Removal of export incentives reduces interest in residential solar panels
Talk of revising the incentives in Energy and Mineral Resources Ministerial Regulation (Permen ESDM) No. 26/2021 on rooftop solar power systems (PLTS) has been floating around the House of Representatives.1 The incentives were to allow owners of rooftop PLTS to reduce their electricity costs by exporting the electricity they generate back to state electricity company PLN; however, PLN has not implemented these incentives since the regulation was passed in August 2021 due to oversupply.
Although the export electricity incentives are intended to make the adoption of solar panel more appealing to the public, from PLN’s perspective, they just add to its financial burden. To fulfill its role as the primary electricity distributor in Indonesia, PLN is contractually obligated to buy electricity from suppliers with a “take or pay” plan.2 This means that PLN incurs losses during oversupply, because it must still buy electricity even when consumers cannot absorb more power.
To reconcile PLN’s financial struggles and solar energy consumers’ need for incentives, the energy ministry presented a draft of possible revisions to Permen ESDM No. 26/2021 during a public meeting with the House’s energy commission on Jan. 6.
The draft revisions entirely remove Article 6 of the regulation that regulates export electricity from rooftop solar systems to the PLN. This removes PLN’s financial obligations, but also removes the incentive for consumers to install solar panels. In return, the draft revisions also remove the capacity costs stipulated in Article 20 of the regulation as an additional fee for the industrial use of rooftop solar panels exclusive of the operational fee for solar panels.3
The removal of Article 20 serves as a new incentive to replace the loss of the export electricity incentive for industrial users of rooftop solar panels. However, there is no equivalent for residential users of rooftop solar panels. According to the calculations of players in the solar energy industry, conventional electricity from PLN would be cheaper for residential consumers than solar energy without the export incentive. 4 If these revisions are approved, they will create an obstacle for solar energy adoption at the residential level.
Unlike for industries, energy storage systems remain too costly for the average Indonesian household. According to the calculations of the Indonesian Solar Energy Association’s (AESI), a household would have to invest between US$650 and $700 per kilowatt-hour (Wh) for a home-scale battery. This would be in addition to the actual cost of installing solar panels, which average around $2,000.5
AESI also argues that these changed to the Permen ESDM will discourage rooftop solar panel adoption among residential users, which will in turn eliminate an opportunity for PLN to get a potentially large supply of electricity from renewable sources. If solar energy penetrates the residential market, that segment could potentially provide between 8 to 12 gigawatts of energy to PLN during peak hours, increasing the state-owned enterprise’s electricity supply from renewable sources. This estimate is based on just PLN subscribers above 2,200 volt-amperes, which total more than 4 million households.6
A number of rooftop PLTS users and industry players said that there were several provisions regarding the export-import plan of electricity produced by solar panels in the ESDM Ministerial Regulation No. 26/2021 before the ESDM Ministry’s plans for revision. However, the export-import plans had never been executed by PLN.
The source said that, at first the birth of this regulation had caused euphoria among industry and household consumers to install rooftop PLTS in their respective homes.
However, after the regulation was issued, PLN only wanted to absorb 65 percent of the excess electricity generated by the rooftop PLTS. Even though the ESDM Ministerial Regulation states, if there is excess electricity generated by the rooftop PLTS, then the excess supply of electricity will be fully absorbed by PLN. The electricity absorbed by PLN will then be calculated to reduce consumer bills in the following month.
The source said that rooftop solar panel users are worried that the ESDM Ministry will abolish the export-import scheme of electricity produced by rooftop PLTS. "This new regulation will roll a red carpet for PLN," he said.
In the ministerial regulation’s new draft, the metering scheme from the rooftop solar power plant to the PLN grid is completely removed. This means that if later there is excess electricity from the rooftop PLTS entering the PLN network, it will not be counted as a deduction for paying for electricity in the following month.
Not only that. The former PLN official added that the government will divide the electricity quota from rooftop solar panels based on the PLN electricity system and electricity sub-system. Thus, the rooftop PLTS quota would be divided per region according to the PLN electricity system.
For rooftop solar panel users and industry players, this disincentive will prevent consumers from being interested in installing rooftop mini-grid solar panels. This worsens the already low growth of rooftop solar panel adoption in Indonesia. From the target of 3.6 gigawatts in 2025, the installed capacity of rooftop solar panels until the middle of last year was around 54 MW.
The source added that newly installed rooftop solar panels cannot yet operate because they still have to wait for the revision of the ESDM Ministerial Regulation. "A number of companies that install and work on solar panels for industrial use are still waiting to be paid," he said.
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