Incentif For OCEAN Energy In Indonesia

Ocean energy is a new type energy for Indonesia, and also for the world. Ocean energy has  received a greater attention from universities, government agencies, companies and public. 

Among the source of energies, Utilization of renewable energy  is very low especially for ocean energy. Indonesia is still depended badly on fossil fuel. The dependency causes loss of many opportunities in development of the country because some fund went to high fuel subsidy.

In recent condition the government has revised energy policies to become more favor for the renewable energy especially for the ocean energy.

There are two main objective in  the renewable energy  (Ocean Energy)  implementation :

1. To increase the energy access  Electricity ratio where currently is about 67% , Limited access to electricity is commonly at small  islands populations and less developed regions

2.  To reduce the oil “addiction” , which takes about 15% of national budget for energy subsidies

 

Policies on marine power

The first  guide in energy activity in Indonesia is Law No. 30/2007 about  Energy. This law should be followed by all stakeholder involved in energy sector. The government in formulating energy policy is working together with the National Energy Council (NEC/DEN) as a think tank body and finally the policy is ratified by the parliament.

Law no . 30 Year 2007 about  Energy  stated that :

• Renewable energy sources are energy sources produced from sustainable energy resources if manage well , such as geothermal , wind , bioenergy , solar rays , stream and waterfall, and the movement and the temperature differences sealayer ( Article 1 number 6 ) .
•  Provision and utilization of renewable energy shall be increased by the government and local authorities ( Article 20 number 4 and Article 21 number 2 ) .
•  The provision and use of energy from renewable energy sources can obtain facilities and / or incentives from the government and / or the appropriate local government authority for a certain period of time to achieve its economic value ( Article 20  number 5 , Article 21  number 3 ) .
• The Law also creates a National Energy Council ( NEC ) with an authority to design and formulate a national energy policy on behalf of the GOI  but the policy must be endorsed by Parliament .

The second guide in implementation of energy project is Law No. 17/2007 about  Long Term Development Planning of  Indonesia.

The Republik Indonesia law  no 17/2007 on the long-term national development plan year 2005 - 2025 (RPJPN, appendix, chapter IV, section IV.1.6, number 2) mandates the development of ocean energy within the mid-term plan (2010-2014)

The third guide is Presidential Decree No.5 Year 2006 about National Energy Policy (KEN) stipulates that the Minister of Energy and Mineral Resources set a National Energy Management Blueprint ( PEN ), which includes among others the management and utilization of energy resources ( Article 4 , number 1 and number 2 letter c ) .

From this presidential decree state that The share of renewable energy is growing :

 From 4.3% (in 2005)  until  17% (in 2025).

Recently, NEC is reviewing the current energy policy and intends to include the role of ocean enegy in the energy mix of 2010-2050. And we have infomation that  in 28 January 2014 the Parliament has ratified revision of national energy policy.  It is ratified that contribution from renewable energy become  23 % in 2025 bigger than previous policy (17 %).

 

Incentif in Ocean Energy

There two type incentif fiscal in renewable energy based on Ministry of Finance Regulation No. 21/2010.

 1. Income tax incentif:

Income tax reductions. A renewable energy investor is eligible for net income reduction by 5 per cent of the investment value each year, over a six-year period ° Accelerated depreciation and amortization. This allows investments to be depreciated within 2–10 years, depending on type of asset. This incentive would reduce the income tax paid by the investors and is expected to encourage expansion of investment (Government Regulation no 1/2007).

° An income tax reduction for foreign investors allows them to pay a rate of only 10 per cent on dividends they receive.

° Compensation for losses for foreign investors. This is available for more than five years and follows certain criteria. VAT on imported goods for producing renewable energy can also be exempted.

  2. Import duty and VAT facilities:

Exemptions from import duty for capital goods and machinery, provided that the goods are not available in Indonesia, or that their Indonesian equivalents have unsuitable specifications or are available in insuffcient quantity. While the Decree is specifically directed for renewable energy promotion, the same import duty exemption is also available for power plant development from all other sources of energy. The exemption is valid for two years and can be extended for one more year. Investors need to request the facility by following various procedures and showing required documentation. The incentive can also be requested for activities to increase the capacity of existing power plants.

° Until recently, Indonesia also offered a tax incentive for investors in renewable energy projects that would allow the government to pay for their income tax and VAT for the current year.

Besides that  based on Ministry of Finance Regulation No. 154/PMK.011/2008 there is an import duty exemption for goods and machinery in order to build and operate power plant for public purpose.

Feed in Tariff

Nowadays The goverment of Indonesia has enacted incentif policies for renewable energy  through  feed in tarif only for geothermal power plant and photovoltaic power plant.

The scheme  based on higher price that can be reach through  negotiation.  For geothermal it could be maximum  11 cent US$/kwh  meanwhile for photovoltaic electricity it could be maximum  18.5 cent US$/kwh  depend on location where  if it is outside java island the price could be reach the highest price.

According to the new national energy policy that  has been ratified by the parliament recently, where the ocean energy included in the renewable energy as part of national energy mix, we hope that the government of Indonesia will publish feed in tariff for the ocean energy immediately.

Written By : Shalahuddin Hasan