IESR: Need Clear Rules on Renewable Energy for Industry

Illustration - Kamojang PLTP with a capacity of 140 MW in Bandung Regency, West Java (ANTARA/HO-PLN)

JAKARTA - The Institute for Essential Services Reform (IESR) asked the government to make clear rules so that industries can use PLN's transmission and distribution networks to distribute electricity from their renewable energy plants to industrial locations.

"The use of this network is subject to reasonable and transparent service fees. This scheme allows companies to build renewable energy plants in locations with the best potential without having to be close to the load center," said IESR Research and Innovation Director Raditya Wiranegara in a statement reported by ANTARA, Friday, February 20.

IESR responded to the captive power plant which dominates the industrial sector. A captive power plant is a power plant that is built and operated directly by an industrial player to meet its own electricity needs, without being connected to the national electricity system.

In Indonesia, captive power plants are widely used in the energy-intensive industrial sector, such as nickel smelters, aluminum, steel, and other processing industries. Most of the types of captive power plants used are still sourced from fossil fuels such as coal and gas.

Raditya continued that the parallel costs imposed on industries using renewable energy plants need to be reduced or eliminated, especially for those who install solar power plants (PLTS) with energy storage systems (BESS).

"PLN needs to apply a transparent and consistent calculation formula to provide certainty about long-term costs," he said.

According to him, it is necessary to make special permits and fast lanes for renewable energy projects on former mine land. This policy can turn the obligation to rehabilitate land into an opportunity for the development of clean energy.

He said the government could also provide incentives such as tax relief, low-interest financing or credit guarantees for renewable energy-based microgrid projects, especially in areas that are not served by PLN and still rely on diesel.

The de-carbonization target, said Raditya, needs to be included in environmental-based industrial area certification. Incentives can be given to industrial tenants who use renewable energy electricity in large quantities.

Furthermore, he said, the licensing process for renewable energy projects needs to be simplified through a centralized digital system with clear service time standards in order to provide investment certainty and accelerate the realization of projects.

In addition, he also asked the government to draw up a roadmap for the gradual cessation of coal-based captive power plants, including early retirement schemes, compensation mechanisms, and loan restructuring, and strengthen supervision of emission reduction commitments.

Another solution, namely the development of blended finance facilities to support the industry to switch to clean energy.

"This scheme can provide low-interest loans through state-owned banks (state-owned enterprises) and risk guarantees for financial institutions," said Raditya.