Friday, March 3, 2017

Indonesia: New Regulations Cause Concern for Geothermal Energy Developers

Indonesia Briefing: Latest Changes In Energy Law (Part 1) (Mondaq News Alerts)


The Indonesian government has recently passed new regulations introducing significant changes to the power and upstream oil and gas sectors.

In January 2017, Indonesia's Ministry of Energy and Mineral Resources (MEMR) issued three power-related regulations which make changes, respectively, to:

  1. Terms and conditions of PPAs, under Regulation No. 10 of 2017 on Principles of Power Purchase Agreements (Regulation 10);
  2. Gas and LNG pricing for power plants, under Regulation No. 11 of 2017 on Utilisation of Natural Gas for Power Plants (Regulation 11); and
  3. Tariffs for renewable energy, under Regulation No. 12 of 2017 on Utilisation of Renewable Energy for the Provision of Power (Regulation 12).
Article 11 of Regulation 12 raises a specific concern for geothermal developers, since it states that PLN may only purchase power from a geothermal IPP in accordance with proved reserves after exploration. Geothermal developers will not want to commit significant time and money to projects without a PPA to lock in guaranteed offtake and pricing, so it remains to be seen whether a PPA that is conditional upon proving reserves will be sufficient to satisfy this Article (and be acceptable to PLN).