Indonesia introduces regulatory framework for hybrid power plants
Indonesia has formalised its regulatory framework for hybrid power plants under Minister of Energy and Mineral Resources Regulation No. 19 of 2025 on Hybrid Power Plants (“Regulation 19”), effective 29 December 2025.
Regulation 19 is intended to support the deployment of hybrid configurations via a network of independently operating power plants connected to local distribution systems to supply electricity to communities on small islands or in remote and isolated areas (“microgrid”). By providing regulatory clarity in this space, Regulation 19 seeks to facilitate greater integration of renewable energy into isolated and off-grid systems.
For these purposes, a hybrid power plant (“HPP”) is defined as a facility that integrates renewable energy generation with other generation technologies and/or battery energy storage systems, operating concurrently at a single grid connection point.
Permissible hybrid configurations
Regulation 19 allows integrating a renewable energy plant with at least one of the following:
- Other renewable energy power plants, including photovoltaic, wind, hydropower, and biomass power plants;
- New energy power plants, such as hydrogen power plants;
- Battery energy storage systems; and
- Operating non-renewable energy power plants, such as diesel power plants or other power plants that use diesel fuel.
Compliance
When developing an HPP, the responsible entity (“entity”) must ensure that the electric power grid operates safely and reliably in accordance with the laws and regulations in the electricity sector. To this end, HPP installations must comply with Indonesian national and/or international standards.
Power purchase
Direct selection scheme
Indonesia’s State electricity company (PT Perusahaan Listrik Negara (“PLN”)) purchases power from HPPs via a direct selection scheme. Priority is given to clusters of power plants within the microgrid. PLN publishes a list of eligible entities every three months or whenever necessary. Eligible entities can participate in the selection scheme by submitting bid documents, which will be evaluated and assessed against administrative, technical, and financial requirements.
If only one entity submits a bid, the selection process is declared unsuccessful and repeated; if only one entity bids in the repeat process, the purchase will continue.
The direct selection scheme must be completed, and the power purchase agreement (“PPA”) signed, within 180 calendar days from the date of the direct selection announcement.
Power purchased from HPPs must be governed by a PPA between the successful bidder and PLN.
Pricing mechanism
The power purchase price payable to the entity is calculated at the connection point between the plant’s electrical equipment and the power distribution system, where the plant busbar is located, and excludes the costs of electricity network facilities. Electricity network facility costs are agreed between the entity and PLN and capped at 5% of the power purchase price; amounts above this require approval from the Minister.
Eligible entities may submit bids to PLN within the benchmarked price range set by ministerial decision, which establishes the upper and lower limits. PLN will purchase power from the lowest bid within this range, and the process must be conducted transparently and fairly, without any special privileges to any participant in the process.
The power purchase price is subject to the following provisions:
- Negotiation within the upper and lower price limits;
- No escalation during the PPA period;
- Approval by the Minister as the applicable price; and
- Consideration of location factors, as stipulated in the ministerial decision.
The price is valid from the commercial operation date, when the power plant begins delivering electrical energy to PLN’s network, and will be evaluated every two years, or whenever necessary, by considering the average PLN contract price and market assessment.
Payment for purchase transactions must be made in Rupiah using the Jakarta Interbank Spot Dollar Rate exchange rate at the time agreed in the PPA.
Transitional policies
From 29 December 2025, the power purchase price must be the price agreed between the parties, provided that (i) the procurement process has been completed, (ii) the price has been agreed upon by the entity and PLN, and (iii) the price has not yet been approved by the Minister. This applies if the agreed price is below the basic cost of electricity from the local diesel power plant used as a reference during the procurement process.
If the agreed price exceeds the reference diesel power cost, power purchase from HPPs for that location will be cancelled.