Assessment of the technical and economic potential of utility-scale solar PV in Indonesia and the effects of policy interventions

Abstract

Indonesia has set ambitious targets to increase renewable energy in the energy and electricity mix for 2025 and 2050. Solar photovoltaic (PV) is one of the renewable energy technology types that could play an important role in this transition, given the high resource potential compared to other countries and the global declining costs. The Ministry of Energy and Mineral Resource (MoEMR) has recognized the potential of solar energy and has expressed the intention to increase the share in the electricity mix (which currently is less than 1%) by focusing primarily on rooftop solar PV systems. However, utility-scale solar PV power plants could also play an important role, given the economies of scale advantages relative to rooftop systems. Unfortunately, a financial roadblock can be identified for the further development of utility-scale solar PV: the maximum allowed electricity prices that state electricity company Perusahaan Listrik Negara (PLN) pays for electricity produced by a solar power plant, are often lower than the levelized cost of electricity (LCOE). This creates an financially unattractive situation. This situation calls for insight into the economic potential of utility-scale solar PV and how this can be increased. However, no studies could be found that (1) look at how policies interventions can help to overcome the financial barrier and increase the economic potential and (2) assess the economic potential quantitatively not just in terms of LCOE but also in terms of the potential capacity and electricity generation given the maximum electricity price regulations that are in place.