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View all search resultsAnalysis: Domestic bottlenecks in RI’s electricity export strategy
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A technician performs maintenance work on a solar power system in Minas, Riau. (Photo:/R. Berto Wedhatama) (Photo:/R. Berto Wedhatama)
S
tate asset fund Danantara recently signed two memorandums of understanding (MoUs) with Singapore's Keppel Electric, Sembcorp Industries and Singapore Energy Interconnections for a cross-border renewable electricity project, marking another milestone in the long-running effort to export Indonesia’s renewable power to the island state. Despite the progress, Energy and Mineral Resources (ESDM) Minister Bahlil Lahadalia said the two countries had yet to reach an agreement on the electricity pricing framework.
According to Bahlil, the proposed export arrangement must provide balanced benefits for both Indonesia and Singapore. Because electricity prices in Indonesia are regulated by the government, exporting power to an external market requires a pricing framework that reflects the interests of both countries.
He also explained that under the existing regulatory framework, the government determines the applicable pricing mechanism.
Indonesia is therefore seeking an agreement that not only enables renewable electricity exports but also ensures that the resulting economic benefits are shared fairly between the two countries.
However, framing the remaining negotiations as simply a matter of "pricing" understates the complexity of the project.
From a commercial perspective, Singapore's willingness to purchase renewable electricity under a market-based pricing mechanism already presents an attractive opportunity for Indonesia. Singapore's liberalized electricity market offers prices that are substantially higher than Indonesia's regulated tariffs, allowing export-oriented renewable projects to generate considerably stronger returns than projects that serve the domestic market.
The central issue therefore extends beyond the price of electricity and concerns how the economic value created by these projects should be distributed within Indonesia.
