The first utility-scale (75 MW) wind farm facility in Indonesia (the “Sidrap” project) was launched in South Sulawesi in early 2018. In this case study, we assess how several factors contributed to the successful development of the Sidrap project including strong signals of support from the Indonesian Government; long-term local presence of private sector partners; familiarity of private sector partners with the risks and nuances of investing in Indonesia; and an innovative private-public sector partnership model. In the last 2 years, Indonesia’s electricity sector has changed much in terms of pricing policy and private sector involvement. Much effort has been directed toward the Indonesian Government meeting its renewable energy deployment target of 23% of the total energy mix by 2025. The question remains, however, on whether Indonesia will be able to develop additional renewable energy projects to Sidrap in the future, given the continuing changes and uncertainty in Indonesian’s renewable energy policy and politics.

KEY MESSAGES

Private sector investors in renewable energy in countries like Indonesia should carefully assess local government policy before making investment decisions. Both macro (policy) and micro (project) level aspects are critical for the success of a renewable energy project. This case matters because it presents some of the problems associated with policy inconsistency. Previously, the Indonesian Government’s energy policy served to harmonize policy and provides support for the private sector to invest in renewable energy development, which was a critical factor in the success of the Sidrap project phase 1. Changes in government policy removed incentive mechanisms, which brought about uncertainty for private sector investment. Too many changes in policy and regulations within a relatively short period of time, especially regulations that are unilaterally determined by government without sufficient stakeholder consultation, send a poor signal to private investors. Uncertainty can increase investment risk and may jeopardize renewable energy development in the future. Political leadership is key to providing an institutional setting and regulatory framework that is conducive to successful renewable energy project development.:

INTRODUCTION

A number of factors are considered important in determining the success or failure of a renewable energy project. Case studies in both developed and developing economies state the economic development level [1], public acceptance [13], political support [46], and government incentives [1, 7] as critical elements of a successful renewable energy project, in particular a wind energy project. Policy continuity is vital to ensure the sustainability of projects [1]. Meanwhile, without government incentives, the private sector would find it difficult to justify the risk-return trade-off [5]. Specifically, Sovacool argues that in the embryo phase of renewable energy development, political leadership has a great role in setting up legal intervention, institutions and policy affinity, and effective incentive schemes [4]. At the project level, project developer’s business and financial capacity and competency is cited as one of the most crucial factors in making a project successful in addition to the necessity and expected profitability of a project [1, 5, 6].

This case study attributes the main success factors of the country’s first large-scale wind farm to the government policy and political leadership (recognition of the important role of the private sector investment and support/incentive mechanisms). In the second part when the prospect of renewable energy in Indonesia is being discussed is where the paradox is observed. The absence of policy continuity and policy certainty after the change of staff at the Ministry of Energy is being scrutinized. The change of policy approach may compromise several renewable energy projects, including the phase 2 of Sidrap project.

Sidrap Unit 1 (with a capacity of 75 MW)1 was completed in early 2018 and is Indonesia’s first utility-scale wind farm project. The project has been praised for its success and best practice and was listed in Asia’s Best Infrastructure Projects as one of the four “Smart Projects” by Project Finance International [8]. The project marks an important milestone of success for renewable energy development in Indonesia. This is despite a current political climate in Indonesian where the incumbent government, particularly the Minister of Energy, is criticized for not encouraging renewable energy development [9]. The Sidrap project is also interesting because the key foreign developer involved has a long history of related business in Indonesia. The local developer also has over 30 years of experience in developing renewable energy in Indonesia, having dealt with substantial changes in the policy landscape across 6 different Presidents since the dictatorship of Soeharto, and 12 different Ministers of Energy since Ginandjar Kartasasmita in 1988. It demonstrates that those familiar with the country’s risks, including political risks, over such a long course of time, have certain capacities that help enable successful project development. The following case analysis examines the factors influencing the development of the project and reflects on whether the policy approach adopted by the current President and Minister of Energy will be sufficient for the project to develop its second phase.

INDONESIA’S CHANGING ENERGY POLICY LANDSCAPE

Over the last 16 years, Indonesia has seen a changing policy landscape governing its electricity sector, including policy related to the development of renewable energy sourced-electricity (RES-electricity) (Figure 1). The Law on Electricity issued in 2002 marked the first attempt to privatize part of the country’s electricity supply. However, it was later annulled by the Constitutional Court for violating the Constitution [10]. The revised Law on Energy issued in 2007 recognized the importance of renewable energy as a means to improve the country’s energy security [11]. In its implementing regulation, issued 7 years later in 2014, Indonesia’s National Energy Plan mandates an increased share of renewable energy in the total energy mix [12]. The presidential regulation acknowledges that Indonesia should decrease its dependency on petroleum; however, it affirms its continued reliance on coal as the main energy resource for a reliable national energy supply [12].

FIGURE 1.

Renewable energy policy landscape in Indonesia 2002–2017.

FIGURE 1.

Renewable energy policy landscape in Indonesia 2002–2017.

In 2009, the Law on Electricity No. 30 reaffirmed the State’s strong control on the whole value chain of electricity. According to this law, the state utility company, Perusahaan Listrik Negara (PLN),2 loses its legal monopoly rights, but is still given the first priority to provide electricity for the public [13]. This “right of first refusal” usually discourages private investment [14].

For the first time in the country, in 2012, under Yudhoyono’s presidency, Indonesia entered into a feed-in-tariff (FIT) regime, where small- and medium-scale renewable energy sources were given higher buying prices (the price paid by PLN). A Minister of Energy decree was issued that year, which instructed PLN to buy electricity from geothermal sources under specified FITs ranging from US$0.10/kWh to US$0.185/kWh, depending on the locations and interconnection types. These tariffs were much higher than the prices paid for other sources of electricity in Indonesian at that time (that ranged between US$0.43/kWh and US$0.57/kWh for coal, gas, and hydro [15]). The middle and eastern regions of Indonesia had higher adjustment factors (and therefore higher FITs) to provide incentives for the investors. FITs for solar PV were introduced 1 year later. The regulator, in this case the Ministry of Energy, based the tariff determination on the main production cost of electricity. The government issued these regulations to reduce dependency on fossil fuels while encouraging the private sector to invest in renewable energy in a context of high fossil fuel subsidies [16]. While these regulations are not perfect, with many critics demanding more transparent methods and adjustment for inflation, this step was praised as a good foundation for a renewable energy industry in Indonesia [17].

The beginning of Joko Widodo’s presidency in October 2014 was seen as the first step toward reform in the energy sector when he appointed Sudirman Said, a former anti-corruption activist, to be the Minister of Energy. The appointment was seen as a brave move considering the controversial history of the sector and the national importance of the role. The energy sector in Indonesia was not generally trusted by the public due to a track record of corruption; particularly after the head of the oil and gas regulatory body and the former Minister of Energy were both convicted of bribery [18]. Said was known as a reformer who “eliminated” the oil and gas “mafia” [18] and took serious actions to reform the electricity sector, including the introduction of the so called “35,000 MW program” and a renewable energy target of 23% by 2025 [19]. The 35,000 MW program was a government program launched directly by President Widodo in 2015 as a measure to tackle the threat of power crisis [20].3 Said also implemented a few “breakthrough” programs to promote renewable energy in the country, such as the Centre of Excellence for Renewable Energy and the Energy Resilience Fund.

When examining the factors that led to the development of the Sidrap project, it is useful to focus on the different policy approaches adopted under the leadership of Sudirman Said as the Minister of Energy between October 2014 and July 2016 and under his successor, Ignasius Jonan (from October 2016 to 2019). The policy approach during these two periods is summarized in Table 1. Figure 2 highlights the timeline of Sidrap Project, FIT implementation, and Minister of Energy’s term.

FIGURE 2.

Timeline of Sidrap project, feed-in-tariff implementation, and Minister of Energy’s terms.

FIGURE 2.

Timeline of Sidrap project, feed-in-tariff implementation, and Minister of Energy’s terms.

TABLE 1.

Comparison of policy approaches 2014–2016 vs. 2016–2019

Renewable energy policy 2014–2016Renewable energy policy 2016–2019
Feed-in-tariffs (geothermal, biomass/biogas, solar, draft on wind) Unilaterally determined electricity pricing regulations 
Simplified tariff negotiation with Perusahaan Listrik Negara More bureaucratic tariff negotiation 
(Proposed) subsidies for renewable energy Pricing is based on the main production cost of electricity (back to 2012) 
Embryo of the Energy Resilience Fund [21]4 Does not reflect levelised cost of energy, does not consider tariff escalation [22
Renewable Energy Centre of Excellence [23]5 The regulation is not a fair basis for tariff negotiation; investment risk is increased [22
Clear stance on renewable energy, supports low-emission coal technology [23Prefers coal by lowering coal pricing for electricity in 2018 [24
Build-Operate-Own Introduce Build-Operation-Transfer scheme for independent power producers [25
Renewable energy policy 2014–2016Renewable energy policy 2016–2019
Feed-in-tariffs (geothermal, biomass/biogas, solar, draft on wind) Unilaterally determined electricity pricing regulations 
Simplified tariff negotiation with Perusahaan Listrik Negara More bureaucratic tariff negotiation 
(Proposed) subsidies for renewable energy Pricing is based on the main production cost of electricity (back to 2012) 
Embryo of the Energy Resilience Fund [21]4 Does not reflect levelised cost of energy, does not consider tariff escalation [22
Renewable Energy Centre of Excellence [23]5 The regulation is not a fair basis for tariff negotiation; investment risk is increased [22
Clear stance on renewable energy, supports low-emission coal technology [23Prefers coal by lowering coal pricing for electricity in 2018 [24
Build-Operate-Own Introduce Build-Operation-Transfer scheme for independent power producers [25

The policy approach in 2014–2016 under Said recognizes the constraints in renewable energy adoption and investment. It promotes affirmative action toward renewable energy generation and provides incentives to level the playing field with heavily subsidized fossil fuels. The policies were intended to support private sector investment. Within this period, the Ministry prioritized renewable energy in consideration of the depleting supply of fossil fuels, the global trend towards renewable energies, and following the Law on Energy and all its implementing regulations that consistently mandated the adoption of renewable energy (Sudirman Said, 12 January 2017).

In contrast, the Ministerial decree on electricity pricing for renewable energy sources that was issued in 2017 by Minister Jonan, was determined unilaterally, increasing risks and uncertainty for investors [26, 27]. Some consider it as a setback because the basis of the pricing model is the same one that was used in 2012. As a result, foreign investors, much needed for improving Indonesia’s energy supply, tend to stand back or exit from Indonesia to divert the investment to other countries deemed more favourable [19]. With the resultant uncertainty, achieving the renewable energy target of 23% by 2025 seems very challenging, if not unrealistic.

WHAT FACTORS LED TO THE SUCCESS OF SIDRAP?

Despite this changing renewable energy policy, Sidrap Wind Farm, the first commercial scale wind farm in Indonesia, entered its operational phase in the second quarter of 2018. The construction phase, arguably the most critical phase of the project lifecycle took only 2 years (Figure 3) Sidrap Wind Farm made the headlines in Indonesia after it successfully started generating electricity to Mattirotasi Village and Lainungan Village, Regency of Sidenreng Rappang (Sidrap) in South Sulawesi in 2018. The power purchase agreement (PPA) was signed in August 2015 and the project continued to meet important milestones until the first phase of the plant, with a capacity of 75 MW, became operational in May 2018. The tariff negotiation with PLN, the state utility company, was considered one of the main challenges of the project to achieve the expected return on investment [28]. However, the project developers and PLN reached a positive agreement on tariffs that enabled the project to proceed. This indicates that a good relationship with key stakeholders is critical for developing new renewable energy projects in Indonesia (but we noted that a single project-based negotiation6 process that takes a long time can be a significant cost factor and prohibitive for investors). A more systematic pricing regulation that does not require project-based negotiation is likely to present wider benefits for more investors.

FIGURE 3.

Project lifecycle roadmap (offshore wind farm), adapted from Hsiung [45].

FIGURE 3.

Project lifecycle roadmap (offshore wind farm), adapted from Hsiung [45].

The premium tariff enjoyed by Sidrap phase 1 is also important in convincing the private sector to further pursue the investment. It is comparable to an FIT although it was not regulated by the government yet at the time when the PPA was signed. The experience of other countries suggests that FITs are one of the most effective policy instruments to support the development of new renewable energy projects [29, 30]. The agreed tariff of US$0.11/kWh was higher than the average main cost of electricity production in the South Sulawesi subsystem (of US$0.0728/kWh) in 2017 [31]. Unfortunately, for other wind energy projects in Indonesia, the FIT regulation was never enacted following the change of Minister of Energy in July 2016.

The strong capital position of a multinational company that has been in the renewable energy business for more than three decades is perhaps the most important factor behind the success of the Sidrap project. Although wind technology is developing and the price has gone down in recent years [32],7 investment in wind farms is capital intensive [33]. UPC Renewables, a U.S. company, has successfully developed and operated more than 3,500 MW of wind and solar power generation projects worth more than US$5 billion worldwide. In addition, a solid partnership with a reliable local partner, Binatek, a firm that also has lengthy experience in the energy sector, was crucial to the project’s success. Binatek was founded in 1991 and has been assessing, managing, and developing renewable energy projects throughout Indonesia since that time.

Another critical success factor is the business model of the Sidrap project which involves financing from both public and commercial banks. Public funding was secured through the Overseas Private Investment Corporation, a development finance institution of the U.S. government, which formed a bilateral investment agreement with the Government of Indonesia in 2010, while Sumitomo Mitsui Banking Corporation provided a commercial loan amounting to 50% of the total loans [34]8. OPIC’s portfolio in Indonesia in terms of debt financing and political risk insurance was renewed under the bilateral agreement signed in 2010 [35]. Sidrap is its first renewable energy project and one of very few that receives financing of up to US$120 million as the principal amount [36]. This has proved to be a good example of effective public-private partnership in renewable energy.

Foreign investors view regulatory support for renewable energy as very important in their investment decisions [37]. Government regulations and programs supportive of renewable energy development were important factors for investors in this project. The Indonesian Government showed strong support for renewable energy, proven when President Widodo, the PLN Director, the King of Yogyakarta, and the U.S. Ambassador to Indonesia, inaugurated the 35,000 MW program in UPC Renewables and Binatek consortium’s other windfarm project site in Bantul, Yogyakarta [38, 39]9. The strong government’s support appears to be one of the key factors in the successful development of the Sidrap project.

Sidrap’s success is strongly related to the vital role of the local government and stakeholder involvement. The local government has been supportive since the initiation of the project and, in return, the developer built the infrastructure such as the access roads and jetty. (Rida Mulyana, 27 November 2017). The project has also been engaging local communities since the beginning, resulting in full support for the project. The project creates 1,150 jobs [40] during construction and operation phases, including skilled jobs for the local people [41]. Renewable energy projects are sensitive to public opinions that in some cases, they affect project continuation [42]. There were a few cases where renewable energy projects are not supported fully by the local government [39] or even faced opposition by the local government and the local people [39, 4345], which in Sidrap’s case could be avoided and managed successfully.

Combining strong technical experience and government support, the project owner managed to deal with the challenges in siting of the project started in 2012. The siting of a wind farm is critical and depends on the following factors: technical, social, environmental, land ownership, and infrastructure availability [46]. In addition to having medium wind speed of 9.39 m/s at hub-height, Sidrap has also suitable topographic conditions for wind energy, with 53% of the total area of 2,506 km2 comprising hills and mountains giving a speed up effect. The project owner initially had a land acquisition problem because some of the turbines had to be located in the forest areas. The private developer was supported by the Ministry of Energy and Mineral Resources, specifically from the Implementation Unit for National Electricity Development in dealing with the National Land Agency (BPN) because Sidrap is one of the flagship projects of the government’s priority program of 35,000 MW. This project is also fully supported by the local government, leading to a better community acceptance.

PROSPECTS FOR RENEWABLE ENERGY DEVELOPMENT IN INDONESIA

The rate of renewable energy project development in Indonesia has increased in recent years; however, it is important to note that the power stations that became operational in 2017 commenced development several years earlier. In 2015, Indonesia’s renewable energy share was only 5% of the total energy mix [47]. By early 2018, the share increased to 12.52%, mostly from large-scale geothermal and hydro-power projects. This is equivalent to 408 MW capacity of newly operated RES-electricity [48]. Notwithstanding that this increase in development is a very substantial achievement, Indonesia still has a long way to go before reaching its renewable energy target of 45.2 GW by 2025. Sarulla geothermal project is the largest geothermal project in the region. Its Unit 1 and Unit 2, each with a capacity of 110 MW, took decades to become fully operational in 2017 after its commencement in 1987 [49]. After being hit by the 1997–1998 Asian Financial Crisis, the project was hampered by several challenges ranging from changing government policies, financing problems, licensing bureaucracy, and tariff negotiations [50, 51]. The Ulubelu geothermal project, which started in 1991, was stalled for similar reasons, before Pertamina revived the project in 2008 and began constructing Unit 4 in 2014 [52]. These projects suggest that the increasing renewable energy share seen in 2017 is not the result of more recent government policy, but more likely a success of policy “de-bottlenecking” [53]10 that happened in the last few years of Yudhoyono’s presidency (2012–2014) and the first few years of Widodo’s presidency (2014–2016).

The so-called “Build–Operate–Own-Transfer” (BOOT) scheme seems to be a major drawback of current energy regulation in Indonesia. The Minister of Energy Decree No. 50, Year 2017 mandated that electricity contracts between PLN and all Independent Power Producers (IPPs) require that the project’s ownership is transferred to the government after the concession period ends. BOOT is one of the models of public-private partnerships where the private business is contracted within certain period of time to finance, design, build, and operate public infrastructure, in which private business assumes all financial risks in exchange for a high return [54]. The “transfer” means the private sector will transfer ownership to the public sector at the end of the project lifetime. Actually, from the perspective of project finance, the transfer of ownership hardly makes any difference. What matters in project finance are the generated cash flows and the discounted value of the cash flows is almost negligible after 30 years of project lifetime [55]. However, the long-term residual value of certain assets affects the expected return on investment [55]. PLN also includes land as asset that the private business has to transfer at the end of the concession. For some companies, this clause makes their projects not bankable. Because of that, some project developers are demanding the government to appraise their land at the time of the transfer using market value [56]. They also ask the government to revise the Ministerial Decree No. 50/2017 to at least give options whether to transfer the ownership at the end of the concession or continue to provide the service for another period [57].

Although not a new concept internationally, BOOT is new for the electricity sector in Indonesia. Indonesian financial institutions are not familiar with risks arising from such a new arrangement. The policy makes it more difficult for private sector parties to secure finance for renewable energy development in Indonesia because it is harder for them to prove sufficient collateral if the project assets are to be transferred to the government [58]. As a likely result, in early 2018, 46 renewable energy projects were threatened to be cancelled by PLN for not having secured the necessary financing [59].

The anti-graft commission (KPK) praised Sidrap as a project that has a transparent and very good public-private cooperation scheme. The current business model prevents middle men from taking advantage, which might have placed additional financial burden on the project [60]. The change of previous public-private partnerships scheme (BOO) to BOOT scheme seems to have little impact on the transparency and accountability of the project. In both cases, the transparency and accountability will remain a challenge.

In addition to FITs, value added tax and import tax relief of wind turbines [30] and Research and Development policies have been instrumental in the wind farm technology diffusion and technology transfer in emerging markets such as China [30] and Iran [61]. Indonesia started implementing tax and duty facilities for renewable energy in 2010, and this will continue benefit future renewable energy development.

Deployment of wind farm projects in developing countries face a number of barriers [62]. The main challenge is the uncertainty of the electricity sold, which in most cases would require government guarantees to ensure the bankability of a project and the certainty of the tariff [62]. In the Indonesian case, changing tariff regulation may create a barrier for future project development. Phase 1 of the 75 MW Sidrap project was developed with an investment of US$150 million and managed to secure a tariff of US$0.11/kWh. Phase 2 of the project (65 MW) would require a lower amount of investment: US$90 million,11 since the developers do not have to build the additional infrastructure such as access roads, bridges, and ports as they did for the first phase. However, phase 2 will have to follow new regulation that will drop the tariff to below US.07/kWh, below the regional main cost of electricity [63]. In the latest business plan of PLN 2018–2027, the grid of the South, South-east, and West Sulawesi, to which Sidrap supplies electricity, is also expect to be supplied from coal and hydro power plants. This will make the pricing structure even more competitive and will very likely lower the tariff (and gross revenue) for Sidrap.

Although generic investment climate has been improved, development of renewable energy is still subject to a number of barriers. Investors view political, policy, and regulatory risks as a major constraint for renewable energy investment [64]. Policy and regulatory risks affect business case and investment decision [42, 65]. A shift in government priorities often sacrifices renewable energy support schemes such as FITs and tax incentives. As the first wind farm project in the country, Sidrap project is riskier because government’s policy-making experience in dealing with investment in this scale is limited. Unexpected changes in regulations increase investment risks and can cause investors shift their investment to other countries with more stable regulations [66]. Political risks insurance is one way to mitigate the risks; however, since policy changes are difficult to predict it requires high premiums [64]. This is relevant for the phase 2 of the project that will have to follow the new regulation with lower tariff. PLN also demands phase 2 to be equipped with batteries to maintain grid stability. The project owner improves the economics of the project by relying on the plummeting cost of technology, an increase in capacity from 50 to 65 MW and the use of more powerful and efficient turbines. To manage the risks, the investor has been adopting international portfolio diversification; a common tool to improve the risk and return profile [65, 67].

Phase 2 of the Sidrap project is also facing more challenges in terms of guaranteed grid access. PLN is worried that the high capacity of intermittent wind farm will disturb the grid. The developer has agreed to equip phase 2 with batteries, which will increase the investment cost. Guarantee on grid access and the length of contract would attract more wind energy investment [68]. Sidrap project phase 1 signed a fixed tariff in their 30 years of project lifetime, which the phase 2 is also looking to secure.

That the Sulawesi grid system is now experiencing a surplus of electricity also complicates the matter. Currently, the grid of South, South-east, and West Sulawesi has 500 MW of excess supply. This means that most electricity generated from the Sidrap project will only be used as reserve power. Incorrect assumption about electricity growth in the previous business plan (2017) is one reason why there is a surplus of electricity in some Indonesian regions such as Jawa-Bali, West Kalimantan, and Tanjung Pinang [69]. Growth of electricity demand, initially predicted at 8.3%, was adjusted to 6.9%. This change has forced PLN to revise its business plan from procuring 77 GW of electricity to only 56 GW between 2018 and 2027 [69]. The first victims of this change are renewable energy projects. For example, 6,600 MW worth of renewable energy development has been postponed until an undetermined later date [70].

The move that PLN has taken to sacrifice renewable energy is to some extent understandable. This is because electricity surplus from IPPs will place additional financial burden on PLN because of the take or pay clause in the PPA [71]. However, renewable energy has the advantage that it is not subject to global market price volatility like coal, oil, and gas are [70]. PLN and the Ministry of Energy should take into consideration the importance of meeting the renewable energy targets of 2025 when making these decisions. Reliance on coal has a high price to pay in terms of health and productivity costs resulting from worsening air pollution and in terms of climate change.

Indonesia’s current policy towards renewable energy seems to be exactly the opposite of the policy on coal price. In the first quarter of 2018, the surging price of coal caused PLN subsidies to soar. The government acted fast by issuing regulations to ask the coal producers to supply coal for electricity at 30% lower than the regulated benchmark [7274]. This move stands in contradiction to the government’s unwillingness to subsidize renewable energy and sends mixed messages for the future of renewable energy investment in Indonesia.

CONCLUSION

Recent developments in the Indonesian electricity sector have raised questions over whether Sidrap phase 2 will be profitable. Government policy will clearly play an important role. Changing policy and regulations by different Presidents and Ministers of Energy in Indonesia have created policy uncertainty and seem to deter new private investment. Investors who have had a long-term presence in Indonesia and are more familiar with the country’s risks appear to adapt better to or at least accept the uncertainty. However, these types of investors are rare. Most would prefer to invest in other countries that have clear policies and regulations in place.

In addition to the provision of affordable energy, Indonesian energy policymakers need to consider broader aspects of electricity supply including energy security, price volatility, and environmental sustainability. More forward-looking and reform-oriented policy is needed to address the long-term energy supply issues for the country. Immediate actions could include the re-implementation of the Energy Resilience Fund to reduce the price gap between renewable energy and coal.

CASE STUDY QUESTIONS

  1. Why is renewable energy development facing challenges in Indonesia?

  2. Who are the key stakeholders in the Sidrap project and what role do they play in its development?

  3. What could be done differently to facilitate more investment in renewable energy in countries like Indonesia?

AUTHOR CONTRIBUTIONS

MM conceived, designed, and drafted the manuscript. PD critically revised the manuscript. PA critically revised the manuscript. AW contributed to the conception of the manuscript and the interpretation of the data, drafted and revised the teaching notes.

The authors would like to thank Australia Awards for the Ph.D. scholarship; Valina Rainer for language editing, and Erwin Jahja from Binatek Energi Terbarukan.

FUNDING SOURCES

The lead author receives scholarship from the Australia Awards. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for profit sectors.

CONFLICTS OF INTEREST

The authors declare no conflict of interest.

SUPPLEMENTARY MATERIALS

Teaching Notes. Doc.

1.

Performance data of Sidrap project phase 1 (75 MW) are as follows: complete construction: April 2018; 30 × 2.5 MW Gamesa turbines; wind class: IEC IIa; hub height: 80 m; kWh generated: 31,116,978 kWh; number of households served: 67,000 households with average of electric power of 1,300 vA. Performance analysis: average wind speed: 9.39 m/s; wind power density 1,161 kg/m3; capacity factor: 54.32%; availability factor: 98.04%.

2.

PLN is the state utility company that holds monopoly rights of electricity business in Indonesia. It acts as the single buyer of all electricity projects in the country. The government sets the electricity prices at consumer level, lower than PLN’s production cost. PLN relies on government subsidies every year to recover its expenses.

3.

The 35,000 MW Program was Government’s program under President Widodo launched in 2014 to accelerate electricity infrastructure development to overcome power deficit and crisis in many electricity systems in the country and to increase electrification ratio. This program requires US$72.9 billion investment to build power plants, transmissions, and substations. The program relies mostly on private sector investment due to limited financial capability of PLN.

4.

Energy resilience fund was proposed to address the need of investment in renewable energy to meet the renewable energy targets (RETs), which requires IDR1,600 trillion or more than US$114 billion. The fund was designed to manage and channel funds from various sources including fossil fuel depletion premium to finance energy projects including feed-in-tariff margin.

5.

The Centre of Excellence was designed to be the centre of research and technology as well as investment and business support for renewable energy business in Indonesia in a collaborative manner involving international and local stakeholders.

6.

This term refers to business to business negotiation between PLN and private developers in negotiating the tariff under a PPA without following any tariff regulations set by the Government. This is usually a long and winding process, can take 1–2 years and highly specific depending on the location of the project, type of renewable technology, capacity, and other factors.

7.

Global benchmark average LCOEs for wind has fallen 38% to US$55/MWh.

8.

Debt-equity: 80–20, UPC US$27 million, Binatek US$3 million. Debt providers: OPIC US$60 million, SMBC US$60 million. Total debt funding US$120 million. Total investment US$150 million.

9.

The Power Purchase Agreement (PPA) of Samas project was signed on 4 May 2015. However, the project was cancelled due to land acquisition issue.

10.

This term is used by the Presidential Delivery Unit for Development Monitoring and Control which is part of their tasks to “help set priorities, keep the president informed about the priorities’ progress, and resolve the bottlenecks that interfere with policy implementation”. The Presidential Unit had the task to oversee cross-ministerial government priority programs including renewable energy projects that, like the Sarulla geothermal project, had failed to progress for more than a decade.

11.

This figure is the figure without batteries. By the time this case is written (September 2018), Sidrap project phase 2 is undergoing a tariff negotiation with PLN (started in July 2018). PLN is worried about the grid disturbance this project may cause due to the intermittency of wind technology. The developer has agreed to equip phase 2 project with batteries to prevent grid instability. The project owner declined to give further comments on this matter.

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Supplementary data