In the heart of Southeast Asia, Indonesia is making bold strides towards a greener future, and a recent study by Surya Budi Ariyadi from Universitas Indonesia is shedding light on the path forward. The research, published in the Indonesian Journal of Infrastructure Development, delves into the economic and technical challenges of integrating large-scale solar photovoltaic (PV) systems into the national grid, offering a roadmap for policymakers and investors alike.
The study, which evaluates 10 MW grid-connected solar PV systems, reveals a stark contrast between two scenarios: one without a Battery Energy Storage System (BESS) and one with. The findings are clear: without BESS, the project boasts an impressive Internal Rate of Return (IRR) of 21.30%, making it a highly feasible venture. However, when BESS is included to reduce grid reliance, the IRR drops significantly to 5.89% due to the higher costs associated with energy storage.
Ariyadi emphasizes the importance of policy interventions in making solar PV projects more attractive. “Combining carbon tax and tariff adjustments can significantly improve the feasibility of these projects,” he says. The study shows that such measures can achieve a Profitability Index (PI) of 1.00 and an IRR of 14.74%, making the inclusion of BESS more viable. Additionally, competitive auction schemes further lower costs, enhancing the feasibility of BESS projects.
The research also highlights the risks associated with capital cost increases, which could jeopardize the economic viability of solar PV projects without BESS. For BESS projects, the study underscores the necessity of policy interventions such as auctions and incentives to make them commercially viable.
This study is a wake-up call for the energy sector, demonstrating that while solar PV is economically viable, strategic measures are needed to accelerate its adoption. As Indonesia continues to decarbonize its power systems, the insights provided by Ariyadi’s research will be invaluable in shaping future developments. Policymakers and investors can use these findings to scale up renewable energy deployment effectively, paving the way for a more sustainable energy landscape in Indonesia and beyond. The research was published in the Indonesian Journal of Infrastructure Development, which translates to the Civil and Structural Infrastructure Development Journal.
