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Indonesia preparing move to fixed-price geothermal feed-in-tariff

Drilling rig at Sarulla project, Indonesia (source: Sarulla Operations)
Alexander Richter Alexander Richter 11 Aug 2016

Indonesia is preparing a move to a fixed-price geothermal feed-in-tariff to help boost development, as previous tariff mechanisms did not create sufficient drive for geothermal development in the country.

With geothermal development still lagging behind government plans, the government in Indonesia is now preparing a change to its feed-in-tariff mechanism to help boost development.

Having gone through several changes throughout the past few years, this change actually could have a big impact.

Since the feed-in-tariff (FIT) for geothermal was introduced in 2012, there has been an alternating system between a ceiling tariff and a fixed tariff model.

In 2014, a competitive tender process was introduced again with a ceiling price set for the electricity tariffs.

None of the FIT elements really brought the great interest and boost in development activities, particularly as the latest process was based on resource data before drilling and was not taking into account development cost and economic factors, like location, closeness to the grid etc.

In conjunction with the 4th Indonesia International Geothermal Convention & Exhibition in Jakarta, Indonesia, the Energy and Mineral Resources Ministry’s geothermal director Yunus Saefulhak said the feed-in tariff mechanism was better economically in facilitating geothermal developers as this new tariff regime adopted a fixed-price system. In a fixed-price system, energy suppliers do not have to negotiate with state-owned electricity firm PLN as the power-off taker.

He further said the feed-in tariff mechanism aimed to assist power plants with capacities ranging between 5 to 220 Megawatts (MW) and accommodate tariff variables.

Yunus said the ministry, along with a consortium of researchers consisting of Arup, Japan International Cooperation Agency (JICA) and geothermal engineers, was currently studying the feed-in tariff scheme.

Arup has submitted a final report and we are now evaluating it,” Yunus said. He further said the government had made some innovative breakthroughs in the geothermal sector by harmonizing regulations and removing geothermal from the list of mining activities. The government has also improved the structure of geothermal transactions, he went on to say.

“We have simplified geothermal business permit request procedures by establishing a one-stop service and giving fiscal incentives for geothermal development such as a tax allowance and import duty facility,” he said.

Source: The Jakarta Post