Author: Kristalia Andiani Puteri and Felicia Cindy Hanubrata
” The current laws primarily focus on using renewable energy as sources of electrical power and fuel (bioenergy). Under the new regime, investment in the energy and power plants sector is 100% open to foreign capital investment”.
The concept of renewable energy was introduced in Law No. 30 of 2007 on Energy (“Energy Law”) and Government Regulation No. 79 of 2014 on National Energy Policy (“GR 79/2014”). The renewable energy concept is in the form of providing (producing, for example bioenergy) and/or utilization (convert the energy into secondary energy, for example electricity) of renewable energy itself.
As of now, the current existing laws are mostly focused on utilization of renewable energy as sources of electrical power and fuel (bioenergy).
General Description of Renewable Energy
Energy Law has stated renewable energy as energy which originated from renewable energy sources like geothermal, wind, bioenergy, sunlight, water, and sea movement. Furthermore, the regulation of renewable energy itself has spread among the regulation concerning energy which can be found in the following regulations:
1. Law No. 21 of 2014 on Geothermal (“Geothermal Law”)
This regulation consists of the stipulation of directly and indirectly utilization of geothermal energy and its type of license.
2. Regulation of Ministry of Energy and Mineral Resources No. 25 of 2013, No. 20 of 2014, and No. 12 of 2015 on First, Second, and Third Amendment upon Regulation of Ministry of Energy and Mineral Resources No. 32 of 2008 on providing, utilization, and biofuel commercial administration as another fuel (“RM 12/2015”)
This regulation consists of stipulation of utilization of commercial activity of biofuel as another fuel and its type of license.
3. Law No. 30 of 2009 (“Electricity Law”) on Electricity and all derivative regulations concerning electricity (Regulation of Ministry of Energy and Mineral Resources No. 12/2016, RM 39/2018, etc)
This regulation consists of stipulation regarding electricity and its type of license.
4. Regulation of Ministry of Energy and Mineral Resources No. 39 of 2017 on Implementation Physical Activity of New Energy and Renewable Energy Alongside with Energy Conservation Utilization and its last amendment on No. 12 of 2018 (“RM 12/2018”)
This regulation consists of the implementation of physical activity of new energy, renewable energy and energy conservation utilization which is conducted by The Government.
5. Regulation of Ministry of Energy and Mineral Resources No. 50 of 2017 on Utilization of Renewable Energy Sources for Electricity Supply and its last amendment on No. 4 of 2020 (“RM 4/2020”)
This regulation consists of the obligation for Electric Stated-Owned Company (“PLN”) to buy electricity energy from power plants that use renewable energy.
6. President Regulation Number 112 of 2022 on the Acceleration of the Development of Renewable Energy for the Supply of Electrical Power
The regulation consists of provisions related to stopping the operation of steam power plants and a mandate for PLN to prepare and implement a business plan for the supply of electricity that optimizes the development of renewable energy.
In accordance with the promulgation of Law Number 11 Year 2020 on Job Creation as replaced by Regulation of the Government in Lieu of the Law of the Republic of Indonesia Number 2 Of 2022 on Job Creation, several provisions on Geothermal Law and Electricity Law had amended mostly on change of the authorization to Central Government, which are policy maker, business license issuance, supervision, etc.
Moreover, the business that related with renewable energy can be categorized as follow:
| Power Plant for Electricity Provider | Power Plant for Non-Electricity Provider |
| Sunlight Power Plant (PLTS), Mini-hydro/Micro-hydro Power Plant (PLTM/PLTMH), Bayu (Wind), Power Plant (PLTB), Coal Gasification Power Plant (PLTGB), Biomass Power Plant (PLTBm), Biogas Power Plant (PLTBg), Domestic Solid Waste Power Plant (PLTSa), Biofuel Power Plant, Geothermal Power Plant, Ocean Movement Power Plant | Biomass-based fuel supply installation, Biofuel-based fuel supply installation, Biogas-based fuel supply installation |
Business License Related to Renewable Energy Utilization
Business license that related to renewable energy utilization can be found in the following table:
| Type of Business License | Business Activity | Authority |
| Electricity Energy Supply Business Permit (“Izin Usaha Penyedia Tenaga Listrik” or “IUPTL”) Operation Permit (“Izin Operasi”) | Business activity related to power plants for public interest and integrated IUPTL. Business activity related to power plants for private interest. | Directorate General of Electricity Energy, Ministry of Energy and Mineral Resources, integrated with Online Single Submission (OSS) |
| Geothermal Permit (“Izin Panas Bumi” or “IPB”) | Business activity related to exploration, exploitation, and utilization. As for the indirect utilization required IUPTL. | Directorate General of New, Renewable Energy, and Conservation Energy, Ministry of Energy and Mineral Resources |
| Biofuel as Another Fuel Permit (”Izin Usaha Bahan Bakar Nabati sebagai Bahan Bakar Lain”) | Business activity related to purchasing, sale, processing, export/import, freight, and storage. | Directorate General of New, Renewable Energy, and Conservation Energy, Ministry of Energy and Mineral Resources |
Investment Limitation for Foreign Capital Investment
The parties that can be involved in renewable energy business are State-Owned Enterprise (BUMN), Local State-Owned Enterprise (BUMD), private entities, and qualified cooperatives. Nevertheless, for electricity-related business activity, private entities must cooperate with PLN as priority-company in electricity business for public interest.
Previously in 2016, as governed by the provision of Presidential Regulation No. 44 of 2016 on Negative Investment List, the limitation for foreign capital investment are ranging from entirely closed for foreign direct investment to maximum 95% of foreign direct investment shares ownership i.e. depends on the specific business-related activity and power plant capacity.
However, with the promulgation of the Regulation of the President of the Republic of Indonesia Number 10 of 2021 on business investment fields as amended by Regulation of the President of the Republic of Indonesia Number 49 of 2021, the DNI 2016 no longer applies. In the new regime, investment in the sector of energy and power plant are 100% open to foreign capital investment.
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