Indonesia preparing new electricity tariff scheme for geothermal projects

Transmission lines in Tanjung Priok, Indonesia (source: flickr/ BxHxTxCx, creative commons)
Alexander Richter Alexander Richter 16 Oct 2016

The Indonesian government is preparing a new electricity tariff scheme for geothermal projects, with a sliding scale to determine final prices.

With the current pricing and tariff scheme for electricity generated by geothermal power plants, the Indonesian government has explored ways to improve the scheme how it prices geothermal over the past few months.

The country’s Ministry of Energy and Mineral Resources (ESDM) is now preparing a new pricing scheme for geothermal electricity. Once a Government Regulation on the Indirect Use of Geothermal is signed, the new rates could be legalised, said Director of Geothermal Yunus Saefulhak.

According to Yunus, the prices will be set using a sliding scale scheme. The tariffs are based on the potential of each work area, ranging from 5 MW to 250 MW, with the selling price starting at $0.14/ kWh.

“The Minister of Energy and Mineral Resources’ Regulation No.2014 (on the Purchase of Electricity Geothermal and Steam Power Plans) is quite effective. We have the best rates in the world,” said Yunus.

He estimated that until 2019, Indonesia’s geothermal power of about 1,600 MW could be sold at the new rate.

Initially the new feed-in-tariff was expected to be set to a fixed-rate scheme, aimed at avoiding protracted negotiation problems with post- tendering adjustments.

Under an early proposal predicted PPA Tariffs were to be selected after completion of a post-exploration Feasibility Study. In this way, issues related to pre- exploration tariff selection can be avoided (such as extended negotiation periods and impacts of less than anticipated resource size).

There have been two schemes so far … from 2012 (which has been quite unsuccessful) and a new 2014 regulation based on competitive tender process with ceiling price. Competitive tendering is based on pre-exploration resource data which led to prolonged tariff negotiations and often stalled development.

We have to see if the new scheme will take into account a variety of factors, including type of developer, project size, infrastructure cost, resource enthalpy, region, COD, cost assumptions etc.  In an initial proposal the new tariff was to be constrained by Ceiling tariffs as defined by regulation of 2014 (and based on ADB/ World Bank methods).

Source: Tempo