NEWS DETAIL

11 Oct 2013
REGULATION OF THE MINISTER OF ENERGY AND MINERAL RESOURCES REGARDING SOLAR ENERGY

The Minister of Energy and Mineral Resources (“MEMR”) has issued MEMR Regulation No. 17 of 2013 regarding Purchase of Electricity Power by PT Perusahaan Listrik Negara (Persero) (“PLN”) from Photovoltaic (Fotovoltaik) Solar Power Plant (“Solar Energy Regulation”). The regulation is meant to promote greater use of solar energy for electricity power generation.

Purchase of Electricity Power

The Solar Energy Regulation imposes on PLN the obligation to purchase the electricity produced by the solar power plant owned by the business entity which has been declared as the winner of the capacity quota tender (the “Tender”). The purchase price is stipulated to be a maximum of US$ 25 cents/kwh, but if the solar power plant uses photovoltaic modules with a local content of at least 40%, the price may be increased to a maximum of US$ 30 cents/kwh. The purchase price is inclusive of the interconnection cost from the solar power plant to the interconnection point in PLN’s transmission line.

Offering of Capacity Quota and Tender Procedures

The capacity quota, defined as the maximum solar power plant capacity that can be interconnected to a system/sub system of PLN’s electricity network, will first be determined together by the Directorate General of New Renewable Energy and Energy Conservation (“DGRE”) and PLN before being offered by using the tender mechanism. For the offering purposes the DGRE will form a tender committee which consists of representatives of the Directorate General of Electricity (“DGE”), the DGRE and PLN.

The Tender committee manages the Tender, prepares the Tender documents, evaluates the offers and proposes the Tender winner (“Winner”). The determination of the Winner is in the hands of the DGRE.

Some of the Tender rules:

  •  Only business entities which fulfill the administrative, technical and financial requirements may participate in the Tender;
  • In a Tender, one business entity may only participate in one consortium;
  • Instruction to PLN to Purchase Electricity Power


After being declared as Winner, the Winner is required to submit the evidence of its remittance of 20% of the total construction cost of the solar power plant to an escrow account in the name of both the DGRE and the Winner in a state owned bank or a prime bank in Jakarta, not later than 15 (fifteen) days as of the date of the Winner declaration.

Upon receiving the evidence of the bank remittance, the DGRE will submit the Winner declaration to the MEMR c.q. the DGE. The MEMR will then issue to PLN, the instruction  to purchase the electricity generated by the Winner’s solar power plant. The instruction letter serves as the MEMR’s approval of the purchase price, which is determined based on the final result of the tender.

The approved purchase price must be stated in the power purchase agreement (“PPA”) between PLN and Solar Power Plant. The PPA is valid for 20 (twenty) years and is extendable. The PPA must be signed within 60 (sixty) days as of PLN’s receipt of the instruction to purchase the electricity produced by the Winner’s solar power plant.

Obligations of the Winner

The Winner is obliged to:

 

  • close the financial deal within 3 (three) months as of the signing of the PPA;
  • commence the construction of the solar power plant  within 3 (three) months as of the financial closing;
  • ensure that the solar power plant’s commercial operation date (“COD”) is at the latest 18 (eighteen) months as from the signing of the PPA. If necessary the period may be extended for a maximum of 12 (twelve) months, but for that there is a sanction in the form of reduction of the purchase price. If at the end of the 12 (twelve) months extension the COD is still not achieved, PLN’s obligation to purchase the electricity power ceases to be in effect and the PPA is revoked.

The Solar Energy Regulation came into effect on 12 June 2013.