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More consistent use of policy could drive geothermal development in Indonesia

Drilling rig on site at Sorik Marapi, Indonesia (source: KS Orka)
Alexander Richter 14 Mar 2017

Despite a pickup in geothermal development in Indonesia, a more consistent approach to use of policies and implementation of incentives could help spur geothermal development further.

Unfavourable legislative framework and policies have been a big obstacle for helping the geothermal sector in Indonesia to grow as planned by the government. With various efforts over the past 6 or so years, Indonesia has taken a big leap into creating more favourable policy frameworks that actually could help to grow geothermal development activities in the country. But analysts are still seeing various obstacles.

Development in the country has not lived up to expectations and incentive schemes created are seen as still being insufficient to mitigate high exploration risk for geothermal projects … and there continue to be obstacles for the private sector pushing development.

“Recognising the potential, the Indonesian government has introduced various incentives to try to encourage development. If the relevant public authorities made full use of such incentives and implemented them consistently in a way that mitigated key private sector risks, they could make a real difference,” says Marius Toime, partner at Berwin Leighton Paisner. “However, political and bureaucratic tensions often get in the way of effective administration, and sponsors may be discouraged by exploration risks, complex regulations and inadequate feed-in tariffs.”

It seems though that higher tariffs are not necessarily the only remedy needed, and analysts see the need for an acceleration of the issuance of licenses and permits, according to the article in Asia Power yesterday.

Compared to the dire state of development progress made, things have though seen a upswing with several projects now being built and see start of operations this year. More than 200 MW are expected to come online in 2017 and more is in the pipelines. So things have progressed, but there still seems to be room for improvement to make the sector more attractive for investors to further spur development.

Source: Asian-Power