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Indonesia Unveils New Regulation To Boost Renewable Energy Use

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Indonesia Unveils New Regulation To Boost Renewable Energy Use

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  • World’s largest coal exporter aims to increase proportion of renewables in its energy mix to 23% by 2025
  • No new coal plants can be built
  • Those in the pipeline must reduce emissions by 35% within 10 years of operation

Indonesia has issued a regulation to encourage renewable energy use in one of the world’s biggest carbon emitters, including a plan to retire some coal plants early, a presidential decree said.

The world’s largest exporter of coal aims to increase the proportion of renewables in its energy mix to 23% by 2025, but has only reached around 12% so far. Coal currently powers around 60% of the country’s electricity needs.

Indonesia set a goal last year to achieve net-zero emissions by 2060 and pledged alongside dozens of other countries to phase down coal use to help limit global warming to less than 1.5 degrees Celsius above pre-industrial levels.

Authorities have been instructed to create a plan for early retirement of some coal power plants and the government could help absorb any losses incurred, according to the regulation issued late on Wednesday.

The regulation states no new coal power plants can be built, but those that are already in the pipeline and those that are integrated with the natural resources processing industry will be allowed to go ahead as planned.

However, emissions by new coal power plants must be reduced by 35% within 10 years of operation compared to average coal plant emissions in 2021, the document read, and could only be operated up to 2050.

See related article: Ormat Secures $100 Million Supply and EPC Contracts in New Zealand and Indonesia

Video source: CNBC International TV / YouTube

The government also set a new pricing system for renewables – geothermal, hydro power, and solar power – to encourage investment. Developers previously had to go through a lengthy negotiation with the state utility to reach a pricing agreement.

Indonesian Geothermal Association (INAGA) chairman Prijandaru Effendi said the regulation differed from industry proposals, including by using a ceiling tariff instead of feed in tariffs, but said more detail was needed.

“Maybe in six months time we can say whether this is good or bad,” Prijandaru said.

To boost renewables’ investment, the government will also give fiscal incentives including financing facilities and ease of licensing in forest areas.

International Energy Agency (IEA) said this month Indonesia needs to ensure policy reforms including introducing transparent and competitive tariffs and predictable project pipelines to encourage renewables and reduce reliance on coal.

Source: Reuters

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