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Indonesian geothermal legislation expected to pass this month

Taman Hutan Raya Bung Hatta, Solok, West Sumatra, Indonesia (source: flickr/ Daniel Wilder, creative commons)
Francisco Rojas 11 Jun 2014

The "Draft Bill" will incorporate provisions to establish an attractive power purchase price scheme for geothermal project investors including feed in tariffs.

A new piece of legislation emitted by the Indonesian Government on Geothermal, known as the “Draft Bill” will be passed this month before the previously set target of 1 July 2014. Represented by Jero Wacik, the Minister of Energy and Mineral Resources, the Government has said that the Draft Bill will help with the current national power deficit by encouraging the construction of geothermal power plants.

“Prospective investors will surely always calculate the power purchase price so they can adjust investment costs. By providing an attractive feed in tariff scheme, this will surely stimulate investment flows,” said Mr. Wacik.

The Geothermal electrical supply is quite small considering that the country has avast amounts of geothermal potential. Records from the ESDM showed that until May 2014 Indonesia only produced geothermal electricity totaling 1,300 MW from a potential geothermal resource estimated at 28,000 MW.

Tisnaldi, Director of New and Renewable Energy at the ESDM, admitted that the low power purchase prices for geothermal energy remains one of the biggest challenges to the development of geothermal reserves. The fact that geothermal projects are a costly investment needs to be supported by appropriate power purchase prices.

“Geothermal electricity projects are more expensive than coal-driven electricity projects. It costs approximately USD 8 million to USD 9 million for one geothermal well,” explained Mr. Tisnaldi.

To address this issue, Mr. Tisnaldi informed that the Government is currently drafting three regulations. In addition to creating an attractive power purchase price, these regulations will also provide provisions on the involvement of foreign private entities in geothermal investments and transparency for geothermal project auctions.

Source: Hukum Online Website