 0 20 59 52 173 Timor-Leste 0 7 42 73 123 Netherlands 0 2 18 0 68 Singapore 1,013 414 292 980 59 Australia 5,631 6,892 128 57 54 Turkey 0 0 0 0 53 Germany 123 46 0 8 48 Maldives 0 0 0 0 45 Table 51: Exports of Heat-exchange units (excluding instantaneous heaters, storage water heaters, boilers and equipment) Source: Trade Map Unit: US Dollar thousand
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Exporters Imported Imported Imported Imported Imported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 14,943 17,129 18,505 22,776 31,498 Netherlands 14 83 36 20 6,950 Japan 330 1,823 727 1,317 5,546 India 1,148 3,902 3,301 5,316 5,462 China 2,409 5,275 5,583 4,387 4,999 Italy 13 43 11 336 4,000 Austria 307 140 162 416 2,176 Slovenia - - - - 562 Taipei, Chinese 1,030 890 948 948 531 Singapore 1,332 1,239 2,316 5,703 272 Table 52: Imports of Hydraulic turbines, water wheels, and regulators therefor (excluding hydraulic power engines) Source: Trade Map Unit: US Dollar thousand
Importers Exported Exported Exported Exported Exported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 305 57 878 626 138 Thailand 4 - 270 36 85 Singapore 188 24 35 48 23 Myanmar - - - 2 12 Malaysia 39 2 311 32 7 Madagascar - - - 9 4 Ethiopia - - - - 2 Philippines - 20 89 65 2 United Arab Emirates - 2 - - 2 Australia - - 25 - - Table 53: Exports of Hydraulic turbines, water wheels, and regulators therefor (excluding hydraulic power engines) Source: Trade Map Unit: US Dollar thousand
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Exporters Imported Imported Imported Imported Imported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 85,427 137,917 107,088 79,202 81,613 China 17,481 34,383 49,738 41,517 51,134 Germany 6,708 13,912 18,248 8,956 8,630 Japan 19,342 18,912 7,975 3,769 5,762 Italy 1,964 9,343 13,976 3,068 5,013 United States of America 3,015 3,795 3,993 6,904 2,382 Switzerland - 58 14 13 2,025 Korea, Republic of 24,410 43,028 1,493 1,104 1,350 Hong Kong, China 31 30 2 8 698 Finland 1,247 334 990 1,559 656 Table 54: Imports of Furnace burners for pulverised solid fuel or gas, incl. combination burners Source: Trade Map Unit: US Dollar thousand
Importers Exported Exported Exported Exported Exported value in 2012 value in 2013 value in 2014 value in 2015 value in 2016 World 582 1,657 1,553 871 1,179 Malaysia 302 116 954 521 547 Singapore 173 176 61 7 323 Germany - - 121 39 177 United Arab Emirates - - - - 68 Japan - 43 3 18 56 Colombia - - - - 5 Timor-Leste - - - 1 3 Australia - 594 214 3 1 New Zealand - - - - 1 Table 55: Exports of Furnace burners for pulverised solid fuel or gas, incl. combination burners Source: Trade Map Unit: US Dollar thousand
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