Indonesia: Designing FITs to Align with Specific Subnational Circumstances and Development Goals

The cost to generate and provide electricity in Indonesia varies greatly by location due to the remote locations of populations across the country’s many islands. Additionally, there are regions in the country where electrification rates are as low as 30 percent, such as in Papua (APEC 2013). To address the cost differences and the goal to increase electrification rates, Indonesia designed its FIT with different rates based on the location of the project. In regions where it is least expensive to generate electricity currently (e.g., Java and Bali), the FIT is approximately 50% lower than the FIT in Papua, where electricity costs are higher. Indonesia provides a strong example of a country harnessing the flexibility of FIT design to support varying circumstances and development goals at the subnational level.