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Renewable Energy Law in Indonesia

“The current existing laws are mostly focused on utilization of renewable energy as sources of electrical power and fuel (bioenergy)

Presently, Indonesia does not have specific regulation on renewable energy. Indonesia is still looking forward to The House of Representative’s deliberation of renewable energy bill, as the part of priority of national legislative program 2020.

The concept of renewable energy is 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.

Nevertheless, 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 is consist the stipulation of directly and indirectly utilization of geothermal energy and its type of license.  

  • 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 is consist stipulation of utilization of commercial activity of biofuel as another fuel and its type of license.

  • 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 is consist stipulation regarding electricity and its type of license.

  • 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 is consist the implementation of physical activity of new energy, renewable energy and energy conservation utilization which conducted by The Government.

  • 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 consist the obligation for Electric Stated-Owned Company (“PLN”) to buy electricity energy from power plant that use renewable energy.

In accordance with the promulgation of Law No. 11 of 2020 on Job Creation (“Omnibus Law”), 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 ProviderPower 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 PlantGeothermal Power PlantOcean Movement Power PlantBiomass-based fuel supply installationBiofuel-based fuel supply installationBiogas-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 LicenseBusiness ActivityAuthority
Electricity Energy Supply Business Permit (“Izin Usaha Penyedia Tenaga Listrik” or “IUPTL”)     Operation Permit (“Izin Operasi”)Business activity related to power plant for public interest and integrated IUPTL.       Business activity related to power plant 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 indirectly utilization require 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.

Furthermore and according to Presidential Regulation No. 44 of 2016 on Negative Investment List (“DNI 2016”), 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, according to Omnibus Law, the update negative investment list will be further promulgated by government which has possibility to change the current foreign investment limitation and adjustment of the newest KBLI 2020.

Author: Kristalia Andiani Puteri

Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include Energy Law.

For further queries and information, please contact us:

+62- 21 2271 8638  | +62 – 811 877 216 |  info@gaffarcolaw.com | www.gaffarcolaw.com

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