PSEL (Waste-To-Electricity Processing) Momentum To Build Renewable Energy Ecosystem That Accelarate The Energy Transition In Indonesia

 

Amidst the hype surrounding Danantara's planned investment in PSEL (Waste-to-Electricity Processing), many have welcomed this plan, considering it a significant step forward in driving the energy transition toward national energy independence. However, many also consider this inappropriate, as it would significantly burden the finances and operations of PT PLN (State Electricity Company), and make it difficult for PLN itself to invest in renewable energy.

We should really support this program because the main problem that the government wants to address through this program is the problem of urban waste which is already very severe. So the spirit of issuance the  Presidential Regulation No. 109 year 2025 is to overcome the waste problem in all cities in Indonesia which is very urgent at this time which is different from the spirit of Presidential Regulation No. 35 year 2018 which is more about the development of  PLTSa (electricity from waste). This is evident from the terminology used currently with PSEL (Waste Processing into Electrical Energy) which shows that waste is the first priority of this program and is different from the previous program with the terminology of PLTSa, where electricity is the main priority not the waste. In fact, the previous  program is less successful because the PPA (Power Purchase Aggrement) process with PT PLN involves many parties, very complicated and lengthy aspects. The program with the previous Presidential Regulation No. 35 of 2018 which targeted 12 cities in Indonesia has not been successful in promoting the PLTSa program as an alternative energy source and waste utilization and in actually waste problem is getting worse.

The latest Presidential Regulation No. 109 of 2025 is considered to simplify the PPA process with PT PLN, reduce the number of parties involved, and eliminate tipping fees from local governments and other potential waste producers. This makes waste management the sole responsibility of the IPP in the landfill area. This is expected to drastically reduce complaints about the mounting waste by reducing the volume of waste. 

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We must support the spirit of the PSEL program to address the urban waste problem and immediately benefit from electricity through a simplified PPA system. Furthermore, the PSEL program is expected to provide a strong momentum for building a "renewable energy ecosystem" in the energy transition towards sustainable energy independence in Indonesia.

However, there are many things we need to improve to achieve that.

With the current electricity oversupply of PLN, especially in Java Island, where by 2024 alone in 4 GW (Giga Watt), it will be difficult for PT PLN to absorb PSEL electricity if at the same time the construction of PLTS  (solar PV) is very intensive even though it is limited by an annual quota. 

The current major waste problem is more prevalent in large cities on the island of Java and Bali, which average around 1,000 to 2,000 tons per day of waste production, while DKI Jakarta is the highest contributor at around 8,000 tons per day. If 1,000 tons of waste can produce 20 MW (Mega Watt) electricicty, then with a plan of around 33 PSELs and estimated around 20 units on the island of Java, there will be around 400 MW of additional electricity on the island of Java-Madura-Bali (Jamali), this is also a large amount for PT PLN Jamali which has a capacity of around 46 thousand MW but the peak load in 2024 is only around 28 thousand MW.

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In terms of price, 20 cents per kWh is very high compared to other electricity sources. This high price will complicate PT PLN's routine financial management and disrupt its routine operations. It will also make it difficult for PT PLN itself to invest in electricity from renewable energy sources. The difference between the purchase price of electricity from the private sector/IPP (independent Power Producer) and PLN's electricity cost (BPP) has been addressed through a government compensation scheme, but the process has been quite lengthy in the House of Representatives (DPR). The existence of the price compensation component actually masks the true picture of PT PLN's efficiency; PT PLN's inefficiency is masked by this compensation. This compensation cost differs from the cost of electricity subsidies for the poor citizen, where subsidies are related to a lower selling price than PT PLN's BPP. As of 2024, electricity subsidies are approximately 73.24 trillion rupiah, while electricity compensation is approximately 17.8 trillion rupiah. 

So, how can we address these issues?

To create a conducive investment ecosystem for renewable energy, facilitating investor in development of renewable energy and maintaining the financial and operational health of PT PLN (State Electricity Company), We should manage compensation and subsidies through a special funding agency. This will ensure that PSEL and other renewable energy development activities are aligned with the available funding within the agency. This strategy will prevent PT PLN from having to pay substantial subsidies and compensation for several months.

The existence of this special fund is in line with the spirit of the EBT ( New and Renewable Energy) Bill. If the Bill is enacted, it will ensure the smooth implementation of renewable energy programs that support the decarbonization program in accordance with Indonesia's Nationally Determined Contribution (NDC) under the Paris Agreement of 31.89% by 2030.

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As stated in Article 56 paragraph 3 of the pending Bill, "The New Energy and Renewable Energy Fund as referred to in paragraph (1) shall be used for":

a. Financing New Energy and Renewable Energy infrastructure;
b. Financing New Energy and Renewable Energy incentives;
c. Compensation for Business Entities developing New Energy and Renewable 
    Energy;
d. Price subsidies for Renewable Energy where prices cannot yet compete with 
    non renewable Energy.

Therefore, given the current situation, a dedicated fund for renewable energy (NRE) is essential as soon as possible to create a conducive business environment for renewable energy development and support the energy sector's decarbonization program. This fund will be effective if the legal framework for the R&D Bill is enacted immediately.  

Currently, deliberations on the 2022 Renewable Energy Bill have been delayed due to a dispute over power wheeling and stalled due to the replacement of House members. Deliberations on the Renewable Energy Bill are now in the hands of the 2024-2029 House of Representatives (DPR) member for immediate resolution.

Of course, to ensure the swift enactment of the EBT Bill, the power wheeling dispute must be resolved immediately. The power wheeling scheme is considered to increase the efficiency of new and renewable energy utilization while simultaneously encouraging the development of green electricity infrastructure in various industrial sectors.

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