NEW AND RENEWABLE ENERGY POLICY

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DIRECTORATE GENERAL OF NEW RENEWABLE ENERGY AND ENERGY CONSERVATION MINISTRY OF ENERGY AND MINERAL RESOURCES, INDONESIA NEW AND RENEWABLE ENERGY POLICY By: Dr. Djadjang Sukarna Secretary of Director General for New Renewable Energy and Energy Conservation Presented at 1st Indonesia Specific GSMA Green Power for Mobile Working Group Bali, December 13 th, 2012

2 Introduction Average growth of energy consumption is 7% per year, the fulfilling of energy demand is still dominated by fossil fuels. Electrification ratio and accessibility to electricity are limited, therefore Government of Indonesia has to strangthen its energy security. Indonesia has an abundance potential of new and renewable energy. Unfortunately, many of the potentials are left unutilized. Indonesia s commitment : to reduce GhGs emission as much as 767 million TOE (26%) by 2020, in which energy sector to contribute 30 million TOE. To support the utilization of new and renewable energy, the Government of Indonesia has to change paradigm of energy utilization from a supply side to demand side. The target in energy utilization based on new and renewable energy will reach to 25% of total national mixed energy in year 2025.

4 CURRENT CONDITION 2011 Total Energy Mix 1176 million BOE Oil 47% Gas 24% NRE 5% Coal 24% The average of growth rate of energy consumption is 7% per year High dependence on fossil energy while it reserves are more limited Less of development of energy infrastructure particularly in rural / remote areas and outer islands Utilization of renewable energy and implementation of Energy Conservation is not optimal Public access to energy (modern) is still limited, Electrification ratio (2012) is 74.% Share of Non Fossil Energy 5% Linkage to environmental issues about mitigation of climate change

ENERGY RESERVES AND PRODUCTION NO NON FOSSIL ENERGY RESOURCES (SD) INSTALLED CAPACITY (KT) RATIO KT/SD (%) 1 2 3 4 5 = 4/3 1 Hydro 75,670 MW 5,705.29 MW 7.54 2 Geothermal 29,038 MW 1,189 MW 4.10 3 Mini/Micro Hydro 1,013.5 MW 462.0 MW 46.0 4 Biomass 49,810 MW 1,618.40 MW 3.25 5 Solar Energy 4.80 kwh/m 2 /day 13.5 MW - 6 Wind Energy 3 6 m/s 1.87 MW - 7 Uranium 3.000 MW (e.q. 24,112 ton) for 11 years *) *) only in Kalan West Kalimantan NO FOSSIL ENERGY RESOURCES (SD) RESERVES (CAD) RATIO SD/CAD (%) PRODUCTION (PROD) RASIO CAD/PROD (YEAR)*) 1 2 3 4 5 = 4/3 6 7 = 4/6 1 Oil (billion barrel) 56.6 7.99 **) 14 0.346 23 2 Gas (TSCF) 334.5 159.64 51 2.9 55 3 Coal (billion ton) 104.8 20.98 18 0.254 83 4 Coal Bed Methane/CBM (TSCF) 453 - - - - 6 *) note: assuming that there is no new found **) Cepu Block is included

NATIONAL COMMITMENT TO REDUCE GHG EMISSION Presidential Regulation No. 61/2011 on National Action Plan on GHGs Emission Reduction *) Own efforts 26% (767 million Ton) 41% Own efforts and international support Forestry, Peat Land, Agriculture Energy Sector Waste Industry and Transportation 680 million Ton 30 million Ton 48 million Ton 9 million Ton Through the development of new renewable energy, implementation of energy conservation and clean fossil technology 7 *) by the year of 2020, as the Government of Indonesia s commitment at the G-20 meeting at Pittsburg.

REGULATIONS TO PROMOTE RENEWABLE ENERGY

POLICY DIRECTIONS Global trend shows that new and renewable as well as clean energy are energy option. Based on energy potential of Indonesia as well as GHGs Emission Reduction, in the future new renewable energy is main of energy resources with non renewable energy (fossil energy) act as balancing; Facing the situation, Indonesia is focusing on developing renewable energy sector, especially in the fields of Geothermal, Hydro Power, Photo Voltage, and Biomass/Biofuel. To enhance the development of renewable energy, Indonesia has set up a series of regulation on fiscal incentive as well feed-in tarriffs. 9

10 Business as usual President Regulation 5 / 2006 Vision 25/25 POLICY DIRECTION NRE Oil Gas Oil 1176 Million BOE 5 % 24 % 24% 47% 1649 Million BOE 2419 Million BOE 3298 Million BOE 3,1% 34.6% 20,6% 41.7% 3200 Million BOE 17% 33% 30% 20% 2785 Million BOE ENERGY CONSERVATION (15.6%) 25 % NRE 32% Coal 20% Gas 23% Oil ENERGY DIVERSIFICATION 2011 2015 2020 2025

PROJECTION OF INDONESIA S ENERGY MIX (%) SCENARIO ENERGY MIX 2010 2015 2020 2025 2030 2040 2050 Biomass Biofuel 3,1 4,7 5,2 7,9 8,3 9,5 9,7 Biomass from waste (for electricity) 0,0 0,5 1 2,4 4,2 5,4 5,6 Geothermal 1,9 4,2 5,2 7,9 8,3 8,8 8,7 Hydro Power 0,6 0,9 1,7 2,9 3,1 2,7 2,4 Ocean Power 0 0 0,2 0,3 0,3 0,4 0,6 Solar Power 0 0,2 0,7 1,1 1,3 1,9 1,8 Other Renewable Energy Resources 0 0,1 0,3 0,4 0,4 0,5 0,5 Oil 49,7 38,6 29,3 23,7 19,4 16,9 16,5 Gas 20,1 19,5 19 19,7 18,8 16,2 14,3 Coal 24,5 31,3 36,9 30,7 31 30 29,7 New Energy (nuclear, etc.) 0 0 0,7 3,2 5 8,1 10,2 Non New Renewable Energy Mix 94,30 89,40 85,00 74,10 69,10 62,70 60,50 New Renewable Energy Mix 5,7 10,6 15 25,9 30,9 37,3 39,5 11

STRATEGY FRAMEWORK AND POLICY INSTRUMENTS STRATEGY FRAMEWORK Energy diversification: to increase the utilization of new renewable energy. Geothermal power plants Biodiesel Municipal solid waste power plants Energy conservation: to have the sectors of household, commercial, industry, and transportation use the energy efficiently. Mandatory energy management for energy user > 6000 TOE/years Labelization of energy efficiency products Sosialization of energy efficiency Transformation Energy management : to change the paradigm of energy management with orientation to use more NRE, also to develop small scale NRE with local resources. Development of Self Suficient Energy Village (Desa Mandiri Energi, DME) Micro and pyco Hydro Powers Solar Energy (Photo Voltaic) Home System (100 W) Bio Digester 12 POLICY INSTRUMENTS Fiscal Fiscal incentive for NRE development Pricing for new renewable energy (Feed-in Tariff/FIT) Renewable Portfolio Standard (RPS)

INCENTIVES IN DEVELOPING NEW AND RENEWABLE ENERGY

Fiscal Incentives 1. Ministry of Finance Regulation (PMK) No. 21/PMK.011/2010 and No. 24/PMK.011/2010 on tax and custom facilities for renewable energy utilization; 2. Ministry Of Finance Regulation No. 130/PMK.011/2011 on Provision of Exemption Facilities or Reduction of Income Tax. 3. Ministry of Energy and Mineral Resources Regulation No. 04/2012 concerning Electricity Power Purchased Price from Renewable Generations (small and medium scale) and Excess Power. 4. Incentives for geothermal developers: MEMR Regulation No. 22/2012 on geothermal. Exemption custom facilites for imported goods (PMK No. 177/PMK011/2007) GoI to guarantee value added taxes on imported goods (Ministry of Finance Decree No. 22/PMK011/2011) Income tax facility (Governmental Regulation No. 62/2008 jo No. 1/2007) 5. Incentive grants for the implementation of Energy Conservation Programs (President Instruction No. 2/2008). 14

15 Pricing for Renewable Energy, Geothermal (Minister of Energy and Mineral Resources Decree No. 22 Year 2012) No. AREA PRICE (Cent US$/kWh High Voltage Medium Voltage 1. Sumatera 10 11,5 2. Java, Madura and Bali 11 12,5 3. South, West and Southeast Sulawesi 4. North and Central Sulawesi and Gorontalo 12 13,5 13 14,5 5. West amd East Nusatenggara 15 16,5 6. Maluku and Papua 17 18.5

16 MANDATORY ON RENEWABLE ENERGY President Regulation No. 4 / 2010 about the assignment of PLN to support the Fast Track Program. Minister of Energy and Mineral Resources Regulation No. 22 / 2012 about the assignment of PLN to buy electricity from geothermal power plants. Minister of EMR Regulation No. 15/2010 on Crash Program 10.000 MWe Phase II, to support and to enhance the development of geothermal Presidential Regulation No. 61/2011 on National Action Plan of GHG Emission Reduction (RAN-GRK) Presidential Instruction No. 13/2011 on Energy and Water Saving Ministerial Regulation No. 13/2010 on Determination and Enforcement of Energy Manager s Competency Standards for Industrial Sector Ministerial Regulation No. 14/2010 on Determination and Enforcement of Energy Manager s Competency Standards for Building Sector Ministerial Regulation No. 6/2011 on Energy Efficiency Labeling on Swabalast Lamp Ministerial Regulation No. 13/2012 on Electricity Saving Ministerial Regulation No. 14/2012 on Energy Management Ministerial Regulation No. 32/2008 on Provision, Utilization and Procedures of Commerce Biofuel

Thank You Go Green Energy! Green energy, Future energy DIRECTORATE GENERAL OF NEW RENEWABLE ENERGY AND ENERGY CONSERVATION MINISTRY OF ENERGY AND MINERAL RESOURCES, INDONESIA Jalan Jenderal Gatot Subroto, Kav. 49 Jakarta 12950; Phone/Fax : 021-5250575 www.ebtke.esdm.go.id

18 PROJECTION OF INDONESIA S ENERGY MIX (MTOE) SCENARIO ENERGY MIX 2010 2015 2020 2025 2030 2040 2050 TOTAL Energy 159 215 290 380 480 740 980 Biomass Biofuel 5 10 15 30 40 70 95 Biomass from waste (for electricity) - 1 3 9 20 40 55 Geothermal 3 9 15 30 40 65 85 Hydro Power 1 2 5 11 15 20 24 Ocean Power - - 0,5 1 1,4 3 5 Solar Power - 0,5 2 4 6 14 18 Other Renewable Energy Resources - 0,2 1 1,5 2 4 5 Oil 79 83 85 90 93 125 162 Gas 32 42 55 75 90 120 140 Coal 39 67 107 117 149 222 291 New Energy (nuclear, etc.) - - 2 12 24 60 100 Subtotal of Biomass 5 11 18 39 60 110 150 Subtotal of NON Biomass Renewable Energy 4 12 24 48 64 106 137 Subtotal of Renewable Energy 9 23 42 87 124 216 287 TOTAL of New Renewable Energy 9 23 44 99 148 276 387

19 Pricing for renewable energy, Biomass Electricity Price of Small Scale and Medium Scale Renewable Energy Electricity Generation or Excess Power (Minister of Energy and Mineral Resources Decree No. 4 Year 2012) No. Energy Capacity Electricity Tariff Note Medium Voltage 1. Biomassa until 10 MW Rp. 975,- / kwh X F 2. Biogas until 10 MW Rp. 975,- / kwh X F Non Municipal Solid Waste 3. Municipal Solid Waste (MSW) until 10 MW Rp. 1050,- / kwh Zero waste *) 4. Municipal Solid Waste (MSW) until 10 MW Rp. 850,- / kwh Landfill *) Low Voltage 1 Biomassa until 10 MW Rp. 1.325,- / kwh X F 2 Biogas until 10 MW Rp. 1.325,- / kwh X F Non Municipal Solid Waste 3 Municipal Solid Waste (MSW) until 10 MW Rp. 1.398,- / kwh Zero waste *) 4 Municipal Solid Waste (MSW) until 10 MW Rp. 1.198,- / kwh Landfill *) F as an incentive factor based on the region where the power plant installed, as follows: Jawa, Bali, and Sumatera region : F = 1 Kalimantan, Sulawesi, NTB and NTT region : F = 1,2 Maluku and Papua region : F = 1,3 Note : * ) Based on Act No. 18 Year 2008 concerning to Waste Management.