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Indonesia experiences hick-ups in development on pricing issues

Indonesia experiences hick-ups in development on pricing issues Wayang Windu Unit II, West Java, Indonesia (source: Aecom)
Alexander Richter 22 Oct 2010

Indonesia's extensive geothermal power program is currently facing some hick-ups based on pricing issues with the state power firm, which leaves private developers in a limbo.

Reported from Indonesia, “the country’s government’s ambitious geothermal power program remains caught up on pricing issues with the state power firm, leaving 10 private developers who have been issued licenses by the Energy and Mineral Resources Ministry in limbo.

The program is likely to miss its 2014 deadline as none of the developers have concluded so-called power purchasing agreements (PPAs) with the sole buyer in the program — state power firm PT Perusahaan Listrik Negara (PLN).

The government targets to generate around 3,967 megawatts (MW) of geothermal power under the program by the end of 2014. Of that total, 3,627 MW would be generated by private developers and 340 MW through a combination of resources between state oil and gas company PT Pertamina and PLN.

As of April this year, the government had issued licenses to 10 private developers to develop 37 geothermal fields.

“The 10 companies cannot start drilling at the fields as they have not signed PPAs with PLN yet. This is worrisome as the primary program may fail due to this problem,” said Suryadarma, chairman of the Indonesian Geothermal Association (API), on Thursday.

The projects under the 10 private developers have the potential to bring in around US$12 billions in investment.

“We are actually ready to spend around $1.2 billion on our two projects, but as we have not signed the PPA yet, our current activities are still very minimal,” Supramu Santosa from Supreme Energy — one of the 10 licensed companies — said.

He said negotiations with PLN over the PPA had not begun.

Both Supramu and Suryadarma said they were baffled as to why PLN was reluctant to begin the negotiation process. “We are told that PLN still needs the go-ahead from the government,” he said.

The ceiling price for power purchases from geothermal plants is set at 9.7 US cents per kilowatt hour. Efforts to contact PLN about the PPAs went unanswered.

Indonesia has 28,000 MW of geothermal energy potential reserves, which accounts for 40 percent of the world’s geothermal potential energy. But the country currently utilizes around 1,100 MW or 4.2 percent of that potential.

The geothermal fields, whose exploration rights have been awarded to the companies, include the Jaboi field in Aceh, awarded to a consortium led by PT Bukaka Teknik Utama; the Sorik Marapi field in North Sumatera, awarded to a consortium of Tata Power and Origin Energy; the Muara Laboh field in West Sumatera and the Gunung Rajabasa in Lampung, awarded to PT Supreme Energy; the Jailolo field in Halmahera, awarded to Star Energy; the Sokoria field in Flores Island, awarded to Bakrie Power; the Tangkuban Parahu field in West Java, awarded to PT Indonesia Power; the Cisolok field in West Java, awarded to PT Rekayasa Industri; the Tampomas field in West Java, awarded to PT Wijaya Karya; and the Ungaran field in Central Java, awarded to PT Golden Spike Energy Indonesia.”

Source: The Jakarta Post