Indonesia may soon become a budding solar power market as feed-in tariffs recently announced by the government are expected to yield very attractive returns for developers.

According to an analysis by the Bloomberg New Energy Finance (BNEF), solar power projects in Java and Sumatra may yield rate of return up to 18.8% the capital cost of setting up solar power projects in these areas will be lower compared to that in other regions of Indonesia.

Indonesia recently announced feed-in tariffs for solar PV power projects in the range of US¢14.5/kWh and US¢25.0/kWh. The tariff vary from region to region. Java and Sumatra have been assigned the lowest tariff of less than US¢20.0/kWh but the levellised cost of energy is even lower at around US¢8.8/kWh.

Projects selected for implementation will sell electricity through 20-year power purchase agreements. Java has been allocated a total capacity of 150 MW with project size capped at 20 MW. Projects will less than 10 MW capacity will have to be commissioned within 12 months while larger projects will get 24 months.

Over the last few months the government has taken several measures to promote investment in the renewable energy sector, including the implementation of a single-window approval system. The planned incentives would play a critical role in Indonesia’s endeavor to boost the share of renewable energy sources in the total energy mix to 19% by 2019 and to 25% by 2025, up from its current share of renewable energy sources of between 5% and 6%.

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