Local municipalities to soon profit from geothermal operations in Indonesia

Local municipalities to soon profit from geothermal operations in Indonesia Patuha geothermal plant, Bandung, Indonesia (source: ESMAP)
Alexander Richter 21 Jun 2016

Local governments in Indonesia will soon be able to receive a share of the profits from geothermal operations in their region, with new legislation to be implemented in July 2016.

Local governments in Indonesia have been trying to get access to some of the profits derived from geothermal operations in their communities and it now seems like this is going to happen.

The Indonesian government has entered the final stages of drafting a regulation on the bonus from geothermal production for local governments, which is expected to be implemented next month.

“The Energy Minister, Finance Minister, Home Affairs Minister, and the Coordinating Minister for the Economy have all agreed. We now only have to wait for the president’s approval,” Yunus Saefulhak Director of Geothermal Energy and Mineral Resources, told Tempo Monday, June 20, 2016.

The bonus and profit portions for local governments will be given based on the sales percentage between geothermal developers and the central government. The calculation is based on power units (kilowatt hours/kWh). For thermal power sales and purchase agreements (SAPs), the profit share is 1.0 percent and for electricity SAPs the share is 0.5 percent.

Yunus said areas that are eligible for a share of the revenues are cities and regencies—not provinces. If a work is located in more than two regencies/cities, the production bonus will be divided according to the area size.

Yunus said the policy will lower non-tax revenues from the geothermal sector. This year, the non-tax revenue target is set at just Rp630 billion, below last year’s Rp882 billion.

Abadi Purnomo, chairman of the Indonesian Geothermal Association, agrees with the production bonus concept proposed by the government. Before it is applied, however, he asks the government to increase the sales tariff of geothermal power, because a production bonus scheme will change power plants’ cost structure, especially those that are already in operation.

Source: Tempo