Why is solar energy having such difficulty breaking through in Indonesia?
In recent years, an effort had been made by PLN, the national company which has the monopoly of distribution and sale of electricity in Indonesia, to allow the export of electricity produced by the solar panels of individuals which is not self-consumed, this is called Net Metering. When you produce more electricity than you consume, it goes to the national grid and your meter runs backwards to reduce your bill and enhance your investment. The power of the solar installation was limited to the size of your subscription / grid connection: if you had a 5.5kVA meter, you could install 5.5kW solar power (alternating current). The bill was never zero since there was a minimum monthly fee due to the connection to the network.
But last March 2022, PLN changed the situation and now only accepts a maximum of 15% of your subscription, which has put a sudden brake on the installation of solar panels in Bali and everywhere else in Indonesia. PLN surprised everyone as it contravenes government regulations. So why this shift? And this general impression that renewable energies are not developing as fast as they should in Indonesia? Let us remember on this occasion that the Archipelago is home to the largest geothermal deposit in the world, a carbon-neutral energy, but that geothermal energy only represents 5.2% of the electricity produced in Indonesia1.
The only reason for the reversal of PLN and the slow development of renewable energies in Indonesia is coal. Indonesia is the world’s second largest producer behind China and ahead of India, its production has increased by 9.2% in 2021 and by 74% since 2011. We can of course deplore that countries continue to extract coal and to burn it in their thermal power stations because this highly polluting material contributes to 42% of greenhouse gas emissions. It will of course be objected that the economic reality and the low cost of coal explain its intensive use and its development, especially in Asia.
Conflicts of interest in coal mining at the highest government level.
But in Indonesia, the situation is made even different by the conflicts of interest as they were highlighted by an extraordinary documentary filmed in 2019 and entitled SEXY KILLERS2 which is easily found on Youtube. This documentary sheds light on how the campaign team that brought Jokowi to power has interests in coal, not only owning mines but also thermal power plants.
60% overcapacity of coal-fired power plants Despite Finance Minister Sri Mulyani’s warning in 2017 to the boss of PLN, the national electricity company, PLN has continued to program the construction of coal-fired power plants to the point that Indonesia is at least on the 10 next years in overcapacity of 40 to 60%3. This is the main reason why PLN is doing everything possible to curb renewable energy programs in Indonesia, and in particular photovoltaic solar energy. And when we also know that the energy supply contracts are accompanied by a TAKE-OR-PAY clause, which means that whatever the energy demand, PLN is obliged to pay the supplier, it is easy to understand that the business coal-fired electricity benefits an elite that holds the reins of power.
Blame is placed on the Japanese and the Chinese
Two Indonesian analysts belonging to the Institute for Energy Economics and Financial Analysis, a very respectable international institution, published in November 2021 a 23-page study titled “Indonesia Wants to Go Greener, but PLN Is Stuck With Excess Capacity From Coal-Fired Power Plants It’s Time for Japanese and Chinese Investors to Step Up and Be Part of the Solution”. We strongly disagree with the angle of this analysis which brings opprobrium to the Japanese and the Chinese and makes no mention of the financial interests of the Indonesian political elite in this energy market based on the coal. As shown in the attached diagram, 41% of shares in private thermal power plants are owned by Indonesian companies, with the Japanese and Chinese coming far behind.
1 International Energy Agency – IEA), Key World Energy Statistics 2021 [archive], september 2021, [PDF].
2 SEXY KILLERS (Full Movie) – YouTube
3 Institute for Energy Economics and Financial Analysis. IEEFA. “Indonesia Wants to Go Greener, but PLN Is Stuck With Excess Capacity From Coal-Fired Power Plants” page 9. Ieefa.org
4 Indonesia’s PLN in talks with investors over early retirement of coal plants | Reuters
