Indonesia unveils new regulation to boost renewable energy use

JAKARTA, Sept 18 (Reuters): 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 in Indonesia 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 this week.

Plans to get rid of 15 Gigawatts of coal power generation over the next three decades will require $600 billion of capital support, Erick Thohir, Minister for State-Owned Enterprises told Bloomberg News on Thursday.

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.

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.

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

The United States, Japan, and other donor countries will support Indonesia's efforts "with significant amounts of financial support," the U.S. Treasury said in a statement after officials visited Jakarta.

The 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. - Reuters