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Infrastructure & PPPs in Indonesia - Q1 2024 Update

YOG INFRA Q1 2024 insight series

INDONESIA is seeing development of alternative energy generation sources; however, the overall renewable energy target of 25% by 2025 has been reduced based on actual progress of project implemnetation. We see continued interest from international developers to develop clean energy & Infrastructure projects in the country. Transport sector is remains active with projects being developed both by government agencies as well as via PPP route.

Read more about key developments in Infrastructure and PPPs in Indonesia in our latest insight.

 

January 2024

INDONESIA ALLOWS 30% IMPORTED CARBON FOR STORAGE PROJECTS

Indonesia issued a presidential regulation on carbon capture and storage (CCS) which will allow CCS operators to set aside 30% of their storage capacity for imported carbon dioxide (CO2). Contractors of oil and gas may use aquifers or depleted reservoirs in their blocks for CCS, which can possibly store more than 400 giga tonnes of CO2 equivalent. The administration will collect royalties from storage fees levied by the CCS operators. Indonesia has 15 CCS and CCUS projects in different preparatory stages with a cumulative investment of almost USD 8 Bn.

CO2 stored for the CCS operations could come from emissions by upstream oil and gas activities, refineries, power plants and by industrial activities from Indonesia and overseas. To store carbon from abroad, Indonesia would only allow emitters which had invested in the country, or which were affiliated with companies which had done so, and the government must have a bilateral agreement with the government where the emission originated from.


POSCO PLANS GLOBAL EXPANSION FOR BIOFUELS AND WIND GENERATION

South Korean energy-to-industrial conglomerate POSCO International is planning to expand globally in 2024 in the areas of biofuels and offshore wind generation. It aims to build an international value chain through partnerships. It will jointly develop a palm oil refinery with GS Caltex Corporation on a 300,000-sq ft site in the Balikpapan Industrial Complex, East Kalimantan province in Indonesia, with a view to using the refined oil to produce sustainable aviation fuel. The facility will have a designed capacity to produce 500,000 tonnes of refined oil.

 

MOU SIGNED TO DEVELOP NORTH PATUHA GEOTHERMAL PROJECT IN INDONESIA 

PT Geo Dipa Energi (Persero) has signed a memorandum of understanding (MoU) with Kopjasa Ahli Teknosa (KKT) to develop a geothermal project in the North Patuha in West Java, Indonesia. As per the MoU, Persero and KKT will jointly collaborate for land use and will conduct social management studies during the implementation of the project. 

Moreover, Persero is currently operating the 60 MW Patuha Unit 1 geothermal power plant and the company is making efforts for the expansion of 55 MW Patuha Unit 2 and has announced a tender for an engineering, procurement, and construction (EPC) contract for the project.

 

INDONESIAN GOVERNMENT PROPELS GREEN AGENDA WITH 50 MW SOLAR POWER PLANT FOR NEW CAPITAL 

The Indonesian government, in its commitment to establishing an eco-friendly National Capital City (IKN), has taken a decision to implement Solar Power Plants (PLTS) with a substantial 50-megawatt (MW) capacity. This solar facility is slated for construction on a 100-hectare expanse in the Sepaku District, North Penajam Paser Regency, East Kalimantan. Envisioned to contribute 10% of the electricity requirements for IKN Nusantara, the PLTS represents a significant leap toward a greener metropolis. 

This 50 MW PLTS aligns with the government’s broader strategy to bolster new and renewable energy (EBT) within IKN Nusantara. The overarching goal is to ensure that 80% of the capital’s total electricity needs are met through EBT sources by 2045.

 

INDONESIA TO ABANDON 23% RENEWABLE ENERGY TARGET BY 2025 

Indonesia is planning to slash the targeted share of renewables in the national energy mix, a move seen by experts as a step back in the country’s ambition toward clean energy. The new target will hover at between 17% and 19%  by 2025, as proposed by the National Energy Council (DEN). Previously, the government had set a target of 23% for the same period. Renewable energy development had been painstakingly slow and this was partly due to the domination of coal-fired power plants.

 

PLN AND COCA-COLA EURO PACIFIC PARTNERS ELEVATE INDONESIA’S GREEN AGENDA WITH 90 GWH RENEWABLE ENERGY CERTIFICATE COLLABORATION 

In a major stride towards environmental sustainability, PT PLN (Persero) has entered into a collaboration with Coca-Cola Euro pacific Partners (CCEP) Indonesia, agreeing on a Renewable Energy Certificate (REC) collaboration of 90 Gigawatt hours (GWh). The collaboration was formalized through the signing of a Sale and Purchase Agreement utilizing PLN’s Green Energy As Services REC service for 90,211 units until 2025. 

REC is a renewable energy certificate service provided by PLN, internationally recognized, and available for use by industrial and household customers to claim renewable energy usage. CCEP Indonesia plans to utilize the REC to meet the energy requirements of its Bekasi 1 Factory, the largest facility in its network. PLN’s REC service simplifies the process for customers to claim the use of renewable energy, providing transparency, accountability, and international recognition. Since its introduction in 2020, the demand for PLN RECs has surged, growing more than tenfold by November 2023, with over 300 corporate buyers. 

 

February 2024

PERTAMINA NRE AND HUAWEI JOIN FORCES TO ADVANCE RENEWABLE ENERGY AND SMART GRID IN INDONESIA

Pertamina New & Renewable Energy (Pertamina NRE) and Huawei Technologies Co., Ltd. have inked a memorandum of understanding to collaboratively develop renewable energy and a smart grid in Indonesia. The agreement, signed by Pertamina NRE’s Director of Projects & Operations and Huawei Tech Investment’s Head of Department of Digital Power Business, focuses on advancing innovation and technology in smart grid, distributed generation, and digitalization. The partnership aims to bring breakthroughs in renewable energy projects in Indonesia, enhancing Pertamina NRE’s operational excellence through digitalization and smart grid applications.


THE GOVERNMENT OF INDONESIA APPROVES THE GREATER BANDUNG LRT PROJECT

The Government of Indonesia has approved the Greater Bandung Light Rail Transit (LRT) project. The government has approved two corridors for the LRT project. The two routes are the Babakan Siliwangi-Leuwipanjang route and the Leuwipanjang-Tegalluar route. The Babakan Siliwangi-Leuwipanjang route corridor will span 10 km and is expected to cost USD 639 Mn and the second corridor is also expected to have a similar length and cost. Additionally, USD 639 Mn will be spent on land acquisition.

The construction process will be run under a public-private partnership scheme involving the private sector with government guarantees. The specifics regarding state budget financing for the LRT project remained uncertain, whether for the construction or for procuring rolling stock.


JERA AND PLN TO JOINTLY DEVELOP LNG INFRASTRUCTURE IN INDONESIA

Japan-based JERA has signed a memorandum of understanding (MoU) with PT PLN Energi Primer Indonesia (PLN EPI) to develop the liquified petroleum gas (LNG) infrastructure in Indonesia. The scope of the MoU includes LNG procurement, optimisation, and the development and operation of LNG-receiving terminals.

Further, JERA and PLN EPI will establish the infrastructure for the power segment in the country and will also study the possibility of converting to a hydrogen and ammonia-based infrastructure. The partnership also aligns with the country’s commitment to achieve net-zero emissions by 2060.


INDONESIA BOOSTS ROOFTOP SOLAR ADOPTION WITH NEW REGULATIONS

In a strategic move to boost Rooftop Solar Power Plants (PLTS) implementation, the Ministry of Energy and Mineral Resources has issued Regulation Number 2 of 2024. This regulation, effective from January 31, 2024, aims to enhance and replace the previous regulation, focusing on the efficient deployment of Rooftop PLTS. Despite the existing PLTS Rooftop regulations falling short of its optimal potential, the new regulation, a collaborative effort of various stakeholders, seeks to address these challenges and improve the current scenario. The regulation sets a target of 1 GW of rooftop PLTS connected to the PLN network and 0.5 GW from non-PLN sources annually. This ambitious plan aims to utilize Indonesia’s silica sand resources for the solar cell industry, encouraging growth in the solar module industry.

 

INDONESIA JOINS UN-LED ENERGY COMPACTS, COMMITS USD 122 BN TO SDG7

Indonesia has officially launched its Energy Compact, joining a global community of member states and non-state actors who have made commitments towards Sustainable Development Goal 7 (SDG7) and net-zero goals. This marks a significant milestone in the nation's energy transition trajectory and aligns with the country’s Roadmap for Sustainable Development Goals.

Finance committed under this Energy Compact is substantial, exceeding USD 122 Bn, for which several financing strategies are being considered. It will be used to increase the share of renewable energy, targeting 23 % by 2029, with a focus on significant solar and wind power capacity expansions, reaching up to 5.3 GW. The Government of Indonesia also plans to accelerate grid connectivity in selected areas to enable greater penetration of renewable energy, especially in industrial estates and economic zones.


March 2024

BW AND CITRAMAS TO DEVELOP DATA CENTRE IN INDONESIA

BW Digital and Citramas Group have signed a memorandum of understanding (MoU) for the joint development of a carrier-neutral digital ecosystem in Batam’s Nongsa Digital Park (NDP), Indonesia. This strategic partnership follows BW Digital’s acquisition of more than 55,000 square meters of land at the Citramas-owned Nongsa Digital Park in Batam, to build its inaugural data centre in South-East Asia and strengthen its Asia-Pacific digital infrastructure portfolio.

With a capacity of up to 80 MW, the next-generation data centre will be designed to meet high density requirements. It will provide scalable solutions for enterprise, cloud and AI workloads, while helping customers to achieve their goals for carbon neutrality and general sustainability. As joint partners, BW Digital and Citramas Group will work together to deliver a comprehensive suite of Infrastructure-as-a-Service (IaaS) solutions co-located within BW Digital’s data centre.


SEMBCORP TO INSTALL INDONESIA’S FIRST SOLAR AND BATTERY STORAGE PROJECT

PT Sembcorp Renewables Indonesia and PT PLN Nusantara Renewables have formed a joint venture (JV) to install Indonesia’s first utility-scale solar and battery storage project in the new capital city of Nusantara. The partners will develop a photovoltaic (PV) park of 50 MW with a 14 MWh integrated battery storage system. PT PLN will have a share of 51 per cent while Sembcorp will have a share of 49 per cent. Further, PT PLN will buy the solar farm’s output under a 25-year power purchase agreement (PPA).

The Project is expected to generate up to 93 GWh of clean energy annually for Nusantara and the East Kalimantan province, which is equivalent to avoiding over 100,000 tonnes of carbon emissions per year or removing approximately 20,000 cars from the roads annually. With this project, Sembcorp will make an entry into the utility-scale solar sector in Indonesia and will expand its gross renewables capacity of 13.9 GW globally.


IFC LENDS USD 200 MN FOR SUSTAINABLE FINANCE IN INDONESIA

The International Finance Corporation (IFC), a member of World Bank Group, has granted a USD 200 Mn loan to boost sustainable financing in Indonesia. As part of the financing package to Bank Shinhan Indonesia (BSI), at least 40% will be directed towards green loans to support renewables, energy efficiency and green transport projects. 15% will be allocated for marine or water resources-related projects, while 20% will be set aside for the social component, providing support to micro, small and medium-sized enterprises over the next 5 years. The remaining 25% will be assigned to any of the three segments.

BSI is a subsidiary of Shinhan Financial Group, a commercial bank in South Korea. The financing package is the latest investment, covered by a memorandum of understanding signed between IFC and Shinhan Financial Group in May 2023 to promote environmental, social, and governance investments in emerging markets.

 

List of key transactions - Indonesia Q1 2024


Source: YOG INFRA analysis, Public Information

 

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YOG INFRA is an infrastructure focused financial advisory firm. We work with Developers and Development Finance Institutions (DFIs) and help them make informed investment decisions across infrastructure development lifecycle.

With our offices in Singapore, India and UAE, we work on projects globally, and the team brings strong experience in supporting development of infrastructure projects.

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