Policy Insight - Indonesia: Guidelines on Power Purchase Agreement from Renewable Energy Sources

Overview

The Guidelines on Power Purchase Agreement from Renewable Energy Sources under Indonesia’s Ministry of Energy and Mineral Resources (MEMR) Regulation No. 5/2025 introduces key advancements in Indonesia’s renewable energy regulatory framework, building on Presidential Regulation No. 112/2022. This regulation enhances the foundation for renewable energy power purchase agreements (PPAs) by refining MEMR Regulation No. 10/2017 which strengthens the contractual agreements between Independent Power Producers (IPPs) and PLN as the state-owned utility to improves project
bankability, making RE projects more attractive to investors and lenders.

This policy insight explores the updates introduced by MEMR Regulation No. 5/2025, including longer PPA durations (up to 30 years), clearer provisions on carbon credits and RECs, refinancing mechanisms, addresses intermittent renewable energy generation, and price adjustment mechanisms for geothermal power plants.

The regulation addresses challenges in Indonesia’s renewable energy sector by streamlining procurement, reducing regulatory uncertainties, and improving project execution frameworks. These changes are poised to catalyse increased investment, enhance national energy resilience, and support Indonesia’s target of installing approximately 182 GW of renewable energy plants by 2060, with 70.5 GW coming from variable renewable energy (vRE) and hydro, as outlined in the National Electricity Plan (RUKN) 2024–2060.

The data was collected from various reliable sources, including official reports from the government, the private sector, international organisations, and the ASEAN Centre for Energy report.