On 3 July 2024, Vietnam issued its direct energy buy agreements (DPPAs) decree for renewable power between non-public mission builders and shoppers. This enables renewable power mills to promote their energy to company shoppers, utilizing their transmission amenities or through state-owned utility traces. Further laws encourages funding alternatives and information centre growth. In response, firms like Alibaba, AWS, and Google plan to discover enterprise alternatives, which might ignite fast renewable power development.
On 26 July 2024, Malaysia launched the Company Renewable Power Provide Scheme (CRESS) which goals to reinforce company entry to inexperienced electrical energy by way of open grid techniques, permitting third events to provide or buy electrical energy by way of the present grid community. Following this, Google and Oracle introduced investments in Malaysia, that are anticipated to contribute over US$9.5 billion to the nation’s financial system by 2030.
Indonesia’s intention to speed up the renewable power transition
Indonesia, probably the most populous Southeast Asian nation, is ranked third within the area for photo voltaic potential. It has the capability to turn into the chief within the renewable power sector. Nonetheless, its renewable power growth might be thought of stagnant in comparison with its neighbors. That is because of the difficult monetary place of its nationwide electrical energy utility, PT Perusahaan Listrik Negara (PLN), the first developer of renewable power, and several other regulatory challenges that scale back the attractiveness of investing on this sector.
To speed up the power transition, the Authorities of Indonesia (GOI) intends to develop the open marketplace for clear power by proposing energy wheeling in the draft of its renewable power invoice. An influence wheeling mechanism permits non-public firms or Impartial Energy Producers (IPPs) to promote renewable electrical energy on to clients by way of PLN-owned transmission techniques. Given PLN’s delays in implementing utility-scale renewable power, non-public builders and industrial shoppers can assist fill the hole.
The facility wheeling mechanism has been pushed by over 430 massive world companies which can be members of the RE100, a world initiative comprising firms dedicated to 60 per cent renewable electrical energy by 2030 and 100 per cent by 2050. RE100 has 121 members working in Indonesia. Nonetheless, these firms nonetheless have insufficient renewable power options for powering their amenities and provide chains, thus impeding their skill to satisfy RE100 pledges and company sustainability mandates.
Together with energy wheeling within the invoice might enhance Indonesia’s attractiveness as an funding vacation spot and concurrently speed up renewable power growth.
Energy wheeling might enhance renewable power deployment and add to PLN’s income
Regardless of Indonesia’s dedication to achieve a 23 per cent share of renewable power in its electrical energy combine in 2025, the share in 2023 was solely 13.1 per cent. Energy wheeling can assist the nation obtain its renewable power goal by delivering the flexibility of direct transactions for the non-public sector, which is required to speed up the large-scale deployment of renewable power.
PLN will even profit from the facility wheeling mechanism as it will assist the utility preserve its electrical energy provide, particularly exterior Java and Bali Island. Moreover, the utility would achieve one other income stream by renting its transmission amenities to personal electrical energy firms by way of a wheeling cost. Nonetheless, it’s crucial that wheeling expenses are developed in a good and clear method to keep away from extreme pricing whereas making certain system integrity. Such situations are necessary each for attracting traders and defending PLN because the transmission community proprietor.
Growing funding potential from world firms and information centres
Indonesia’s heavy reliance on fossil fuels has turn into an impediment to investments from world firms that more and more need clear power. In September 2024, the Indonesian Minister of Funding said that Tesla was hesitant to put money into the nation due to Indonesia’s fossil gas power utilization. The deal with the carbon emissions depth of provide chains is rising, most notably represented by Europe’s Carbon Border Adjustment Mechanism. There’s a rising urgency to scale back the carbon emissions of the Indonesian grid, at present at over 682 grams of carbon dioxide equal per kilowatt-hour (gCO2e/kWh), making it one of many highest world emitters.
Energy wheeling, reserved just for renewable power, generally is a answer to draw new funding from world firms and information centres dedicated to reaching 100 per cent clear power.
At the moment, information centres worldwide utilise 1 to 2 per cent of complete energy. In 2022, the power consumption of knowledge centres was 460 terawatt-hours (TWh), 45 per cent larger than Indonesia as an entire. The IEA expects that information centre demand might enhance to between 1.5 per cent and three per cent of world energy by 2026.
Nations like Singapore have established themselves as main information centre hubs in Southeast Asia. Nonetheless, the Singapore market faces provide constraints with restrictions on establishing new information centres, restricted renewable power availability, and better price of operations. Due to this fact, traders are more and more trying in the direction of rising markets like Indonesia.
Google goals to realize net-zero emissions throughout all its operations and worth chains by 2030. Microsoft has additionally dedicated to being carbon-negative by 2030. By 2050, it additionally goals to take away all carbon emitted by the corporate, both straight or by electrical energy consumption, since its founding in 1975. Microsoft introduced that it’ll make investments US$1.7 billion over the following 4 years in new cloud and Synthetic Intelligence (AI) infrastructure in Indonesia. Consequently, Indonesia wants to supply large-scale entry to scrub power to supply firms like Google and Microsoft choices to ascertain their information centres exterior Singapore that meet their world sustainability targets.
Indonesia has a quickly rising digital financial system and might play a significant position in increasing information centres. Its digital financial system had a gross merchandise worth of US$77 billion in 2022 and is anticipated to extend to between US$220 and US$360 billion by 2030, making it the biggest digital financial system in Southeast Asia.
Energy wheeling can enhance financial development by way of investments, create new jobs, and assist Indonesia meet its decarbonization targets with out burdening the nationwide price range. It could additionally assist PLN deal with grid modernisation and enhancements to facilitate power transition.
Regardless of broad trade assist, opposition to the facility wheeling scheme stays, significantly throughout the GOI, the place inner disagreements persist. There are issues about energy oversupply and PLN’s take-or-pay scheme with IPPs, which poses important monetary dangers to the utility. The answer might lie in contract negotiations with IPPs, price effectivity, and the retirement of inefficient coal-fired energy crops mixed with the fitting energy wheeling components.
Indonesia is already behind on its renewable power targets. The dearth of renewable power provide within the nation creates dangers of lacking out on golden financial alternatives and falling behind its neighbors. Energy wheeling can play a vital position in a balanced technique that accommodates all stakeholders, enabling Indonesia to speed up clear power deployment whereas tapping into important financial alternatives.
Mutya Yustika is IEEFA‘s power finance specialist, based mostly in Indonesia.
