Presidential Regulation Number 112 of 2022: Is Green Industry in sight?

The Government of Indonesia, through the Ministry of Energy and Mineral Resources (“MEMR”), has officially banned the construction of Coal-Steamed Power Plants (Pembangkit Listrik Tenaga Uap, “PLTU”). This is marked by the issuance of Presidential Regulation Number 112 of 2022 on the Acceleration of Renewable Energy Development for the Provision of Electricity (“PR 112/2022”) by President Joko Widodo. The issuance of PR 112/2022 marks the start of the era of building low-emission and environmentally friendly power plants as well as prohibiting the construction of new PLTU.

A. The Beginning of the Green Industry Era

The Director General of Renewable Energy and Energy Conservation of the MEMR stated that with the issuance of this PR 112/2022, Indonesia has started the construction of current and future power plants that will lead to the Green Industry Era where the economy will be better. PR 112/2022 is a policy to prohibit the development/construction of new PLTU and to accelerate early retirement of PLTU in order to accelerate the reduction of greenhouse gas emissions from the coal-fired power sector. These provisions are made as a form of commitment of the Government of Indonesia to achieve the carbon neutral target or Net Zero Emission by 2060 or sooner. Pursuant to PR 112/2022, the construction of power plants will be carried out selectively and the construction of power plants sourced from New and Renewable Energy (“NRE”) is targeted to go hand in hand so that for now the reduction of greenhouse gas emissions by 29% (twenty-nine percent), which is a national program, is targeted to be achieved in 2030.

B. The End of the PLTU Existence

Article 3 of PR 112/2022 regulates the acceleration of the termination of the PLTU operation period where the MEMR needs to prepare a roadmap for the acceleration of the termination of the PLTU operation period as outlined in the sectoral planning document in the context of the energy transition of the electricity sector, which will include the reduction of greenhouse gas emissions at the PLTU, the strategy of accelerating the termination of the PLTU, and other policy alignments. This termination also includes the termination of the PLTU owned by the State Electricity Company (PLN) (Persero) in the form of a power purchase agreement for the PLTU developed by the Power Plant Developer (PPL) in collaboration with PLN. The development of new PLTU is prohibited except for PLTU that have certain criteria for new development, as follows:

PLTU specified in the Business Plan for the Provision of Electricity (Rencana Usaha Penyediaan Tenaga Listrik, “RUPTL”) 2021-2030.
PLTU integrated with industry and built to increase the added value of natural resources
PLTU included in the National Strategic Project.
PLTU that is committed to reducing greenhouse gas emissions, within ten years of operation, by at least 35% of the average PLTU emissions in Indonesia in 2021, which can be achieved through technology development, carbon offsets, and/or renewable energy mix.
PLTU that operates the longest until 2050.

C. Government Support through Incentives

Business Entities that carry out the development of power plants utilizing NRE sources are given fiscal and non-fiscal incentives. The fiscal incentives are in the form of:

income tax facility;
import facilities in the form of exemption from import duties and/or taxes in the context of imports;
land and building tax facilities;
geothermal development support; and/or
support for financing and/or guarantee facilities through state-owned enterprises assigned by the government.

Furthermore, non-fiscal incentives are provided by the Central Government and local governments in accordance with the applicable laws and regulations.

D. Way Forward to the Green Industry Era

The Director of Various New and Renewable Energy of the MEMR stated that there are several derivative regulations that must be made so that the implementation of Presidential Regulation 112/2022 goes well i.e., 4 (four) Regulations of MEMR and 3 Ministerial Decrees. Indonesia has started the construction of current and future power plants that will lead to the Green Industry Era where the economy will be better.

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