ADB sees pricing as factor in slowing geothermal development in Indonesia

ADB receiving the award for the Rantau Dedap financing, June 2019 (source: The Asset)
Alexander Richter 21 Feb 2020

The financial viability of geothermal projects due to the pricing scheme and regional caps, is a challenge and has slowed development in Indonesia, so the Asian Development Bank. But promising development is under way and the bank seems overall optimistic for development.

In an interesting interview with Winfried Wicklein, country director for Indonesia at the Asian Development Bank (ADB), the Oil & Gas Yearly covers a lot of details related to the energy market in Indonesia, including geothermal energy.

The interview covers challenges for the economy, the current state of the banking system and leverage of it in leading energy development in Indonesia, the strategy of ADB in the country’s energy market, the renewable energy benchmark, trends for the hycrocarbon market, but also geothermal energy.

Commenting on the state of geothermal development in Indonesia and the role of the banking sector in supporting geothermal development, Mr. Wicklein highlights the never ending topic of complexity and risk in exploration.

ADB has been supporting geothermal development in Indonesia, namely in participating in the financing of the 330 MW Sarulla geothermal project, the 80 MW Muara Laboh plant (inaugurated this week), the 90 MW Rantau Dedap project, to go online this year. ADB is also working with state-owned companies to help them develop designated geothermal areas quickly and as effectively as possible.

ADB describes that geothermal development has slowed in the past 12-18 months, mostly due to pricing as a key factor.  “Depending on location, current electricity pricing caps linked to the average generation cost would impact the financial viability of projects, especially in the renewable energy space.”

The bank though is hopeful as there are some promising development as it relates to financing. The launched de-risking mechanism for geothermal project by the World Bank and the Green Climate Fund through PT SMI, will help de-risk geothermal projects and make them more attractive to investors.

For the full interview see link below.

Source: The Oil & Gas Year