(Bloomberg) -- Indonesia will temporarily ease rules that have slowed the development of solar power in the coal-dependent country, removing one of the archipelago's regulatory and legal barriers to its commitment to reaching zero emissions net by the middle of the century.
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The government will remove the requirement that solar projects use most domestically produced materials by 2025, when Indonesia's first solar panel factory is expected to start production. According to conservative estimates, the equatorial country could produce more than 4,000 times the current solar output.
Accelerating the energy transition has been one of President Joko Widodo's top priorities, and removing the "local content" requirement for solar power was one of dozens of policy reforms outlined in the draft energy plan. solar investment in the country. $20 billion Just Energy Transition Partnership. Jokowi spoke with US President Joe Biden and other wealthy countries.
Bloomberg reviewed a copy of the plan, which was drafted by the JETP Secretariat, a stakeholder coordination body based in Indonesia's Ministry of Energy and Natural Resources and supported by the Asian Development Bank. Dadan Kusdiana, secretary general of the Ministry of Energy, confirmed that the government is considering relaxing rules for solar power projects.
The plan highlights several major challenges for JETP, including insufficient grants or cheap loans from rich countries and the reluctance of private financial institutions to finance anything coal-related, including early retirement .
Among the legal reforms called for by the plan, changing Indonesia's solar energy requirements might be the simplest. The country currently produces less solar energy than Norway, exporting much of its production to neighboring Singapore. According to the investment plan, the government wants to quintuple solar power capacity over the next five years, but this will require nearly $2.4 billion.
It must also address other policies and laws that effectively block important efforts to replace coal with renewable energy. Among them: Indonesia currently subsidizes coal-fired electricity. The state-owned enterprise has limited capacity to raise funds to invest in renewable energy; The use of “captive coal” (purpose-built power plants that do not feed into the grid) is widespread and growing.
Restrictions on the sale of state assets also limit the possibility of liquidating coal-fired power plants. In particular, it prohibits the sale of a public asset below its book value, and although the law is designed to prevent corruption and cronyism, it discourages the types of agreements that promote the premature end of energy coal mine. The investment plan recommends clarifying to the legislator that this will not constitute a crime in these particular circumstances.
--With the help of Harry Suhartono and Eco Listiorini.
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