Indonesia issues new regulation on waste-to-energy processing: AGI Legal

8 December 2025

On 10 October 2025, Indonesia issued Government Regulation No. 109 of 2025 on Urban Waste Management Through Processing Waste into Renewable Energy Based on Environmentally Friendly Technology (“Regulation 109”), which took effect immediately. Regulation 109 replaces Regulation No. 35 of 2018 on the same subject (“Regulation 35”) and introduces a simpler and more comprehensive legal framework for the renewable energy sector.

Regulation 109 centres on waste-to-energy-processing, which converts waste - including household and household-like waste - into renewable energy, such as electricity, bioenergy, renewable fuel oil, and other by-products, using machines and/or equipment while simultaneously reducing waste volume. This processing may be carried out through several types of processing plants, including waste-to-electrical-energy plants, waste-to-bioenergy plants, waste-to-renewable-fuel-oil plants, and waste-to-other-by-product plants.

This article provides an overview of the key processes and requirements set out in Regulation 109.

Waste-to-electrical energy plants

A waste-to-electrical-energy plant (“WTE Plant”) is a waste-based power facility that converts waste into electrical energy while significantly reducing waste volume. WTE Plants are designed to be environmentally friendly and must meet the required quality standards as stipulated in Regulation 109. Regulation 109 stipulates the processes and requirements regarding entities that plan, construct, and operate a WTE Plant (“WTE Operator”).

Selection of WTE Operators

Daya Anagata Nusantara Investment Management Agency (“Danantara”) - through its investment holding, operational holding, state-owned enterprises, and their subsidiaries - administers the selection of WTE Operators. Danantara is responsible for stewarding and managing state-owned enterprise assets.

The Minister of the Environment (“MOE”), in coordination with the Minister of Internal Affairs and the Minister of Energy and Mineral Resources (“MEMR”), will assess and designate any district or city (including the administrative city of the Special Capital Region of Jakarta, each a “Region”) that seeks to develop a WTE Plant. The outcomes of this assessment will be provided to Danantara, which will use them as the basis for conducting technical and economic studies and for identifying and selecting WTE Operators.

In general, the appointment of a WTE Operator is carried out through a competitive qualification process. Direct appointment is permitted only in exceptional situations prescribed under the framework. Where a competitive process does not yield any qualified participants, a cooperative arrangement between the Region and an interested investor may be pursued. The table below outlines the criteria and conditions for each approach.

Appointment Pathway	Criteria / Conditions
Competitive selection (default)	· WTE Plant technology must be proven, up-to-date, and environmentally suitable for waste type; · Demonstrated financial capacity and ability to meet investment obligations; · Relevant experience in waste-to-energy processing; and · Compliance with applicable provisions and sector standards
Direct appointment (exception)	· Only one qualified participant exists for the project; or · Waste emergency due to inadequate management leading to accumulation, pollution, environmental damage, or public health problems requiring immediate action; or · A WTE Plant developer was designated by a Region before 10 October 2025 and that designation has been terminated with final and binding effect.
Cooperation mechanism (contingency)	· No participants register or none of the participants are qualified; · MOE cooperates with the Region to identify an interested entity; · Entity submits a statement of investment interest to MEMR; · Region works with the entity on WTE Plant development; and · Cooperation formalised via a notarised cooperation agreement between Region and the WTE Operator.

Preconditions for WTE Plant development

A Region that intends to develop a WTE Plant must, among other things, satisfy a set of baseline commitments. These include:

Waste supply guarantee: The Region must be able to distribute at least 1,000 tonnes of waste per day to the WTE Plant throughout its operational lifespan.
Budget allocation: The regional government must allocate and realise funding for waste processing activities, including waste collection and transportation from source to the WTE Plant.
Land provision: The Region must provide land for waste management activities and for WTE Plant construction, and make such land available to the WTE Operator free of charge through a use-and-borrow mechanism for both construction and operational phases.
Supporting regulations: The Region must issue implementing regulations on waste management service charges.

Licensing

A WTE Operator must obtain and maintain a business licence through the Online Single Submission System (“OSS System”) throughout the lifecycle of the WTE Plant, including the pre-construction, construction, and operational phases. The business licence authorises the WTE Operator to supply electricity in the public interest and becomes effective once a power purchase agreement (“PPA”) has been executed between the State Electricity Company PT Perusahaan Listrik Negara (“PLN”) and the WTE Operator.

Environmental approval arising from an environmental impact assessment must be applied for through the OSS System. It will be issued within two months from the date the OSS System records receipt of a complete and accurate application. If this period lapses without a decision, the environmental approval will be deemed issued automatically.

Power purchase

Under the PPA, PLN purchases electricity generated by the WTE Plant from the WTE Operator at a fixed price of US$0.20 per kWh, regardless of plant capacity. This price is specified in the PPA and constitutes approval from MEMR. In limited circumstances, MEMR may reconsider this price. The tariff excludes the cost of electricity infrastructure provided by PLN.

The PPA is characterised by the following key terms:

Fixed price: The contracted tariff is non-negotiable, non-escalating, and applies once the WTE Plant is in the commercial production phase based on the schedule agreed in the PPA;
Take-and-pay: No fines or penalties apply if the minimum power requirement is not met due to technical issues beyond the WTE Operator’s control and insufficient waste supply of the Region; and
Grid access: Priority access to PLN’s network is provided in accordance with contracted annual energy.

PLN must sign the PPA within 10 working days of the WTE Operator fulfilling the licensing obligations required prior to construction. The PPA remains valid for 30 years from the commencement of commercial operations, and the WTE Operator is entitled to the proceeds from electricity sales to PLN.

Commercial operations

A WTE Plant may commence commercial operation once two conditions are met:

MEMR issues a Certificate of Operation Worthiness, confirming the plant’s fitness for operation; and
PLN and the WTE Operator sign minutes of commercial operation, which formally initiate the 30-year operational period.

During this period, the WTE Operator must construct, operate, and maintain the WTE Plant in accordance with applicable technical and environmental standards, and sell the generated electricity to PLN in accordance with the PPA. The operator must also implement pollution control measures and maintain environmental safeguards throughout the plant’s operation.

Incentives

The central government may grant fiscal and non-fiscal incentives to WTE Operators, including value-added tax exemptions. The VAT exemption applies where domestic technology is prioritised in the development and operation of the waste-to-energy processing system.

Existing WTE Plants

WTE Plants that were already in implementation before 10 October 2025, including where a Region has selected a developer or entered into a cooperation agreement or PPA, will continue to be governed by Regulation 35. If such pre-existing arrangements do not achieve one or more of the required outcomes (that is, converting waste into electricity, or significantly reducing waste volume or processing time), the earlier arrangements must be terminated before the project can proceed further. Once termination has taken effect, any continued development or commercial operation of the WTE Plant will be governed by Regulation 109.

Other forms of waste-to-energy plants

In addition to waste-to-electrical energy plants, Regulation 109 also addresses other methods of converting waste to energy:

Waste-to-bioenergy: A waste-to-bioenergy plant converts waste into energy in the form of biomass or biogas (“Bioenergy Plant”), which may be consumed locally or supplied to the public or industry as an alternative to fossil fuels. Operators of Bioenergy Plants are required to obtain a business licence via the OSS System. MEMR is expected to issue additional regulations governing the development and operation of Bioenergy Plants.
Waste-to-renewable-fuel-oil: A waste-to-renewable-fuel-oil plant (“Waste-to-Fuel Plant”) converts waste into liquid fuel that meets prescribed quality standards and can be used as a substitute for conventional fossil fuels. The resulting fuel may be used internally or supplied to power plants, the transportation sector, or other end-users. Operators of Waste-to-Fuel Plants must obtain a business licence by submitting an application through the OSS System. MEMR is expected to issue further regulations governing the operation of such plants.

Operators of Bioenergy Plants and Waste-to-Fuel Plants are required to obtain a business licence via the OSS System. MEMR is expected to issue additional regulations governing the development and operation of these plants. In addition, more regulations are expected in relation to the conversion of waste into other products.