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The tech giant has signed a corporate power purchase agreement (CPPA) with Indonesia’s state-owned electric utility PLN to procure power from four solar projects located in Bali and Java Island. Amazon’s AWS division launched its first cloud region in Indonesia in 2021, and the recent move is part of the company’s efforts to decarbonize its operations globally, by 2025. While there have been other CPPAs for onsite installations in Indonesia, Enerdatics’ research reveals that this is the country’s first CPPA for offsite facilities.
CPPAs aren’t frequently observed in Indonesia, primarily because only PLN is authorized to sell electricity to end customers. According to Baker McKenzie, an established PPA advisor, the Indonesian government can demarcate certain parts of PLN’s business area for private businesses to govern, provided the region houses an industrial estate or is in a remote area where PLN’s grid is not available. However, there are several hurdles for private electricity suppliers to obtain a business area stipulation if PLN is present in the area.
The most frequently used CCPA structure in Indonesia, according to Baker Mckenzie, is a relatively straightforward operating lease arrangement, where a power developer leases its power plant to a consumer, with the rental fee being structured in a similar way to the conventional power purchase agreement with PLN. However, complications with rental fees, requisite licenses, and approvals, and local content, among others, have historically resulted in muted activity in the country’s CPPA market. However, Enerdatics’ research shows that recent regulatory changes to Indonesia’s energy policy, coupled with the country’s ambitious renewable energy targets, are helping to increase the off-take of clean power by corporate consumers. Earlier this year, mining corporation Nickel Industries agreed to contract more than 400 MW of solar power through two, long-term PPAs.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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