29 Apr 2024
Indonesia Issues New Rules on Operation of Rooftop Solar, Abolishes Net Metering

On 31 January 2024, the Indonesian Ministry of Energy and Mineral Resources (“MEMR”) issued a new regulation governing the installation and operation of private rooftop solar panel systems by customers of Public Interest Electricity Supply Business License Holders (Pemegang Izin Usaha Penyediaan Tenaga Listrik untuk Kepentingan Umum / “IUPTLU Holder”).

The new instrument, MEMR Regulation No. 2 of 2024 (“Reg. 2/2024”),[1] which replaces MEMR Regulation No. 26 of 2021 (“Reg. 26/2021”),[2] introduces several key changes to the previous. These include:

(a)  abolition of restrictions on installed capacity and the introduction of an on-grid rooftop solar power quota to replace them;

(b)  abolition of net-metering and capacity charges; and

(c)  modifications to the rooftop solar system installation approval procedure.  

Reg. 2/2024 defines a “Customer” as “any individual or entity that connects a rooftop solar system to the electricity system of an IUPTLU Holder,” and, just like Reg. 26/2021, requires such Customer to pay an electricity tariff to the IUPTLU Holder for electricity supplied by the IUPTLU Holder at times when solar energy is unavailable (such as at night). 

PLN, which continues to enjoy a virtual monopoly on power supply in most of Indonesia, is by far and away the largest and most important IUPTLU Holder.

1. Abolition of Restrictions on Installed Capacity and Introduction of On-Grid Rooftop Solar Power Quota

Under Reg. 26/2021, the permitted capacity of an on-grid rooftop solar system was (i) restricted to 100% of the PLN connected capacity in the case of a PLN Customer; or (ii) limited by the connected capacity of the electricity system, as stated by the IUPTLU Holder in a report to the MEMR’s Director General of New, Renewable Energy and Energy Conservation (“DGRE”), in the case of a Customer in the business area[3] of an IUPTLU Holder other than PLN.

These restrictions have now been removed and replaced with a new rooftop solar power quota system. Under this system, the size of the quota is stipulated by the Director General of Electricity (“DGE”), based on a proposal by PLN or other IUPTLU Holder that is the power supplier in the relevant business area.

The quota proposal should cover a period of 5 years, with breakdowns given for each calendar year. In preparing the quota proposal, the IUPTLU Holder should have regard to the following: (i) national energy policy; (ii) electricity supply business plan and realization; and (iii) reliability of the IUPTLU Holder’s electrical power system. The quota proposal must be submitted by the IUPTLU Holder to the DGE, copied to the DGRE. Upon receipt, it should be evaluated by the DGE within the following timeframes:

Within 10 business days of the proposed quota being approved by DGE, the IUPTLU Holder is required to further cluster the quota for each electricity system operated by its business unit (note: PLN’s operations around Indonesia are managed by a large number of individual business units). During the same 10-day period, the clustering results must also be: (i) reported to the DGE and DGRE; and (ii) published on the IUPTLU Holder’s website, app, or official social media channel.

An IUPTLU Holder may apply to have an approved quota amended using the general procedures for quota approval outlined above. Should a quota remain unused at the end of a single year within the quota period, it will be added to the quota for the following year.

2. Abolition of Net Metering and Capacity Charge

Under Reg. 26/2021, excess electricity produced by a solar rooftop system that was exported to the IUPTLU Holder’s grid could be factored in to reduce the electricity bills of the Customer. The excess was calculated using an export-import kWh meter, installed by agreement of the IUPTLU Holder, on a rooftop solar system connected to its grid.  Under Reg. 2/2024, the net-metering provision has been revoked, and excess power can no longer be offset against Customers’ electricity bills.

The old requirement to use export-import kWh meters has also been revoked. Instead, more sophisticated meters (termed “advanced meters” by Reg. 2/2024), with two-way communication and measuring capabilities, are to be used. In addition, while previously the cost of installing an export-import kWh meter was borne by the Customer, under Reg. 2/2024 the cost of installing the new meters should be covered by the IUPTLU Holder.  

Reg. 2/2024 has also eliminated the capacity charge  that was previously applied by the IUPTLU Holder on rooftop solar systems installed by industrial Customers under Reg. 26/2021. The charge used to be applied each month based on total inverter capacity (kW) multiplied by 5 hours, and then multiplied by the electricity tariff.

3. Modifications to Rooftop Solar System Installation Approval Procedure

As with Reg. 26/2021, Reg. 2/2024 requires a prospective Customer to submit a rooftop solar system installation proposal for approval by the IUPTLU Holder, with copies to the DGE and DGRE. However, there are a number of changes to the approval process:

1. Limited Application Window

While Reg. 26/2021 was silent as to the timing for submission of a rooftop solar system installation proposal by a prospective Customer to an IUPTLU Holder, Reg. 2/2024 restricts submissions to the months of January and July of each year.

2. Extended Timeframe for Evaluation; Deemed Approval

Reg. 2/2024 extends the timeframe for an IUPTLU Holder to evaluate a rooftop solar system installation proposal from 5 to 30 business days.  It also introduces the concept of “deemed approval”: should an IUPTLU Holder not provide a determination on a proposal within 30 business days, it will be deemed to have been approved.  Such deemed approval should be notified by the MEMR (via the DGRE) to the IUPTLU Holder.

3. Sanctions for Operation of Unapproved On-Grid Rooftop Solar System

Reg. 2/2024 introduces clear sanctions for the operation of an on-grid rooftop solar system without the consent of the IUPTLU Holder. In such a case, the IUPTLU Holder may require the Customer to (i) disconnect the system from the IUPTLU Holder’s grid; and (ii) pay a financial penalty based on total inverter capacity, multiplied by 240 hours and the electricity tariff.

In the event that a Customer fails to comply within one month, the IUPTLU Holder may temporarily disconnect them from their grid.

ABNR Commentary

Reg. 2/2024 appears somewhat contradictory when it comes to the Government’s stated determination to reduce dependence on fossil fuels as it seems to prioritize the interests of IUPTLU Holders (the bulk of whose power is generated by fossil fuels) over those of domestic / household rooftop solar users.

This bias in favour of IUPTLU Holders is apparent from the abolition of the net-metering system, which allowed both domestic and industrial rooftop solar users to offset the surplus power supplied by their system to the IUPTLU Holder against their electricity bills payable to the IUPTLU Holder. For industrial users, the impact of this change is mitigated by the elimination of capacity charges. However, this does not apply in the case of domestic users as capacity charges were only ever imposed on industrial Customers.

It is reasonably clear that the abolition of net-metering will reduce the attractiveness of an investment in a rooftop solar system at the household level, despite this form of renewable energy having enormous potential for growth if the right incentives were in place.

On the upside for would-be rooftop solar power users, they will benefit as a result of the deemed approval arrangement at the expense of an IUPTLU Holder that is tardy in evaluating installation proposals, although it should also be said that the time permitted for such evaluation has been extended from 5 to 30 business days. The deemed approval provision is important as there have been widespread complaints about serious delays in the processing of installation applications by PLN.

By partners Ms. Serafina Muryanti (smuryanti@abnrlaw.com), Mr. Maher Sasongko (msasongko@abnrlaw.com), associates Ms. Adya Sepasthika (asepasthika@abnrlaw.com) and Mr. Kenny Poltak (kadrianus@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.