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Indonesia still facing challenges with its push for geothermal development

Darajat Unit I owned by Indonesia Power (a PLN subsidiary) with steam supplied by Chevron (source: wienblog-growingtree/ blogspot)
Alexander Richter 10 Jul 2012

A recent report of WWF looks into the Indonesian geothermal energy market, ongoing development, challenges and estimates for development and capacity coming online over the next couple years.

A new report released on the Indonesian geothermal energy market by WWF provides not only a great overview on current issues in geothermal development in the country, but also provides somewhat realistic estimates on development over the coming years.

The country currently has an installed capacity of 1,196 MW of power generation capacity, representing about 4 percent of the country’s total resources and reserves. So while the government had set a target of 3,9767 MW to be developed by 2014, the more realistic number is likely to be 1,700 MW by 2014, 2,750 MW by 2020 and 4,000 MW by 20125. (all are electric generation caapcity).

This would mean an increase of 57 percent by 2015 and 129 percent by 2020, clearly not close to the ambitious targets set by the Indonesian government.

The total geothermal resources and reserves for Indonesia are estimated at 28,994 MW.

Still the importance of geothermal as a source of energy for the country is immense, given rising oil prices and a growing and increasingly energy hungry economy.

In its executive summary, the WWF highlights a few facts on why there still are some roadblocks for development in the country.

In this the risk involved in the electricity market , particularly the ongoing pricing disagreements between the government and the state-owned electricity company. So while price increases might be necessary, the the debt position of PLN is a huge concern for projects wanting to finance based on a PPA signed with PLN. So there have been continuous discussions about state guarantees.

Grid capacity is another critical element in this context. Other issues such as exploration risk and cost is a common problem not only in Indonesia.

On the policy side, Indonesia has supported geothermal relatively well, but there are some inconsistencies in its drive for renewables while continuing subsidies and incentives for fossil fuel based energy generation.

Overall many of the challenges named are similar in other geographical areas with geothermal development, but need to be addressed to speed up development.

Source: WWF Report Executive Summary (pdf)