In support of Indonesia’s efforts to strengthen energy resilience through renewable energy development, the Ministry of Energy and Mineral Resources (“MEMR”) has enacted Regulation No. 5 of 2025 (“MEMR Reg No. 5/2025”), which replaces the previous MEMR Regulation No. 10 of 2017 on the Key Provisions of Power-Purchase Agreements (“PPAs”). The new regulation has been in effect since March 2025. While existing PPAs signed prior to this regulation remain valid until their expiration, any extension of those agreements must comply with the new regulatory framework.
MEMR Reg No. 5/2025 introduces several significant changes. It adds new mandatory provisions that must be included in PPAs, such as requirements on the use of domestic products, carbon economic value and environmental attributes, refinancing terms, and the use of specific language in contract documents. It also introduces the concepts of “deemed dispatch” and “deemed commissioning” under which PT PLN—the state-owned electricity company—is obliged to make payments to power plant developers (“PPL”) for power supplied under certain conditions, even if not dispatched or commercially operated.
The new regulation expands flexibility for share transfers, particularly to accommodate step-in rights by lenders in the event of default by a PPL. It also formalizes the dispute resolution timeline by stipulating a 30-day deliberation period to reach an amicable agreement, and a further 150-day period for resolution involving appointed experts.
Additionally, the regulation introduces provisions relating to fuel supply, governance of intermittent renewable energy sources, and enhanced guidance and supervision mechanisms. One of the more notable developments is the removal of the 30-year cap on PPA duration, which now allows for extended contract periods depending on project needs.
The regulation also shifts away from the previously mandated build-own-operate-transfer (BOOT) model, allowing instead for build-own-operate (BOO) or other agreed construction and operational structures. Unlike its predecessor, this regulation eliminates the three-stage project implementation guarantee mechanism. Instead, it now requires PPLs to submit a project implementation guarantee to PT PLN equal to a maximum of 10% of the total project cost, due on the effective date of the PPA.
In addressing delays to the Commercial Operation Date (“COD”), the regulation imposes a limit of 180 calendar days for acceptable delays. If a PPL fails to achieve COD within that timeframe, PT PLN has the right to terminate the PPA—marking a significant departure from the more restrictive termination rules under the previous regulation. The regulation also allows PT PLN to purchase power exceeding the contracted availability and capacity factors, provided that the purchase price does not exceed 80% of the agreed PPA price and aligns with local need requirements.
Notably, MEMR Reg No. 5/2025 also revokes the incentive scheme intended to accelerate COD, thereby releasing PT PLN from the obligation to pay such incentives to PPLs.
These developments signal the government’s continued push toward a more adaptive, investor-responsive, and renewable-focused energy framework—balancing commercial certainty with national energy objectives.