17 Mar 2026
New Regulation on Hybrid Power Plants: Accelerating the De-Dieselization Agenda in Small Islands and Isolated areas

Indonesia’s energy transition continues to evolve through the issuance of Minister of Energy and Mineral Resources (“MEMR”) Regulation No. 19 of 2025 on Hybrid Power Plants (“MEMR Reg 19/2025”). The regulation establishes a comprehensive framework for the development of Pembangkit Listrik Tenaga Hibrida (“PLTH”), particularly in small islands and isolated areas, as part of the government’s accelerated de-dieselization agenda.

Building on earlier policy signals under MEMR’s energy transition roadmap and the national commitment to achieving net-zero emissions by 2060, MEMR Reg 19/2025 introduces structured system configurations, reliability standards, procurement procedures, and a new pricing model designed to enhance the bankability and operational sustainability of hybrid generation projects.

1. Background

   For years, electricity supply in small islands and remote regions has relied heavily on diesel-based generation, resulting in high operational costs and logistical challenges. The government’s de-dieselization program seeks to gradually replace diesel power plants with renewable-based generation systems, thereby reducing fuel dependency and improving electricity reliability.

   MEMR Reg 19/2025 is intended to provide regulatory certainty for hybrid systems capable of integrating renewable energy, storage technology, and supporting generation into a single operational configuration.

2. Concept and Scope of Hybrid Power Plants (PLTH)

   MEMR Reg 19/2025 defines PLTH as a power plant that integrates more than one generation technology and/or Battery Energy Storage System (BESS) operating simultaneously within a single interconnection point in a small-scale grid.

   Renewable energy must serve as the primary component of every PLTH configuration. Permitted renewable technologies include:

   1. Photovoltaic Solar Power Plants (“PLTS”);

   2. Wind Power Plants (“PLTB”);

   3. Hydropower Plants (“PLTA”); and

   4. Biomass Power Plants (“PLTBm”).

   These renewable sources may be combined with:

   1. Other renewable power plants;

   2. Hydrogen-based power plants (new-energy-based power plants) (“PLT Hydro”);

   3. Battery Energy Storage Systems (“BESS”); and/or

   4. Existing non-renewable power plants (e.g., diesel power plants) (“PLTD”).

   Importantly, MEMR Reg 19/2025 emphasizes that PLTH must operate as a single and inseparable system configuration, assessed based on overall system reliability rather than individual component performance, with the following configurations (“Hybrid Configuration”):

   1. PLTS with PLTBm;

   2. PLTA with PLTS;

   3. PLTS with BESS;

   4. PLTBm with PLTS and BESS;

   5. PLTB with PLTS and BESS;

   6. PLTS with PLT Hydro and BESS;

   7. PLTD with PLT Hydro and BESS; or

   8. other power plants as determined by MEMR.

   The Hybrid Configuration above must meet the following reliability requirements:

   1. Flexibility to manage supply-demand fluctuations;

   2. Frequency control stability;

   3. Voltage control stability; and

   4. Energy management system requirements (particularly for BESS).

3. Electricity Procurement Mechanism

   Electricity purchase generated from PLTH by PT PLN (Persero) (“PLN”) is conducted through a direct selection scheme.

   Key features of the direct selection procurement process are as follows:

   1. PLN prioritizes clustering of power plant locations in the small-scale system.

   2. Conducted among PLN’s pre-qualified providers, whose list is issued every three months or updated at any time, as deemed necessary by PLN.

   3. Evaluation based on administrative, technical, and financial criteria.

   4. Conducted within a maximum of 180 calendar days from announcement to Power Purchase Agreement (PPA) signing.

   5. If only one bidder participates in the initial selection, a re-selection is conducted.

   6. If only one bidder participates in the re-selection, the process may proceed.

   Procurement must be structured as a single integrated system, consistent with the Hybrid Configuration approved under the regulation.

4. Pricing Framework: 

   1. Ceiling and Floor Benchmark

      One of the most notable aspects of MEMR Reg 19/2025 is the introduction of a dual pricing corridor, consisting of:

      1. A ceiling benchmark price (upper limit)

      2. A floor benchmark price (lower limit)

      Both will be determined through a ministerial decree. As of the issuance of this newsletter, based on publicly available information, the MEMR is in the process of finalizing the relevant draft decrees.[1]

   2. Key Pricing Characteristics

      The following conditions apply to the purchase price of electricity from PLTH: 

      1. Price determined through negotiation within the benchmark corridor

      2. No escalation during the PPA term

      3. Agreed price shall serve as the Minister’s price approval

      4. Location-based considerations apply

      5. Valid from Commercial Operation Date (COD)

      6. Evaluated every two years (or earlier if necessary)

      Electricity is paid in Rupiah using the Jakarta Interbank Spot Dollar Rate (JISDOR) as agreed in the PPA.

   3. Network Facility Costs

      1. Excluded from electricity purchase price

      2. Capped at 5% of the electricity price

      3. Higher percentages require MEMR approval

      Uncertainty remains regarding the pricing treatment of BESS and whether provisions under MEMR Regulation No. 5 of 2025 on Renewable Energy PPAs (“MEMR Reg 5/2025”) will fully apply to hybrid configurations involving diesel and hydrogen elements.

5. Reporting

   PLN must report the implementation of electricity purchases to the MEMR within five working days of signing the PPA, complete with documents regarding the cost structure and financial model used to determine the electricity purchase price for each PLTH. PLN is also required to submit progress reports on PLTH development and local content achievement to MEMR every six months and whenever requested, until the project reaches COD.

6. Transitional Provisions

   For projects where procurement has been completed with the pricing agreed but pending the ministerial approval:

   1. The agreed price may continue to apply if it is below the local electricity supply cost of the reference diesel plant;

   2. If the agreed price exceeds the local cost benchmark, procurement may be cancelled.

   This transitional mechanism raises interpretative questions for hybrid projects not explicitly listed in MEMR Reg 19/2025’s enumerated configurations – see section B (Concept and Scope of Hybrid Power Plants (PLTH)).

7. Key Considerations for Business Actors

   From a commercial and legal perspective, several factors will be central to project viability:

   1. Clarity of the forthcoming ceiling and floor benchmark prices

   2. Treatment of BESS under the pricing regime

   3. Applicability of MEMR Reg 5/2025 to hybrids PPAs

   4. System integration and compliance with technical reliability standards

   5. Bankability of non-escalating tariffs over long-term PPA periods

   MEMR Reg 19/2025 also permits PLN to seek compensation if hybrid electricity purchases increase its generation costs, subject to state fiscal capacity—adding another dimension to financial risk allocation.

ABNR Commentary

MEMR Reg 19/2025 represents a significant step in institutionalizing Indonesia’s hybrid generation framework for small-scale and isolated systems. By formalizing configuration standards, procurement mechanisms, and pricing corridors, MEMR Reg 19/2025 provides a stronger regulatory foundation for accelerating de-dieselization.

However, its ultimate impact will depend on the forthcoming ministerial pricing decree and further clarification on PPA applicability and BESS treatment. Market participants should carefully evaluate technical structuring, pricing assumptions, and regulatory compliance before committing to PLTH investments.

Developers and financiers should closely monitor implementing regulations and assess risk allocation under forthcoming PPAs. Particular attention should be given to tariff rigidity (no escalation), cost recovery structures, and grid integration obligations.

A disciplined evaluation of bankability, technology configuration, and regulatory interpretation will be critical in navigating this evolving hybrid power landscape.

This article was written by partners Emir Nurmansyah (enurmansyah@abnrlaw.com), Serafina Muryanti (smuryanti@abnrlaw.com), Maher Sasongko (msasongko@abnrlaw.com), and associates Muhammad Irsan (mirsan@abnrlaw.com) and Adya Sepasthika (asepasthika@abnrlaw.com).

This ABNR News and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.