Indonesia Biomass / Biogas

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The cycle of biomass/biogas power project development can be divided into three phases: (1) development phase, (2) construction  phase, and (2) operation phase. The details of each phase are outlined below:

Development Phase

The first step is to identify a suitable site for project development (Step 1: Site Selection / Evaluation). Basic information and data must be collected and analysed during a desktop study. A site survey must then be conducted to verify the results. Important partners in the project implementation must be identified and a comprehensive feasibility study (FS) must be finalised.

The developer must negotiate with PLN, the state-owned power utility provider, regarding possible connection points for the biomass/biogas power plant (Step 2: Grid Connection Approval). According to the new Ministerial Regulation - PERMEN (ESDM) no. 27/2014, an interconnection study must be performed to ensure that the grid can absorb power generated from the plant.

Typically, project developers and their partners establish a special purpose company (SPC) to carry out development, construction, and operation of the biomass/biogas power plant. The SPC must be incorporated under Indonesian laws (Step 3: Corporate Fiscal / Legal) which is divided into two parts: Step 3a describes the SPC establishment, while Step 3b provides information regarding income tax reduction. The latter one is to be done at a later stage, in parallel with the operational phase of the power plant.

The Administrative Authorisation step (Step 4) is separated into two parts. Necessary licenses and permits that must be obtained from various governmental institutions are described in Step 4a. The building permit (IMB; Izin Mendirikan Bangunan), that must be applied at the later stage is explained in Step 4b.

Steps 1 thru 4 are closely interrelated with each other. They must be performed partly in parallel. The interconnection study (in Step 2) and the environmental permit along with an environmental management and monitoring report (UKL-UPL; Upaya Pengelolaan Lingkungan Hidup-Upaya Pemantauan Lingkungan Hidup - in Step 3) are prerequisites for the FS (in Step 1). The principle license from the Indonesia Investment Coordinating Board (BKPM; Badan Koordinasi Penanaman Modal) must also be secured, and the SPC must be completely established (in Step 3) before a principle license from the local government can be obtained (in Step 4).

Based on the new Ministerial Regulation, project developers must then register with the Directorate General of New, Renewable Energy, and Energy Conservation (EBTKE; Direktorat Jenderal Energi Baru Terbarukan dan Konservasi Energi) to be appointed as "biomass/biogas power producer“ to be eligible for the guarantee price (Step 5: Support Mechanisms). Following the appointment by EBTKE, the developer must then submit a progress report on a regular basis to EBTKE. This step is separated into two parts: Step 5a describes the registration procedure with EBTKE and the appointment of biomass/biogas power producer status, and Step 5b describes the required content and the submission procedures of the progress report (development phase) that must be done regularly until the commercial operation date (COD).

An electricity production license (IUPTL; Izin Usaha Penyediaan Tenaga Listrik), must be obtained from the Directorate General of Electricity (DJK; Direktorat Jenderal Ketenagalistrikan) in order to allow the developer to generate electricity in Indonesia (Step 6). There are two licenses that need to be obtained in stages. The first one is a temporary license (IUPTL/S; Izin Usaha Penyediaan Tenaga Listrik Sementara) that must be secured before PPA signing (Step 6a). The second one is a permanent license (IUPTL) that must be obtained before the commencement of physical construction (Step 6b).

After a temporary license (IUPTL/S) is issued, project developer can sign a power purchase agreement (PPA or PJBL; Perjanjian Jual Beli Tenaga Listrik) with PLN (Step 7: Power Purchase Agreement)

The Financing step (Step 8) describes the common procedure of obtaining necessary financing from financial institutions. According to the new Ministerial Regulation, the project developer must put up a deposit amounting to 5% of the total investment cost of the project available in their bank account at the onset of the project. In addition to that, a performance guarantee is still required by PLN. The certificate must be issued by a bank and then submitted to EBTKE, allowing an application for the IUPTL/S to be made (Step 6). Necessary financing must be secured from a financial institution. 

Construction Phase

All necessary equipment must be procured from reliable suppliers. Some components may be imported from foreign countries. In that case, the project developer must register themselves as an importer and secure an importer identity number (API-P; Angka Pengenal Importir-Produsen) from the BKPM. Import duty exemption may be applicable for some components. The power plant is then constructed by an engineering, procurement, and construction (EPC) contractor (Step 9: Procurement and Construction).

After the power plant construction is completed and all equipment is installed, it must then be connected to the grid. Inspection and testing must be arranged beforehand to ensure that the power plant and all components can be safely operated according to the requirements and standards. The plant is then commissioned (Step 10: Grid Connection and Commissioning).

The commercial operation date (COD) marks the end of the Construction Phase and the beginning of the Operation Phase.

Operation Phase

After the COD, the biomass/biogas power plant is operated by a contracted plant operator (Step 11: Operation and Maintenance). During this phase, performance of the plant must be monitored. Continuous and reliable supply of biomass feedstock is an important aspect of a biomass/biogas project that must be ensured throughout the project’s lifetime. According to the new Ministerial Regulation, project developer is requested to submit a progress report (during operation phase) on a regular basis to EBTKE.