Legal development

Indonesia issues hybrid power tariff framework

July 23, 2026

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    Introduction 

    Indonesia has taken a further implementing step to provide a regulatory framework for the purchase of electricity from hybrid power plants with the issuance of Ministry of Energy and Mineral Resources Decree No. 264.K/EK.01/MEM.E/2026 on Guidelines for the Implementation of the Purchase of Electricity from Hybrid Power Plants ("MEMR 264/2026"), which was enacted on 24 June 2026. MEMR 264/2026 is an implementing regulation of the earlier MEMR Regulation No. 19 of 2025 on Hybrid Power Plants ("MEMR 19/2025") which was enacted late last year.

    MEMR 264/2026 fills in a key missing piece left by MEMR 19/2025 in setting out the benchmark tariffs and location factors to be used for the purchase by PLN (the national utility) of electricity from hybrid power plants located on Small-Scale [Grid] Systems.

    The lag in issuance of a clear framework on the tariff for hybrid power plants has impacted a number of PLN procurements of hybrid-based power projects, and it is hoped that the decree will now set a clear basis to allow for these procurements to proceed to PPA execution and construction.

    What are hybrid power plants and why are they important to Indonesia?

    Given the scattered nature of Indonesia's geography and grid (being the world's largest archipelago with limited inter-island power connectivity), hybrid power plants (i.e. renewable energy generation units which are coupled/combined with battery energy storage systems ("BESS") and another type of generation technology (including diesel)) are an important technology to support the acceleration of renewable energy utilization in the national energy mix, in providing renewable-based baseload power as an alternative to the thousands of small diesel engine generation units which currently power small islands and isolated grids across the vast Indonesian archipelago. 

    Scope of the framework

    The scope of the Decree and benchmark power purchase price framework covers plant configurations consisting of:

    The decree applies mainly to the purchase by PLN of electricity from qualifying hybrid power plants, but may also be used as a reference by other business entities holding electricity business areas (wilayah usaha) when purchasing electricity from hybrid power plants1.

    Both MEMR 264/2026 and MEMR 19/2025 do not seem to impose a general minimum or maximum installed capacity threshold for hybrid power plants falling within the purchase and tariff framework2.  Pursuant to Article 6(1) of MEMR 19/2025, the purchase of electricity may be carried out from the specified hybrid configurations for all power generation capacities. In relation to this, the capacity ranges reflected in MEMR 264/2026 operate only as tariff bands rather than eligibility thresholds, with different benchmark prices applying for different levels of capacity.

    Instead, the hybrid power purchase framework appears to be limited by grid type in that MEMR 19/2025 only regulates Hybrid Power Plants in "Small-Scale Systems" that combine renewable energy power plants with renewable energy, new energy, BESS and/or already-operating non-renewable energy power plants3.

    Small-Scale System4 is defined as an independently operating power generation network connected to a local distribution network to provide electricity to communities living on small islands or in isolated areas. In other words, the regime is primarily directed at small-scale, isolated or local distribution systems rather than conventional large interconnected grid systems.

    Benchmark tariff regime

    In line with the direction set in MEMR 19/2025, the benchmark purchase prices reflected in Appendix I of MEMR 264/2026 consist of a highest benchmark price and a lowest benchmark price and are determined based on the type and capacity of hybrid power plants. Please refer to Appendix 1 to this article for the detailed benchmark prices for each qualifying category of hybrid plant.

    A summary of the proposed benchmark tariff ranges per technology is set out in the table below:

    ConfigurationHighest benchmark price snapshot
    PV solar + BESS47.23 x F to 49.63 x F USD cents/kWh, depending on capacity
    Hydropower + PV solar10.03 x F to 10.40 x F USD cents/kWh, depending on capacity.
    PV solar + hydrogen + BESSLocal diesel generation basic cost of supply. 
    PV solar + biomass18.57 x F to 20.23 x F USD cents/kWh, depending on capacity
    Biomass + PV solar + BESS20.25 x F to 24.43 x F USD cents/kWh, depending on capacity
    Wind + PV solar + BESS29.00 x F to 31.00 x F USD cents/kWh, depending on capacity.
    PV solar + BESS + diesel22.91 x F to 38.27 x F USD cents/kWh, depending on capacity and renewable energy mix level.
    Diesel + hydrogen + BESSLocal diesel generation basic cost of supply

     

    The relevant tariff ranges per hybrid configuration to be used as highest and lowest tariff for a specific project is then subject to the applicable location factor, except where the benchmark is based on the local diesel generation cost of supply. The location factor is determined based on the cost of local generation and infrastructure or diesel fuel delivery constraints. This is consistent with the approach taken in the earlier general renewable energy tariff framework under Presidential Regulation No. 112 of 2022.

    The initial list of location factors of the tariff framework are stipulated in Appendix II of MEMR 264/2026 (and reflected as Appendix 2 to this article).

    The actual purchase price for a qualifying hybrid plant

     

    Priority areas for deployment of hybrid power plants

    MEMR 264/2026 also identifies certain factors that should guide the prioritization of hybrid power deployment. Pursuant to the decree, the use of hybrid power plants should be prioritized for areas by considering the following factors5:

    • local new and renewable energy potential;
    • local generation basic cost that is much higher than the national generation basic cost;
    • infrastructure and diesel fuel delivery constraints; and
    • the efficiency, type, and age of diesel power units which are in operation in such areas.

    Transitional provisions

    MEMR 264/2026 came into effect on the date it was stipulated, i.e. 24 June 2026. 

    As the decree is an implementing directive of MEMR 19/2025, it should be read together with the transitional provisions of that earlier regulation. Pursuant to Article 22(1) of MEMR 19/2025, for procurements of hybrid projects which had been completed with a tariff agreed between the relevant bidder and PLN, but which was still pending ministerial tariff approval, when MEMR 19/2025 came into force (i.e. 29 December 2025), the so-agreed price could be used and reflected in the relevant PPA if it was below the local diesel generation basic cost serving as the procurement reference. On the other hand, if the agreed purchase price exceeded that local diesel generation basic cost, the procurement and electricity purchase for the relevant project (/plant location) must be cancelled - which in practice could mean that the procurement process and/or PPA in relation to such project / location would need to be cancelled and potentially started afresh. In practice, we understand that the local diesel generation basic cost can be difficult to determine or support, which has led to uncertainties in the sign-off of tariff approvals of projects which potentially fell within the transitional period. Therefore, the more detailed benchmark pricing framework introduced by MEMR 264/2026 should now provide a much clearer basis for procurements and tariff discussions between PLN and IPPs appointed to develop hybrid power projects.

    Conclusion

    MEMR 264/2026 is a narrow but critical piece of the regulatory framework applicable to the procurement of hybrid power plants on small grid systems. It translates the conceptual pricing references contemplated under MEMR 19/2025 into concrete benchmark tariffs and location multipliers, and therefore provides a much-needed practical reference framework for PLN and other business-area holders purchasing electricity from hybrid power plants.

    Authors: Frédéric Draps, Partner and Rachelia Jumanti, Associate.

    1. This is consistent with Article 21 of MEMR 19/2025, which provides that the provisions on purchasing electricity from hybrid power plants may be used as a reference for electricity purchases by business entities holding business areas other than PLN.

    2. This is consistent with confirmation received from officials at the Directorate General of Electricity (MEMR), during a consultation session, that the determinative criterion for classification as a Small-Scale System under Article 1(2) of MEMR 19/2025 is geographic and based on the function of side grid system (i.e., whether the system serves communities on small islands or in isolated areas), rather than a capacity threshold. As this confirmation was obtained verbally and has not been formalized in writing, it should not be treated as a definitive or binding statement of the Ministry's position.

    3. Article 2(1) of MEMR 19/2025.

    4. Article 1(2) of MEMR 19/2025.

    5. Second Dictum of MEMR 264/2026.

    Appendix 1

    Benchmark Purchase Prices for Electricity from Hybrid Power Plants by Type and Capacity

    PV solar + BESS

     No.  Capacity Highest Benchmark Price (USD cents/kWh)  Lowest Benchmark Price (USD cents/kWh)
     1. Up to 1 megawatt-peak (MWp) 49.63 x F  49.63 x 0.8 x F
     2.  More than 1 MWp up to 3 MWp   49.35 x F  49.35 x 0.8 x F
     3.  More than 3 MWp up to 5 MWp   48.76 x F  48.76 x 0.8 x F
     4.  More than 5 MWp up to 10 MWp   47.87 x F  47.87 x 0.8 x F
     5.  More than 10 MWp  47.23 x F  47.23 x 0.8 x F

     

    Hydro + PV solar

     No.  Capacity  Highest Benchmark Price (USD cents/kWh)    Lowest Benchmark Price (USD cents/kWh)
     1.  Up to 5 megawatts (MW)  10.40 x F  10.40 x 0.8 x F
     2.  More than 5 MW  10.03 x F  10.03 x 0.8 x F

     

    PV solar + hydrogen + BESS

    The benchmark prices use:

     Benchmark Price  Applicable Formula
     Highest Benchmark Price  Local diesel generation basic cost of supply
     Lowest Benchmark Price  0.8 of the local diesel generation basic cost of supply

     

    PV solar + biomass

     No.  Capacity  Highest Benchmark Price (USD cents/kWh)    Lowest Benchmark Price (USD cents/kWh)
     1. Up to 1 MW   20.23 x F  20.23 x 0.8 x F
     2. More than 1 MW up to 5 MW   19.31 x F  19.31 x 0.8 x F
     3.  More than 5 MW  18.57 x F  18.57 x 0.8 x F

     

    Biomass + PV solar + BESS

     No.  Capacity  Highest Benchmark Price (USD cents/kWh) Lowest Benchmark Price (USD cents/kWh) 
     1.  Up to 5 MW  24.43 x F  24.43 x 0.8 x F
     2.  More than 5 MW  20.25 x F  20.25 x 0.8 x F

     

    Wind + PV solar + BESS

     No.  Capacity Highest Benchmark Price (USD cents/kWh)   Lowest Benchmark Price (USD cents/kWh) 
     1.  Up to 5 MW  31.00 x F  31.00 x 0.8 x F
     2.   More than 5 MW  29.00 x F  29.00 x 0.8 x F

     

    PV solar + BESS + diesel power units with a renewable energy mix of more than 70% up to 95%

     No.  Capacity  Highest Benchmark Price (USD cents/kWh) Lowest Benchmark Price (USD cents/kWh)  
     1.  Up to 1 MWp   38.27 x F  38.27 x 0.8 x F
     2.  More than 1 MWp up to 3 MWp   36.29 x F  36.29 x 0.8 x F
     3.  More than 3 MWp up to 5 MWp   36.15 x F  36.15 x 0.8 x F
     4.  More than 5 MWp up to 10 MWp   35.64 x F  35.64 x 0.8 x F
     5.  More than 10 MWp   35.42 x F  35.42 x 0.8 x F

     

    PV solar + BESS with diesel power units with a renewable energy mix of more than 50% up to 70%

     No. Capacity Highest Benchmark Price (USD cents/kWh) Lowest Benchmark Price (USD cents/kWh)  
     1.  Up to 1 MWp   35.89 x F  35.89 x 0.8 x F
     2.  More than 1 MWp up to 3 MWp   34.31 x F  34.31 x 0.8 x F
     3.  More than 3 MWp up to 5 MWp   33.59 x F  33.59 x 0.8 x F
     4.  More than 5 MWp up to 10 MWp   31.62 x F  31.62 x 0.8 x F
     5.  More than 10 MWp   31.61 x F  31.61 x 0.8 x F

     

    PV solar + BESS with diesel power units with a renewable energy mix of more than 30% up to 50%

     No. Capacity  Highest Benchmark Price (USD cents/kWh)   Lowest Benchmark Price (USD cents/kWh)
     1.  Up to 1 MWp  29.61 x F  29.61 x 0.8 x F
     2.  More than 1 MWp up to 3 MWp   26.61 x F  26.61 x 0.8 x F
     3.   More than 3 MWp up to 5 MWp   25.74 x F  25.74 x 0.8 x F
     4.  More than 5 MWp up to 10 MWp  24.97 x F  24.97 x 0.8 x F
     5.   More than 10 MWp   22.91 x F  22.91 x 0.8 x F

     

    Diesel power units + hydrogen + BESS

    The benchmark prices are based on:

     Benchmark Price  Applicable Formula
     Highest Benchmark Price  Local diesel generation basic cost of supply
     Lowest Benchmark Price  0.8 of the local diesel generation basic cost of supply

     

    Appendix 2

    Location Factors (F)

    No.   Region  Location Factor (F) for 
    All Capacities
     
     1.  Java, Madura, and Bali  1.00
     Small Islands  1.10
     2.  Sumatra  1.10
     Riau Islands  1.20
     Mentawai  1.20
     Bangka Belitung  1.10
     Small Islands  1.15
     3.  Kalimantan  1.10
     Small Islands  1.15
     4.  Sulawesi  1.10
     Small Islands  1.15
     5.  Nusa Tenggara  1.20
     Small Islands  1.25
     6.  North Maluku  1.25
     Small Islands  1.30
     7.  Maluku  1.25
     Small Islands  1.30
     8.  All of Papua  1.50

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