The state electricty company, PT Perusahaan Listrik Negara (PLN), has initiated the PLN diesel replacement programme in a concerted effort to meet government’s target of 23 per cent renewable energy out of the total energy mix by 2025. The programme aims to reduce electricity production costs as well as to transform PLN into a modern power utility with environmentally-friendly electricity generation. The policy framework is critical for PLN to guarantee its projects are reliable, do-able and affordable from the regulatory perspective. Thus the MENTARI Policy Strand initiated this study to identify and resolve the issues around the power purchase agreement for solar PV hybrid systems. This study investigates how the solar PV hybrid regulatory framework for power purchase agreements and terms can be drawn up in advance.