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Indonesian government sets time limits for development of stalled projects

Indonesian government sets time limits for development of stalled projects Sacred Journey from the Sea to the Mountains, Lake Beratan, Bedugul, Bali, Indonesia (source: flickr/ januartha, creative commons)
Francisco Rojas 10 Jun 2014

The government sets a deadline for PPA's that will apply to new and old projects, yet the latter have to meet special requirements. Indonesia is actively trying to bring new investors and develop geothermal energy through several incentives.

As posted in our website the previous week, the Indonesian ministry has issued a new regulation regarding the ceiling price for new geothermal projects ranging from 11.8 US cents to 29.6 cents as part of the government’s program to attract more investors.

From the Jakarta Post, they reveal that under the regulation, the ceiling price will be applicable to new projects. Existing developments can also be adjusted with certain requirements.

According to a presentation delivered in a geothermal conference in Jakarta last week, ongoing geothermal development projects were asked to seal PPAs with the buyer of electricity (state electric company PLN) produced from geothermal plants on a given date.

The ministry’s geothermal director at the renewable energy directorate general, Tisnaldi, said Dec. 31 would be the deadline for developers to sign a PPA with the electricity price offered in the tender.

“Then, developers will conduct exploration and feasibility studies, in which they will establish the real cost. If the feasibility studies find that the PPA price is not economical, a price adjustment can be carried out but the cost must be audited. So, price negotiations [with the ceiling price regulation in place] will be after the studies,”
Tisnaldi said.

If the developers fail to meet the deadline, they will miss the chance to adjust the electricity rate under the ceiling price plan.

Paul Mustakim of Chevron Geothermal, whose projects of Gunung Ciremai and Suoh Sekincou have deadlines for Oct. 31 and Dec. 31 respectively, said the company still had time to work on the agreements.

The government has been trying to encourage more geothermal projects. To date, 58 geothermal working areas have been offered, but only nine of them are already in operation while the remainder are in progress or are stalled for various reasons including prolonged PPA negotiations, permits related to the usage of conservation or protected areas and resistance from local residents.

Energy subsidies are a big portion of the state budget. This year’s electricity subsidy is set at Rp 71.4 trillion ($ 6 billion) in the state budget and is planned to be revised higher to Rp 107 trillion under the revised state budget as a consequence of the weakening rupiah exchange rate and higher price of crude oil.

Source: Jakarta Post