20 May 2025
Unveiling MEMR 5/2025 - A Comprehensive Guide to Indonesia's Renewable Energy Future

In line with Presidential Regulation No. 112 of 2022 on the Acceleration of Development of Renewable Energy Power Plant for Electricity Supply, the Minister of Energy and Mineral Resources (“MEMR”) has issued a new regulation, MEMR Regulation No. 5 of 2025 on the Guidelines for Power Purchase Agreements (“PPA”) from Power Plants Utilizing Renewable Energy Sources (“MEMR 5/2025”). 

 

The Precursor of MEMR 5/2025

 

The guidelines for PPAs to be entered by Independent Power Producers (“IPP”) and PLN as the offtaker were previously governed by MEMR Regulation No. 10 of 2017 (“MEMR 10/2017”), covering all PPAs from power plants using both renewable and non-renewable energy sources. With the issuance of MEMR 5/2025, provisions related to renewable energy (i.e. geothermal, hydro, photovoltaic solar, wind, biomass, biogas, ocean energy, biofuel, and waste-to-energy) in MEMR 10/2017 are replaced.

 

MEMR 5/2025 modernizes the framework for renewable energy PPAs, adapting existing PPA practices with current market conditions. It aims to accelerate renewable energy development and enhance legal certainty while introducing new mechanisms to strengthen the sector.

 

Please note that these guidelines will only apply to PPAs starting from the date of the enactment of MEMR 5/2025, which is 4 March 2025. Projects already in the procurement process will follow the new regulation if they are still in the bidding stage, while ongoing projects will remain under the previous regulation.  However, any extensions or amendments to ongoing PPAs will be subject to the new regulation.

 

What’s New?

 

MEMR 5/2025 introduces several new provisions, including: 

 

  1. Additional Provision on Performance Security. MEMR 5/2025 introduces a maximum performance security of 10% of the project cost of the power plant, a provision absent in MEMR 10/2017.
     

  2. Rights on Environmental Attributes and Carbon Pricing. While previously silent under MEMR 10/2017, MEMR 5/2025 currently sets out the rights to environmental attributes or carbon economic value of power plants utilizing renewable energy sources including at least: carbon credits, Renewable Energy certificates, green labels, other tradable rights; and benefits that are or will become available for reducing greenhouse gas emissions. This is in line with the executed renewable energy PPAs in practice which entitle the rights to environmental attributes to the agreed party.

     

  3. Language Requirement. MEMR 5/2025  provides clearer provisions that PPAs may be prepared in bilingual (English and Bahasa Indonesia), with parties agreeing on the prevailing language in case of discrepancies in interpretation.

  1. Refinancing. MEMR 5/2025 explicitly recognize the right of IPPs to conduct refinancing, subject to notification to PLN. This provision reflects established practice in the precedent PPAs.

     

Amended or Substantiated Provisions from MEMR 10/2017

 

Several existing provisions under MEMR 10/2017 are amended or substantiated by MEMR 5/2025, including:

 

  1. Broader Subjects of the PPA. Unlike MEMR 10/2017, MEMR 5/2025 expands the applicability of PPA guidelines not only for PLN and IPP, but also IPP and other licensed offtakers other than PLN.

     

  2. Broader Period of the PPA. While MEMR 10/2017 limits the period of PPA to 30 years, MEMR 5/2025 allows an extension period of more than 30 years, provided that the electricity price for the extension period refers to the ceiling price after the 10th year. 
     

  3. Electricity Purchase Price. MEMR 10/2017 initially allowed for the adjustment of the electricity purchase price due to changes in regulations related to  (i) the selling price of electricity; (ii) taxation regulations; (iii) environmental; (iv) energy costs; and/or (v) other conditions stated in the PPA. MEMR 5/2025 amends this, permitting the price adjustments for changes in obligations related to (i) taxes and levy, (ii) environmental, (iii) non-tax payment, and/or other conditions as agreed in the PPA provided that that price cannot exceed the upper benchmark price in accordance with the applicable regulations.
     

  4. Transfer of Shares in IPP before COD. MEMR 10/2017 initially prohibited IPP shareholders from transferring shares before Commercial Operation Date (“COD”), except for up to 90% of IPP shares to an affiliate owned directly by the sponsoring company with more than 90% ownership. MEMR 5/2025 introduces a new exception allowing the transfer of IPP shares to lenders (step-in rights) before COD in the event of an IPP default, provided the sponsoring company's qualifications remain intact.

  1. Termination of PPA. While MEMR 10/2017 allowed PPA termination under the following events: (i) expiration of the PPA period; (ii) termination by either party; (iii) failure to secure funding; (iv) IPP’s bankruptcy or liquidation; or (v) force majeure, MEMR 5/2025 adds new triggers for termination, namely: (i) expiration of the IPP's geothermal license (for geothermal plants) and (ii) other conditions agreed upon by the IPP and PLN.
     

  2. PLN’s Obligation. MEMR 5/2025 amends PLN’s obligations under MEMR 10/2017, requiring PLN to (i) absorb and purchase electricity generated by IPP as stated in the PPA during the PPA period; (ii) pay for electricity that is not absorbed due to Deemed Dispatch due to certain conditions from PLN based on the applicable grace period as stated in the PPA; and (iii) maintain and safeguard the reliability of PLN’s electricity network facilities to receive electricity from IPP.
     

  3. Risk Allocation on the Exchange Rate. MEMR 5/2025 generally maintains the risk alllocation provisions under MEMR 10/2017, but introduces new elements, among others, regarding the exchange rate, where PLN assumes the risk of currency exchange rate volatility and the IPP is responsible for the risk of currency convertibility.

  1. Force Majeure. The scope of force majeure is enlarged under MEMR 5/2025 which includes: (i) war or civil war, whether declared or undeclared; (ii) volcanic eruption, fire, flood, earthquake, pandemic, epidemic, endemic, landslide, natural event, and other events beyond human control; and/or (iii) discovery of dangerous objects or historical relics at the location of the power plant or the location of special facilities for the power plant. MEMR 5/2025 also allows MEMR to designate additional force majeure events related to the technical implementation of the power plant project, based on an evaluation of the affected party's application.

  1. Dispute Settlement. Unlike MEMR 10/2017 which provides that disputes should first be resolved through deliberation, and failing any indication thereon, referred to arbitration by BANI, UNCITRAL, or other arbitration institutions, MEMR 5/2025 expands the dispute settlement for for renewable energy PPAs by adding the option of settlement through state judicial institutions.

  1. Deemed Dispatch.  MEMR 5/2025 entitles IPP to receive a deemed dispatch payment based on the electricity purchase price due to curtailment by PLN, aligning with precedent renewable PPAs. Previously, under MEMR 10/2017, the general concept of deemed dispatch was already recognized. However, it only stipulated that IPPs would be eligible for deemed dispatch payments if disturbances to PLN’s grid occurred due to events outside of force majeure.  MEMR 5/2025 now expressly provides that IPPs are entitled to deemed dispatch payments when curtailment by PLN results from:

  • Inspection or maintenance of PLN’s electricity system; or

  • Emergency events in accordance with the applicable Grid Code and Distribution Code.

 

ABNR Commentary

 

MEMR 5/2025 marks a significant step forward in Indonesia's renewable energy sector. By updating and expanding the guidelines for PPAs, the regulation aims to create a more conducive environment for renewable energy development. The introduction of new provisions such as performance security, rights on environmental attributes, and allocation of risks, reflects the government's commitment to promoting sustainable energy practices and is expected to increase investment in the renewable energy projects and contribute to Indonesia's goal of increasing its renewable energy capacity.

 

 

By partners Serafina Muryanti (smuryanti@abnrlaw.com), Maher Sasongko (msasongko@abnrlaw.com), associates Adya Sepasthika (asepasthika@abnrlaw.com), Kenny Poltak (kadrianus@abnrlaw.com), and Jason Daniel Edgar (jedgar@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.

 

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20 May 2025
Unveiling MEMR 5/2025 - A Comprehensive Guide to Indonesia's Renewable Energy Future

In line with Presidential Regulation No. 112 of 2022 on the Acceleration of Development of Renewable Energy Power Plant for Electricity Supply, the Minister of Energy and Mineral Resources (“MEMR”) has issued a new regulation, MEMR Regulation No. 5 of 2025 on the Guidelines for Power Purchase Agreements (“PPA”) from Power Plants Utilizing Renewable Energy Sources (“MEMR 5/2025”). 

 

The Precursor of MEMR 5/2025

 

The guidelines for PPAs to be entered by Independent Power Producers (“IPP”) and PLN as the offtaker were previously governed by MEMR Regulation No. 10 of 2017 (“MEMR 10/2017”), covering all PPAs from power plants using both renewable and non-renewable energy sources. With the issuance of MEMR 5/2025, provisions related to renewable energy (i.e. geothermal, hydro, photovoltaic solar, wind, biomass, biogas, ocean energy, biofuel, and waste-to-energy) in MEMR 10/2017 are replaced.

 

MEMR 5/2025 modernizes the framework for renewable energy PPAs, adapting existing PPA practices with current market conditions. It aims to accelerate renewable energy development and enhance legal certainty while introducing new mechanisms to strengthen the sector.

 

Please note that these guidelines will only apply to PPAs starting from the date of the enactment of MEMR 5/2025, which is 4 March 2025. Projects already in the procurement process will follow the new regulation if they are still in the bidding stage, while ongoing projects will remain under the previous regulation.  However, any extensions or amendments to ongoing PPAs will be subject to the new regulation.

 

What’s New?

 

MEMR 5/2025 introduces several new provisions, including: 

 

  1. Additional Provision on Performance Security. MEMR 5/2025 introduces a maximum performance security of 10% of the project cost of the power plant, a provision absent in MEMR 10/2017.
     

  2. Rights on Environmental Attributes and Carbon Pricing. While previously silent under MEMR 10/2017, MEMR 5/2025 currently sets out the rights to environmental attributes or carbon economic value of power plants utilizing renewable energy sources including at least: carbon credits, Renewable Energy certificates, green labels, other tradable rights; and benefits that are or will become available for reducing greenhouse gas emissions. This is in line with the executed renewable energy PPAs in practice which entitle the rights to environmental attributes to the agreed party.

     

  3. Language Requirement. MEMR 5/2025  provides clearer provisions that PPAs may be prepared in bilingual (English and Bahasa Indonesia), with parties agreeing on the prevailing language in case of discrepancies in interpretation.

  1. Refinancing. MEMR 5/2025 explicitly recognize the right of IPPs to conduct refinancing, subject to notification to PLN. This provision reflects established practice in the precedent PPAs.

     

Amended or Substantiated Provisions from MEMR 10/2017

 

Several existing provisions under MEMR 10/2017 are amended or substantiated by MEMR 5/2025, including:

 

  1. Broader Subjects of the PPA. Unlike MEMR 10/2017, MEMR 5/2025 expands the applicability of PPA guidelines not only for PLN and IPP, but also IPP and other licensed offtakers other than PLN.

     

  2. Broader Period of the PPA. While MEMR 10/2017 limits the period of PPA to 30 years, MEMR 5/2025 allows an extension period of more than 30 years, provided that the electricity price for the extension period refers to the ceiling price after the 10th year. 
     

  3. Electricity Purchase Price. MEMR 10/2017 initially allowed for the adjustment of the electricity purchase price due to changes in regulations related to  (i) the selling price of electricity; (ii) taxation regulations; (iii) environmental; (iv) energy costs; and/or (v) other conditions stated in the PPA. MEMR 5/2025 amends this, permitting the price adjustments for changes in obligations related to (i) taxes and levy, (ii) environmental, (iii) non-tax payment, and/or other conditions as agreed in the PPA provided that that price cannot exceed the upper benchmark price in accordance with the applicable regulations.
     

  4. Transfer of Shares in IPP before COD. MEMR 10/2017 initially prohibited IPP shareholders from transferring shares before Commercial Operation Date (“COD”), except for up to 90% of IPP shares to an affiliate owned directly by the sponsoring company with more than 90% ownership. MEMR 5/2025 introduces a new exception allowing the transfer of IPP shares to lenders (step-in rights) before COD in the event of an IPP default, provided the sponsoring company's qualifications remain intact.

  1. Termination of PPA. While MEMR 10/2017 allowed PPA termination under the following events: (i) expiration of the PPA period; (ii) termination by either party; (iii) failure to secure funding; (iv) IPP’s bankruptcy or liquidation; or (v) force majeure, MEMR 5/2025 adds new triggers for termination, namely: (i) expiration of the IPP's geothermal license (for geothermal plants) and (ii) other conditions agreed upon by the IPP and PLN.
     

  2. PLN’s Obligation. MEMR 5/2025 amends PLN’s obligations under MEMR 10/2017, requiring PLN to (i) absorb and purchase electricity generated by IPP as stated in the PPA during the PPA period; (ii) pay for electricity that is not absorbed due to Deemed Dispatch due to certain conditions from PLN based on the applicable grace period as stated in the PPA; and (iii) maintain and safeguard the reliability of PLN’s electricity network facilities to receive electricity from IPP.
     

  3. Risk Allocation on the Exchange Rate. MEMR 5/2025 generally maintains the risk alllocation provisions under MEMR 10/2017, but introduces new elements, among others, regarding the exchange rate, where PLN assumes the risk of currency exchange rate volatility and the IPP is responsible for the risk of currency convertibility.

  1. Force Majeure. The scope of force majeure is enlarged under MEMR 5/2025 which includes: (i) war or civil war, whether declared or undeclared; (ii) volcanic eruption, fire, flood, earthquake, pandemic, epidemic, endemic, landslide, natural event, and other events beyond human control; and/or (iii) discovery of dangerous objects or historical relics at the location of the power plant or the location of special facilities for the power plant. MEMR 5/2025 also allows MEMR to designate additional force majeure events related to the technical implementation of the power plant project, based on an evaluation of the affected party's application.

  1. Dispute Settlement. Unlike MEMR 10/2017 which provides that disputes should first be resolved through deliberation, and failing any indication thereon, referred to arbitration by BANI, UNCITRAL, or other arbitration institutions, MEMR 5/2025 expands the dispute settlement for for renewable energy PPAs by adding the option of settlement through state judicial institutions.

  1. Deemed Dispatch.  MEMR 5/2025 entitles IPP to receive a deemed dispatch payment based on the electricity purchase price due to curtailment by PLN, aligning with precedent renewable PPAs. Previously, under MEMR 10/2017, the general concept of deemed dispatch was already recognized. However, it only stipulated that IPPs would be eligible for deemed dispatch payments if disturbances to PLN’s grid occurred due to events outside of force majeure.  MEMR 5/2025 now expressly provides that IPPs are entitled to deemed dispatch payments when curtailment by PLN results from:

  • Inspection or maintenance of PLN’s electricity system; or

  • Emergency events in accordance with the applicable Grid Code and Distribution Code.

 

ABNR Commentary

 

MEMR 5/2025 marks a significant step forward in Indonesia's renewable energy sector. By updating and expanding the guidelines for PPAs, the regulation aims to create a more conducive environment for renewable energy development. The introduction of new provisions such as performance security, rights on environmental attributes, and allocation of risks, reflects the government's commitment to promoting sustainable energy practices and is expected to increase investment in the renewable energy projects and contribute to Indonesia's goal of increasing its renewable energy capacity.

 

 

By partners Serafina Muryanti (smuryanti@abnrlaw.com), Maher Sasongko (msasongko@abnrlaw.com), associates Adya Sepasthika (asepasthika@abnrlaw.com), Kenny Poltak (kadrianus@abnrlaw.com), and Jason Daniel Edgar (jedgar@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.