Photo by Jeroen van de Water on Unsplash
Disclaimer: I am not a professional financial advisor. All financial opinions written in this article are from my personal research and experience, and it is not a recommendation to buy or sell the stocks.
Note: please read previous article before continue
In the previous post, I mentioned the importance of understanding coal’s position in the energy market, from the net-zero emission plan to steps taken by the government to reduce coal usage.
Frail policy and regulations, combined with a lacking amount of investment in renewable energy, make it difficult to reach the target in time. A well-written plan but quite poor execution.
In order to fully grasp the transition phase, after knowing the fossil fuel position, we also need to know the development growth and adoption rate of renewable energy.
The below writings are collections of what I’ve read and summarized from IESR report (https://iesr.or.id/en/agenda-iesr/indonesia-energy-transition-outlook-ieto-2022) and the global outlook report (https://www.iea.org/analysis). Please read their report for a complete analysis.
Renewable Energy: Solar
Solar PV
Solar PV
To reach zero-net carbon emissions, solar electricity generation share should see a massive increase from only 0.05% in 2020 to 24% by 2030, and eventually reach 88% in 2050 — in which renewable energy should account for 50% of total electricity generation by 2030 and reach 100% by 2050. Coal generation, on the other hand, should see a decline from ~60% today to 45% in 2030.
Utility-scale (IPP)stagnated in 2021 due to the lack of projects being commissioned. Most IPP projects in the pipeline (585 MWp) are set to reach commercial operation only by 2023/2024.
Current Solar Projects
Solar PV projects
Driven by Singapore’s electricity imports demand has led to at least 4 development agreement announcements in Batam and the Riau Islands with a total announced solar PV capacity of 9.67 GWp and 12 GWh of battery energy storage capacity.
Two floating solar projects totaling 2.5 GWp in Batam Island:
- 2.2 GWp FPV project at Duriangkang reservoir
- 333 MWp FPV project at Tembesi reservoir.
The former will also feature a 4 GWh battery energy storage system and is planned to export most of the capacity to Singapore via subsea cable.
Duriangkang Floating Solar PV Park is a 2,200MW solar PV power project. It is planned for Riau Islands, Indonesia. The project is currently in permitting stage and will be developed in a single phase. The project construction is likely to commence in 2022 and is expected to enter into commercial operation in 2024. The project is being developed and is currently owned by Sunseap Group.
Rooftop Solar User & Capacity Growth
Rooftop Solar PV growth
By Q3 2021, the Commercial and industrial (C&I) sector accounts for about half of the total installed capacity (18.5 MWp), followed by residential (27%), social (14.5%), and government (11%) sectors.
Rooftop solar PV capacity addition in 2021, 17.9 MWp, was recorded as an all-time-high since 2018, not to mention an estimated addition of 20~30 MWp outside PLN’s concession might still be unrecorded.
The government has prepared a 3.6 GWp rooftop solar PV program in the National Strategic Projects (PSN) in order to achieve the 23% renewable energy target by 2025.
Additionally, Bappenas has also been working on a green recovery proposal to install rooftop solar PV on government buildings, which aligns with the IESR recommendation for 2020. The proposal aims to install 261.2 MWp by 2024, higher than PSN’s rooftop solar PV target for government buildings (37.35 MWp).
Rooftop Solar Adoption Rate
Rooftop Solar PV Adoption Rate
Residential solar PV users are still concentrated in Java and Bali since these regions have better access to information, economic affordability, and availability of solar PV installers.
Saving on the electricity bill was the main reason people consider installing rooftop solar PV. Despite the huge potential, the studies also showed that 34–50% of the respondents are still unaware of the technology. More importantly, it was revealed that the high upfront cost and long payback period are two main concerns for adopting rooftop solar PV.
In addition to price reservation, lack of information availability, lack of product knowledge, perceptions of expensive products, availability of reliable installers, and financing have also become barriers to wider adoption. Market studies found that 36– 60% of respondents prefer to have a financing option (credit installment) to address the high upfront cost issue.
Solar Regulations
Rooftop Solar PV Adoption Rate
The regulation’s scope has been expanded to include other IUPTLU holders (other than PLN) who own an electricity business concession, also known as private power utilities (PPUs).
This opens up opportunities for commercial and industrial consumers interested in reducing their carbon footprints, as there is now regulatory certainty for adopting grid-connected rooftop solar PV within PPU-managed industrial estates.
The regulation also increases the credit accumulation period from 3 months to 6 months and changes thenet metering scheme from 1:0.65 to 1:1. According to IESR analysis, the improved scheme would reduce payback time by 1 to 2 years.
MEMR 26/2021 (Minister of Energy and Mineral Resources) modifies the application and approval process for rooftop solar PV installation. The previous regulation set the approval period at 15 working days. However, according to an IESR survey of 22 solar PV installers, 31% of consumers needed more than 3 months to complete the application, citing the availability of a net meter as the main impediment.
MEMR 26/2021 also has integrated the application process through an electronic application, services, and reporting system to address the issue, and the approval period has been reduced to five working days.
Moreover, MEMR 26/2021 also lays the groundwork for “Rooftop Solar PV Customers” and IUPTLU holders to conduct carbon trading. While the details on carbon credit ownership and carbon trading mechanism are to be further regulated in a separate ministerial regulation, the clause will support emissions reduction in the sector.
Net Metering
Net Metering
Customers discovered that the current financing options have higher investment costs, according to solar PV EPCs. The government could assist financial institutions in developing low-cost financing options for households (low-interest rates and long-term soft loans).
The government could also provide tax breaks or incentives to homeowners who install rooftop solar PV systems. This could include a reduction or exemption of the land and building tax (PBB), which could be linked to green building schemes, as well as a reduction or exemption of the property tax on sales.
Furthermore, through the issuance of a building permit, RUEN has imposed obligations on luxury housing, residential, and apartment complexes to install rooftop solar PV on at least 25% of their roof space (IMB). However, due to the lack of a detailed derivative of the presidential regulation, enforcement remains a challenge. This mandate may be reconsidered and enforced for new luxury residential and commercial buildings constructed after 2024.
IESR Assessment
IESR Assessment
The budget allocation in the national economic recovery program was evaluated in terms of public fund allocation. According to the Energy Policy Tracker (2021), the government allocated USD 6.5 billion to fossil energy while only USD 0.24 billion to clean energy.
Another study, Climate Policy Initiative (2021), found that only 4% of environmentally relevant economic stimulus in 2020 went to the green sector, with the rest going to the dirty sectors (mostly energy).
We can grasp or see the big picture of the government’s progress and commitment to seriously phase out fossil fuels in the future after reading some of this report.
Aside from the fossil fuel transition and solar energy growth, the report provides a much more detailed assessment, including research on progress in energy storage, electric vehicles, clean fuels, energy efficiency, and how to transition energy at the sub-national level, decarbonization financing, and much more.
Overall, I believe that even if the use of fossil fuels outside of Indonesia begins to decline, domestic use will continue to dominate for several years after 2030. We must continue to monitor the progress of renewable energy and the coal phase-out plan, as well as any improvements in government regulations and policy, as well as their seriousness in their commitment.
Next, Let’s talk about coal.
Comments