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Waste is one of the world’s biggest problem. Millions of tons of waste especially plastic are dumped in the ocean every year. Upon such concerns and the future disaster mitigation, Indonesian government initiates to encourage the development of waste management by constructing Waste-to-Energy Power Plants/ Pembangkit Listrik Berbasis Sampah or Pembangkit Listrik Tenaga Sampah Kota referred to as “PLTSa” projects. This project is an environmentally friendly way to overcome waste problems as well as to generate electricity for the nation. On September 2018, the World Bank, on its website, acknowledged that in Indonesia, a $100 million loan supports the $1 billion national program to reform waste management practices for around 70 participating cities, affecting around 50 million people.
Indonesian Government supports the PLTSa projects by issuing a Presidential Regulation Number 35 of 2018 on Accelerated Construction of Waste-to-Energy Power Plants based on Environmentally Friendly Technologies (“Regulation”).
In the Regulation, Indonesian government sets out several regions that have to accelerate the PLTSa construction, as follows: (1) DKI Jakarta Province; (2) Tangerang City; (3) South Tangerang City; (4) Bekasi City; (5) Bandung City; (6) Semarang City; (7) Surakarta City; (8) Surabaya City; (9) Makassar City; (10) Denpasar City; (11) Palembang City; and (12) Manado City. Local government may partner with business entities selected through public procurement mechanism.
Business entities that have been selected (“PLTSa Developer”) must have environmental and electricity supply licence. PLTSa Developer is facilitated in the issuance of development/construction principle licenses. The Minister of Environment and Forestry, the Minister of Energy and Mineral Resources, the Minister of Public Works and Public Housing, the Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency, Head of Investment Coordinating Board, minister as well as head of other agencies and the relevant Local Government in accordance with their authority shall provide supports in licensing and non-licensing matters as well as the simplification needed by PLTSa Developer.
Alike the traditional IPP model, PLN will be the purchaser of the electricity produced by the PLTSa developer, in which the tariff of 20 MW (twenty megawatts) is USD 13,35 cent/kWh, while the tariff for electricity of more than 20 MW (twenty megawatts) is calculated as follows:
Purchased Price (USD cent/kWh) = 14,54 – (0,076 x the amount of PLTSa capacity sold to PT PLN).
It is way higher than The Main Cost Amount/Besaran Biaya Pokok (BBP) National Plant of 2017 which is amounting to USD 7,66 cent/kWh. The above-mentioned tariff is also higher than other types of renewable power plants.
The acceleration of PLTSa construction is funded by Regional Budget which can be supported by the State Budget. The Indonesian government will support the land acquisition process in accordance with the law of land acquisition for public interest.
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By combining commercial sensibilities and legal expertise, ADCO as a Law Firm Jakarta assists the clients to structure, organize and implement their business ventures and investments, including structuring, financing and securing investments as well as establishing new foreign companies in Indonesia. Should you have more queries regarding this matter, please do not hesitate to contact us.
Dendi Adisuryo
dendi.adisuryo@adcolaw.com
Liza Mashita
liza@adcolaw.com
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This publication has been prepared by Aditya Yudhistira for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.