Indonesia is a country dependent on coal, where traditional electricity grids are problematic. The island nation is moving to floating PV (FPV) to accelerate its energy transition. Crush Caroline let’s look at the current status of water-based solar energy and the problems that still need to be solved.
Indonesia’s state-owned enterprise Listrik Negara (PLN) wants 2.4 GW of floating solar generation capacity by 2025, according to its 10-year business plan.
A November 2021 report by the Institute for Essential Services Reform (IESR) stated that PLN is building a 145 MW (AC) site at Cirata Dam and a 60 MW (AC) project at Saguling Dam, both in West Java. plus a 90 MW(AC) facility at Singkarak Lake, West Sumatra.
The Cirata Floating Solar PV project is being developed by UAE state-owned Masdar Energy and PLN subsidiary PT Pembangkitan Jawa Bali Investasi. The Ministry of Energy and Mineral Resources says pv magazine – via its new Directorate-General for Renewable Energy and Energy Conservation – Cirata was “36.38%” complete as of December 2022, although it was due to be completed that year. According to the ministry, domestic content requirements for solar modules have hindered economic profitability and the rough condition of the tank bottom has made it difficult to install the anchoring system.
Floating projects in Saguling and Singkarak are being developed by PLN unit PT Indonesia Power and 50% state-owned Saudi Arabian developer ACWA Power, which in October 2020 offered to generate electricity 30% cheaper than the PLN tariff of $0.058/kWh. coming in at $0.041. “We saw the country’s great potential and its commitment to renewable energy and zero emission goals,” said Salman Baray, ACWA Power Indonesia Country Director. “We are working closely with PLN, Indonesia’s largest public utility company, to support their demands.”
Baray also mentioned the problems of having to source solar panels with sufficient Indonesian content. “The biggest challenge we’re dealing with is meeting the high local content requirements for solar – something that all solar developers face and struggle to overcome,” Baray said. “In fact, at this stage it is almost impossible to meet the requirements of construction-scale projects and we hope that things will improve in this area.”
Made in Indonesia
The local content requirements are defined by the Ministry of Industry’s regulations 4/2017 and 5/2017. The rules require that 34 to 40 percent of the equipment—including solar modules, inverters and mounting structures—comes from Indonesian industry. All project services – such as logistics, installation and construction – must be provided by Indonesian companies.
60% of the panel content is required from Indonesian manufacturers. The plan is for the requirement to reach 90% by 2025, supported by local polysilicon, ingot and metallurgical silicon production, according to IESR’s “Solar Energy Outlook 2023”. It looks like this won’t happen, as according to the IESR, Indonesia’s lack of cell manufacturing means module assemblers can only achieve 47.5% local content. As a result, the projects have fallen short of official requirements.
Data released by the Ministry of Energy in 2022 listed 21 Indonesian solar panel assemblers with an annual production capacity of 1.6 GW. Module components such as tempered glass, EVA film and PV strips cannot be manufactured domestically.
No Indonesian solar manufacturer has reached 100 MW of annual production capacity. “If we need 150 MW of solar modules, no company can sell us that capacity,” said Baray. “We have to buy it from at least two of the three manufacturers, which creates all kinds of challenges, including difficulties in getting financing. Another challenge is also the use of older technology, the price of which is almost 20-30 percent higher than, for example, the price of panels coming from China.
Fear of unbankability
The lack of large solar companies has caused bankability problems for the project. Loans typically used by developers require companies to work with modules from Tier 1 manufacturers. Level 1 is interpreted as having delivered products to at least six projects over two years and obtained non-recourse financing from six commercial banks during the same period. Indonesian solar companies have not been able to meet this standard.
IESR says the government needs to show flexibility on local content. “Indonesia has defined its green goals and is working towards them,” Baray admits. “However, the current restrictions are likely to hinder the achievement of its goals. We need to develop the local industry by creating enough demand to allow local manufacturers to expand and take advantage of economies of scale. If our company pays to buy panels – with old technology at a higher price – it would increase the tariff. PLN then has two options : either pass on the increased tariff to customers or turn to the Ministry of Finance for support.” Baray adds that the latter should go directly to PV manufacturers instead of reaching them through PLN and solar developers.
“PLN often gets a bad reputation for asking for additional subsidies,” says an ACWA representative. PLN has not responded to repeated requests for an interview pv magazine.
According to IESR’s 2021 report, steelmaker PT Krakatau Steel will build a 12.5 MW (AC) project at the Krenceng Dam in Cilegon, West Java, together with renewable energy developer PT Akuo Energy. Aluminum smelter PT Inalum and coal mine PT Bukit Asam are developing 770 kW (AC) FPV sites at the Sigura-Gura Dam in North Sumatra.
Badan Pengusahaan Batam, the government agency of the Batam Freeport Zone, installs these places on dwarfs. IESR reports a 2021 installation at Duriankang Dam near Batam City as a 1.7GW/4GWh FPV and battery storage facility jointly developed by Singapore’s Sunseap. However, the Ministry of Energy recently announced that the project partner will now be the Indonesian subsidiary of coal mining company PT Adaro Energy, PT Batam Sarana Surya. The device is now described as a 1 GW floating solar power plant.
The Directorate General of Renewable Energy Sources says pv magazine that PLN’s PT PLN Batam unit will take 20 percent of the electricity produced at the plant and the rest will be exported to Singapore. No commercial launch date has been set as developers wait to hear from the Department of Public Works and Housing how much of the reservoir’s surface can host FPV. According to regulations, a maximum of 5% of the area of dams, lakes and reservoirs can be covered, but Batam Sarana Surya wants to cover 42% of Duriankang Dam. Development of the forest area also requires state permits.
According to IESR solar analyst Daniel Kurniawan, other FPV sites are guided by corporate sustainability principles. He tells pv magazine that “the biggest reason for the growing initiative of industry and companies is their sustainable development goals and the pressure to reduce their carbon dioxide emissions2 effluent. This was also a good thing for companies in achieving the goals of sustainable development and at the same time reducing electricity costs. Companies also do not have to comply with local content requirements for solar panels if they do not sell their electricity to PLN.”
At the November 2022 G20 summit in Bali, Jakarta reached an agreement under which the governments of the United States, Japan, Canada, Denmark, France, Germany, Italy, Norway and the United Kingdom – as well as the EU – will offer $10 billion on the cheap. loans, grants and capital investments to wean Indonesia off coal. The United States said private financial institutions would provide another $10 billion as part of the $20 billion Just Energy Transition program.
In return, Jakarta promised that the electricity sector’s emissions will begin to decrease this decade and the country’s electricity will be emission-free by 2050. The ministers are working on a strategy for renewable energy sources.
Export of energy
The clean energy export situation remains unclear, according to the IESR, which says the government has yet to issue permits, although at least five developers are eyeing export-oriented solar projects in the Riau Islands. These developers had responded to Singapore’s October 2021 demand to supply “low-carbon electricity” from 4GW of generating capacity, but Indonesian President Joko Widodo reportedly wants to ban green electricity exports due to the lack of domestic emissions. reduction targets. The export of clean electricity is allowed if the local demand is satisfied, the exported energy is not subsidized and the quality and reliability of the electricity deteriorates. However, according to IESR, Jakarta has not yet issued permits.
Although the nation currently produces a surplus of electricity, it comes from coal-fired power plants, severely limiting the market for foreign buyers. Neighboring Malaysia already exports clean electricity, and decades-long discussions about connecting the power grids of the 10 countries of the Association of Southeast Asian Nations (ASEAN) have received renewed attention.
“Governments are looking very seriously at cleaning up the power system — especially as Southeast Asia’s electricity demand is expected to grow rapidly,” said Caroline Chua, a Singapore-based analyst at BloombergNEF. “Many are looking for an alternative to coal-fired power plants.”
According to Chua, the challenge is that ASEAN grids require a lot of harmonization in terms of policies, regulations and market operations once the grids are interconnected. “ASEAN is geographically fragmented, unlike Europe,” he said. “This raises questions about the financing of the infrastructure, how it connects the electricity market, and of course energy security to ensure reliable supply.”
BloombergNEF points out that pilot projects towards a unified grid are underway in Thailand, Laos, Malaysia, Vietnam and Singapore, and some electricity markets already have cross-border interconnections. Singapore has actively sought to source clean electricity to help it meet its climate goals.
“This example shows how a Southeast Asian country can help promote the development of renewable energy sources in another country,” Chua added. “The technology for cross-border electricity trade exists. Still, when it comes to financing, it can be quite tricky, especially in Southeast Asian countries where electricity markets are still highly regulated.