Indonesia will establish an auction system to boost its solar power sector, an official from the Energy and Mineral Resources Ministry has announced.
Successful parties will be given a 20-year contract to sell the power to state utility firm Perusahaan Listrik Negara, the ministry’s director of new energy and renewables Alihuddin Sitompul told Bloomberg.
Developers will bid at a discount on the US$0.25kWh feed in tariff (FiT) level set by the government earlier this year, he said.
In April the ministry revealed a total of 172.5MW of capacity would be up for tender.
Bidders will be expected to complete projects within 18 months of the auction.
No further details of the first auction were given.
Indonesia’s high economic growth means the country will need an additional 2.7-3.4GW of capacity in the coming years and has set itself the ambitious target of generating 25.6% of its electricity from renewable sources by 2025 and 39.5% by 2050.
The government also hopes the auction system will encourage foreign private investment, lower greenhouse gas emissions and improve access to electricity in the country above the 64.5% level recorded by the World Bank in 2009.
The auction system has worked well in other large emerging economies in Brazil, India and South Africa and has helped nations avoid the spiralling costs associated with subsidy regimes in several European countries.
The cost of solar energy in India has fallen by around 40% in the last three years according to Bloomberg New Energy Finance.
The country’s solar PV power market is expected to grow at 10.5% a year while the government also invests US$103 million in 36 public-private projects, according to Subha Krishnan, a research analyst with Frost & Sullivan.