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Government needs to do more to boost investment into geothermal in Indonesia

Rantau Dedap Drilling Equipment (Source: Supreme Energy Website)
Alexander Richter 2 Nov 2018

The geothermal industry in Indonesia is sceptical on government claims on the success of making geothermal energy development an attractive investment in Indonesia and asks for more support.

In an opinion article published in the Jakarta Post yesterday, the claim by the Government of Indonesia that it has had great success making geothermal energy a champion of investment in the renewable energy sector of Indonesia, is largely criticised by industry.

Companies working on geothermal energy are sceptical to say the least claiming that no real significant progress has been made after many years, despite the large 330 MW Sarulla geothermal project having come online. Event that project has taken over 20 years if not more to be developed.

The Chairman of the Indonesian Geothermal Association (INAGA) Prijandaru Effendi stated that the now claimed success took more than 30 years to achieve.

“We started in 1980 with a 30 MW geothermal power plant installed in Kamojang [West Java], and after 38 years we only have around 2,000 MW installed geothermal power generation capacity. Do you think that is fast enough?” he expressed his disappointment ito The Jakarta Post this week.

Turkey alone has added 1,300 MW over the past decade alone.

Based on data on renewable energy development from the Institute for Essential Services Reform (IESR), Indonesia only showed 4.5 percent of growth in its renewable energy capacity, while Thailand achieved 9.8%, Malayisa 10.7%, China 15.4%, and Myanmar 15.5%.

Indonesia is planning to become the largest producer of geothermal energy, according to Rida Mulyana, renewable energy director general at the Energy and Mineral Resources Ministry, ahead of the Philippines and the United States based on installed geothermal power generation capacity.

As we reported, investment into geothermal energy development in Indonesia, contributed around 60-65% of Indonesia’s renewable energy investment, yet reached only $800 million as of September 2018, around 70% of the target for 2018 of $1.2 billion.

With an additional 95 MW to come online this year, Indonesia could nearly reach the full year target of 2,058 MW. The current installed capacity is 1,948 MW.

The industry is asking for efforts to help boost investment into geothermal energy development. Furthermore the value of a project should be ensured in accordance with the risk taken by the developers. PLN should also provide certainty when purchasing electricity from geothermal plants.

In his statement to the Jakarta Post, Prijandaru was referring to a stipulation in a power purchase agreement (PPA) with PLN that the state company would only sign an electricity purchase deal after developers had conducted costly exploration activities, hinting that such a situation created uncertainty in business planning.

“Currently, there is only a pre-transaction agreement [PTA] with PLN that is not [legally] binding,” he said. “Ideally, a PPA should be agreed before developers disburse their money to conduct exploration, which is expensive.”

According to official data, only 30 of a total of 70 PPAs in renewable energy projects signed by the government last year actually reached financial close, while the remaining projects face difficulties obtaining necessary funding.

The ministry continues to promote an upcoming auction for five geothermal working areas (WKP) with a total potential capacity of 784 MW. The five WKPs are WKP Lainea in Southeast Sulawesi, WKP Sembalun in West Nusa Tenggara, WKP Telaga Ranu in North Maluku, WKP Kotamobagu in North Sulawesi and WKP Bora Pulu in Southeast Sulawesi.

The ministry’s geothermal director Ida Nuryatin said currently PLN was preparing PTAs for the five WKPs, adding that three of them had been offered to the state company, which showed no interest in developing the projects.

Source: The Jakarta Post