Heating up geothermal energy market in Indonesia

Heating up geothermal energy market in Indonesia Jakarta, Indonesia (source: flckr/ fidzonflickr, creative commons)
Alexander Richter 2 Oct 2015

Indonesian geothermal market is heating up with several projects moving ahead, increased international interest by both governments and investors and dire energy demand ... this despite current market challenges.

Having seen a lot of attention in the news over the past few years, Indonesia’s geothermal ambitions are very well publicised. This also applies to the fact that Indonesia is in dire need of power generation development.

To fuel an ever increasing demand of power, Indonesian would need to add up to 7,000 MW in power generation capacity … and this per year. So far it only seems to manage to add around 1,000 MW. Therefore ambitious plans of adding up to 9,000 MW in geothermal power generation are maybe not as surprising.

In 2010, hosting the World Geothermal Congress in Bali, Indonesia was expected to become the next big geothermal market for developers, suppliers and international geothermal consultants. Things did though not pick up throughout 2010-2014. Now, things seem to change and I experienced first hand at the recent Indonesian International Geothermal Conference that big companies are moving forward on projects, both private and government-owned development. The Sarulla project, one of the largest geothermal power projects is being developed, Pertamina Geothermal is continuing development of several projects, development banks are ready to step in to finance projects, international investors and developers actively pursue development opportunities.

It is also interesting to see  how different nations are lining up to get involved. There are several initiatives from various countries to help Indonesia develop renewable energy capabilities and projects, all also aimed at opening the Indonesian market for the countries’ suppliers. There is a Dutch-Indonesian geothermal capacity building program, the German government is supporting similar efforts on a broader basis, there is a Swedish-Indonesian Sustainable Energy Initiative, the New Zealand geothermal sector is quite active with support from its government, etc. etc. But there are also lots of efforts done by larger corporations to keep or set a foot in the door. Some are holding specialised “innovation forums”, such as Fuji Electric recently, others are setting up shop in Indonesia.

So there seems to be a certain dynamic in the renewable energy space in Indonesia. For geothermal it is now all about fulfilling promises and make sure that government reforms to the geothermal market are implemented, applied and working.

Today though, Indonesia is challenged by falling commodity prices and a slowing down in GDP growth, this is partly due to government bureaucracy, hampering regulations and other uncertainties. Recent news report though that Indonesia is trying to tackling the situation making foreign investment easier by streamlining regulation and permitting, e.g. for allowing geothermal development in forest areas.

One has to be cautious though as a lot of the challenges named over the years have been addressed again and again, but with limited – perceived – improvements.

But – and this is shown by the Sarulla project – things are looking good and international players being aware of its challenges, see Indonesia as a great opportunity not only for business opportunities but also for lifting the standing of geothermal energy in the global context.