Evaluating Indonesia's Solar Policy Implementation Using System Dynamics Approach

Given its huge solar potential, estimated 207.8 GW, Indonesia has an ambitious target to achieve 45 GW in its renewable energy share by 2050. To scale up solar capacity in the energy mix target, the Indonesia government has implemented solar policies since 2013. However, rather than benefitting solar boom since its implementation, Indonesia continues to struggle with policy optimization. Inconsistency policy, unattractive pricing mechanism, low capacity installed, and unsynchronized policies are the symptomatic factors of ineffective policy implementation in Indonesia. Therefore, the extent of solar policy implementation soliciting Indonesia's energy mix target needs further evaluation. Using the system dynamics simulation, policymakers can explore dynamic correlations between policy variables to evaluate the efficacy of policies. This study assesses the effect of Power Purchase Agreement (PPA) price, government subsidy, and carbon tax on Indonesia's solar development. This study found that PPA price has the biggest contribution to solar installed capacity followed by government subsidy and carbon tax. However, the high PPA price offered in Minister Decree Ministry of Energy and Mineral Resources (MEMR) 04/2022 costs high government spending and high uncertainty due to the pricing mechanism. Meanwhile, in Presidential Regulation 112/2022, the new pricing mechanism might result in a reasonable solar capacity and less government spending. The proxy of the ceiling price gives opportunity to the government and the State Electricity Company (SEC) to optimize the government's surplus and the SEC's surplus. Further, its ceiling mechanism has a positive impact on the state budget and the SEC's financial condition.