INDONESIA'S BOLD NEW ROOFTOP SOLAR-POWER PLANT REGULATION

CLIENT UPDATE

PUBLISHED DATE

FEB 29, 2024

AUTHORS

Denia Isetianti Permata

Robert Reid

INDONESIA'S BOLD NEW ROOFTOP SOLAR-POWER PLANT REGULATION

Overview

The Indonesian Minister of Energy and Mineral Resources (MEMR) enacted MEMR Regulation No. 2 of 26 of 2021 2024 on “Rooftop Solar-Power Plants Connected to Electrical Power Networks of Holders of Electricity Supply Business Permits for Public Interests” on 29 January 2024 (New Regulation). The New Regulation replaces MEMR Regulation No. (with the same title as the New Regulation) (the Old Regulation) and no longer imposes the various restrictions on rooftop solar (photovoltaic) power plant systems (Rooftop Solar Systems) that were present in the Old Regulation.

Such restrictions include electrical capacity limits (in kW), and parallel operation fees (including capacity charges) for Rooftop Solar Systems. Significantly, the net-metering mechanism under the Old Regulation for excess electricity (by which the Rooftop Solar System owner’s bills for importing any required electricity from the grid could be offset by exporting such excess to the grid) has been scrapped under the New Regulation.

As mentioned in the title, the New Regulation only applies to Rooftop Solar Systems that are connected to the electrical power network (grid) of the holder of an electricity supply business permit for public interest for a particular business area (IUPTLU Holder). In Indonesia, the predominant IUPTLU Holder is PT Perusahaan Listrik Negara (Persero) (PLN), Indonesia’s state-owned electricity utility. (So this client update is not applicable to any Rooftop Solar System that is not connected to an IUPTLU holder’s grid.)

Under the New Regulation, an IUPTLU Holder (including PLN) that wishes to include Rooftop Solar Systems within its electrical power network is now subject to a new electricity development quota system (as further described below). The electrical capacity of any particular Rooftop Solar System will now be determined not only based on the Rooftop Solar System’s applied for capacity, but also on the particular IUPTLU Holder’s total quota allocation (given to the IUPTLU Holder by MEMR) for the Rooftop Solar Systems within each IUPTLU Holder’s business area. The development quota allocations are dynamic and subject to a regular reporting and publication regime set out in the New Regulation.

And with the New Regulation comes a new penalty regime for non-compliance.

Development quota requirements

The Old Regulation limited the maximum capacity of each Rooftop Solar System based on its total connected electrical power with the IUPTLU Holder. However, the New Regulation no longer automatically accepts such capacity limits. As mentioned above, if an IUPTLU Holder wishes to include Rooftop Solar Systems within its electrical power network (Relevant IUPTLU Holder), it must first apply for a “development quota” (for the total anticipated Rooftop Solar System power capacity in its business area) in the following stages:

The Relevant IUPTLU Holder must propose a development quota to MEMR for a five-year period covering the total anticipated Rooftop Solar System power capacity in its business area based on a technical study (Proposed Quota).
MEMR will evaluate the Proposed Quota and determine/notify the actual development quota to be allocated to the Relevant IUPTLU Holder (Actual Development Quota).
Following such determination/notification, the Relevant IUPTLU Holder must then allocate the Actual Development Quota to the total anticipated Rooftop Solar Systems within its business area based on “clustering” methodology (Allocated Quota).
The Relevant IUPTLU Holder must then report the Allocated Quota to MEMR and publish it on its website/social media (Published Quota).
A business or a customer that wishes to install a Rooftop Solar System must apply to the Relevant IUPTLU Holder for an electrical capacity based on the Published Quota, which the Relevant IUPTLU Holder will either approve or reject (please see section on applications and licensing below).
Each Relevant IUPTLU Holder may propose to increase or decrease their Actual Development Quota by resubmitting another proposed development quota to MEMR.

The New Regulation provides detailed provisions on the timing of each of the above steps.

Applications and licensing for Rooftop Solar System construction and installation

A business or a customer that that wishes to install a Rooftop Solar System must first apply for its construction and installation to the Relevant IUPTLU Holder based on the available Published Quota (Applicant). If the Applicant’s requested capacity is within the Published Quota, then the Rooftop Solar System will be able to use such capacity, but the applied for allocation is by no means guaranteed until the Relevant IUPTLU Holder has made a decision. The Applicant will be subject to the following procedure and timing:

Application timing	Relevant IUPTLU Holder approval	Reporting/Licensing
1 month after publication of the first Published Quota; or alternatively, in January or July of each year.	Maximum 30 days after the application has been made	For Rooftop Solar Systems 0-500 kW, the Applicant must submit a report to MEMR/ Governor. For Rooftop Solar Systems > 500 kW, the Applicant musobtain an electricity supply business permit for its own interests (IUPTLS).
Approved, either: by the Relevant IUPTLU Holder; or automatically (deemed approval), if the Relevant IUPTLU Holder does not respond within the 30- day period.
Rejected, either: with an explanation; or due to the unavailability within the Published Quota (in which case, Applicants will be wait- listed).

Application timing

Relevant IUPTLU Holder approval

Reporting/Licensing

1 month after publication of the first Published Quota; or
alternatively, in January or July of each year.

Maximum 30 days after the application has been made

For Rooftop Solar Systems 0-500 kW, the Applicant must submit a report to MEMR/ Governor.
For Rooftop Solar Systems > 500 kW, the Applicant musobtain an electricity supply business permit for its own interests (IUPTLS).

Approved, either:

by the Relevant IUPTLU Holder; or
automatically (deemed approval), if the Relevant IUPTLU Holder does not respond within the 30- day period.

Rejected, either:

with an explanation; or
due to the unavailability within the Published Quota (in which case, Applicants will be wait- listed).

Following satisfaction of the above reporting/licensing procedure, the construction and installation of a Rooftop Solar System can only be carried out by business entities that hold an electricity supporting services business permit (IUJPTL). Although the Applicant may be able to proceed with Rooftop Solar System construction after application approval (but before it has satisfied the above reporting/licensing procedure), it is only permitted to operate the Rooftop Solar System after it has completed the above reporting/licensing procedure.

Penalties for Rooftop Solar System owners operating their Rooftop Solar System without Relevant IUPTLU Holder approval

If the above Relevant IUPTLU Holder approval has not been obtained and the Rooftop Solar System owner commences operations, the Relevant IUPTLU Holder will order the Rooftop Solar System owner to:

disconnect the rooftop solar-power plan from the Relevant IUPTLU Holder’s electrical power network; and
pay a penalty (based on the size of the Rooftop Solar System converter capacity) to the Relevant IUPTLU Holder.

If the Rooftop Solar System owner does not comply with the above orders within one month, the Relevant IUPTLU Holder may temporarily disconnect the Rooftop Solar System owner from its electrical power network until the orders have been fulfilled.

Inspection and testing

Each Rooftop Solar System must comply with various inspection and testing requirements by obtaining a certificate of operation (SLO) or a registration number, with the following requirements:

SLO	Registration number
Required for Rooftop Solar Systems > 500 kW connected in one power installation system; and Required for Rooftop Solar Systems 0 – 500 kW with a separate control panel.	To obtain a registration number from MEMR: the Rooftop Solar System must be 0 - 500 kW with an integrated control panel that must fulfill the following requirements: it uses one inverter; or more than one inverter with a total capacity of less than 10 kW; it must have a series of solar modules in one part of the same building construction; it must have in the same earthing; and it must serve the same utilisation installation; and the Rooftop Solar System owner or the business entity that built the Rooftop Solar System must sign a “statement of responsibility” (in the statutory format) addressing the Rooftop Solar System’s electricity safety aspects and include the following documents: product certificate; manufacturer’s warranty; commissioning test results; or power plant installation maintenance documents.
The SLO must be obtained no later than 6 months after the Relevant IUPTLU Holder has approved the Applicant’s application, or the approval will be canceled.	The MEMR Registration Number must be obtained no later than 3 months after the Relevant IUPTLU Holder has approved the Applicant’s application, or the approval will be canceled.

SLO

Registration number

Required for Rooftop Solar Systems > 500 kW connected in one power installation system; and
Required for Rooftop Solar Systems 0 – 500 kW with a separate control panel.

To obtain a registration number from MEMR:

the Rooftop Solar System must be 0 - 500 kW with an integrated control panel that must fulfill the following requirements:

it uses one inverter; or more than one inverter with a total capacity of less than 10 kW;
it must have a series of solar modules in one part of the same building construction;
it must have in the same earthing; and
it must serve the same utilisation installation; and

the Rooftop Solar System owner or the business entity

that built the Rooftop Solar System must sign a “statement of responsibility” (in the statutory format) addressing the Rooftop Solar System’s electricity safety aspects and include the following documents: product certificate; manufacturer’s warranty; commissioning test results; or power plant installation maintenance documents.

The SLO must be obtained no later than 6 months after the Relevant IUPTLU Holder has approved the Applicant’s application, or the approval will be canceled.

The MEMR Registration Number must be obtained no later than 3 months after the Relevant IUPTLU Holder has approved the Applicant’s application, or the approval will be canceled.

Industrial Rooftop Solar System owners

Whereas under the Old Regulation, industrial Rooftop Solar System owners were obliged to pay a capacity charge (as part of a parallel operations fee), the New Regulation contains no such requirement.

Industrial Rooftop Solar System owners (as distinct from domestic Rooftop Solar System owners) are also required to submit an operation plan periodically to the Relevant IUPTLU Holder. In addition, an industrial Rooftop Solar System owner that operates a Rooftop Solar System with a capacity of more than 3 MW must provide an integrated weather forecast management database.

Eligibility for carbon credits

Under the Old Regulation, Rooftop Solar System owners and the Relevant IUPTLU Holders were permitted to sell the carbon credits they could generate. However, under the New Regulation this is no longer the case, so that now, any carbon economic value from Rooftop Solar System will belong to the government. It is always possible that in the future, specific regulations may be issued to deal with the carbon economic value issues involving Rooftop Solar Systems.

Transition from the Old Regulation

Rooftop Solar System owners that have been operating and connected to a Relevant IUPTLU Holder’s electrical power network, but have not yet reported to the Relevant IUPTLU Holder, must make such a report no later than 3 months after the New Regulation has been enacted (i.e. by no later than 31 April 2024) or the owner may be subject to the same penalties as described above for Rooftop Solar System owners that operate without the Relevant IUPTLU Holder’s approval.

Importantly, existing Rooftop Solar System owners (whether or not already operational) that have already been approved by the Relevant IUPTLU Holder (Existing Rooftop Solar Systems) are given an exemption under the New Regulation to the extent that they are permitted to continue applying the net- metering mechanism for excess electricity (so that the cost of electricity they import from the grid will be (partly) offset by any electricity generated by the Existing Rooftop Solar System that is exported to the grid). However, such exemption is only available for a 10-year term, commencing on the Relevant IUPTLU Holder’s approval date.

Conclusion

The New Regulation has changed the Rooftop Solar System business landscape in Indonesia and brings with it some positive and some negative impacts. We summarise below our view of the New Regulation’s main pros and cons:

Pros -

The deemed approval provides some degree of legal certainty for Applicants applying to establish Rooftop Solar Systems within the capacity of the Relevant IUPTLU Holder’s Published Quota.
Existing Rooftop Solar System owners can now maximise the capacity of their Rooftop Solar System if such capacity is within the Published Quota.
Existing Rooftop Solar Systems will be able to take advantage of net-metering to offset their imported electricity costs for a 10-year period.
Industrial Rooftop Solar System owners are no longer required to pay a capacity charge.

Cons -

New Rooftop Solar System owners will not be able to apply net metering to their generated electricity supply, so they are unable to take advantage of the potential savings offset.
The development quota scheme creates uncertainty regarding potential Rooftop Solar System owners applied-for electrical capacity until the Relevant IUPTLU Holder has formally approved such capacity.
The carbon economic benefit regulations do not currently provide any benefit to Rooftop Solar System owners.

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