Indonesia's new feed-in tariffs (FITs) for renewable energy present a conundrum. Will renewables flourish or fade in the new revenue environment? Investors will not welcome the lower tariffs under the new regime, but state utility PLN may be encouraged to sign power purchase agreements that are now more affordable.
The new regime is a cap on what PLN may pay, but not (after negotiation, price bidding or PLN's unilateral tariff determination) what PLN will actually pay. This is not the feed-in tariff investors typically seek, where a known, fixed, cost-based amount is offered in quota batches.