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Indonesia: New Pricing Regulations for Biomass Power Plants

(July 16, 2012) According to Kardaya Warnika of Indonesia's Energy and Mineral Resources Ministry, speaking on July 10, 2012, the country will soon adopt new pricing regulations for biomass power plants. The aim is to encourage investment in the sector, as well as to optimize use of the waste produced by cities for power generation. The new pricing policy for electricity will apply to power from waste-fueled power plants in urban areas and is known as a “feed-in tariff.” (Rabby Pramudatama, Govt to Set Prices for Biomass Energy, THE JAKARTA POST (July 12, 2012).)

Indonesia's main purchaser of power from independent producers is the state electric company, Perusahaan Listrik Negara (PLN). Under a feed-in tariff, PLN is obliged to buy electricity produced from renewable sources of energy at a set price for a set amount of time. Feed-in tariffs have been set in the past for hydropower, biogas, and solar power, as well as city waste. (Id.)

Warnika estimated that the new policy would be completed by the end of next week and stated that the government had previously “set the electricity price for city waste-fired power plants at Rp 600 (US 6.36 cents) per Kilowatt-hour (kWh). Now we want to increase it to Rp 900.” (Id.)

The government will seek input on the issue from mayors and other local administrators, as well as developers. “We will try to facilitate them in any way we can,” Warnika added. (Id.)

The planned price for energy produced from waste under the new pricing structure is still higher than the price of fuel energy, according to Komaidi Notonegoro of the ReforMiner Institute, making the new plan attractive to potential investors. In his view, the price, while close to the Rp800 rate set for geothermal production, should be even higher, as there are added environmental benefits to using city waste. He further argued that there should be a benchmark price for each area within the country, so that investors could calculate costs and profits, and added, “[w]ith the government setting a fixed price, it means we're one step closer to seeing the operation of city waste-fired power plants in Indonesia.” (Id.)

Indonesia has long had difficulty managing its solid waste accumulation. (See Christia Meidiana & Thomas Gamse, Development of Waste Management Practices inIndonesia, 40 EUROPEAN JOURNAL OF SCIENTIFIC RESEARCH 199-210 (2010).)