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Prices paid to IPPs for geothermal power to increase in Indonesia

Prices paid to IPPs for geothermal power to increase in Indonesia Darajat Unit I owned by Indonesia Power (a PLN subsidiary) with steam supplied by Chevron (source: wienblog-growingtree/ blogspot)
Alexander Richter 16 Apr 2014

New regulation will increase prices paid to geothermal independent power producers with a range of $0.11 to $0.29 per kWh.

Reported here before, the Indonesian government continues with its plans to increase prices paid to IPPs for geothermal power.

As reported today by the Jakarta Globe, Indonesia’s “Energy and Mineral Resources Ministry plans to offer higher prices for electricity produced by geothermal power plants, in a move to attract more investors and make geothermal projects more bankable.

According to a regulation issued by the ministry in 2012, state utility firm, Perusahaan Listrik Negara must sign long-term contracts to pay independent geothermal power producers between 10 cents and 18.5 cents per kilowatt hour — a pro-renewable energy policy mechanism known as Feed-In Tariff.

Ridha Mulyana, the director general for new and renewable energy at the ministry, said that the government will reintroduce auctions for geothermal energy station opportunities.

Under the auction scheme, the government can pick out winners for such projects depending on the merits of proposals submitted to the government.

He also said that the ministry is finalizing the new regulation on geothermal energy pricing policy, expected to be out this month, but that the government had already calculated the new price range for geothermal energy.

“The electricity price from geothermal energy will range between 11.5 cents and 29 cents per KwH,” he said on Monday in Jakarta. The director general said that the new pricing policy was based on a recommendation from the World Bank.

“The World Bank recommended the price of geothermal energy should range between 12 cents to 30 cents per KwH.”

Ridha added that the new price range will be effective until 2025.

The government will permit contractors who recently won the right to build geothermal projects based on the old pricing scheme to “return” the projects to the government and participate in re-auctioning. Contractors who have already begun work can continue with their project and renegotiate for better price with PLN, Ridha added.

Indonesia is home to around 40 percent of the world’s geothermal potential, amounting to an estimated 27,000 megawatts — but as of 2013, geothermal energy only accounted for 2.89 percent of total installed capacity.

The government has set an ambitious target in which renewable energy must account for 23 percent of Indonesia’s energy mix, with geothermal alone expected to contribute 12 percent.

PLN estimates that Indonesia will need investment worth at least $77.3 billion to add another 13,000 megawatts of renewable energy to the country’s supply by 2021.

Geothermal projects have been slowed by forestry law which means geothermal power plants are banned in conservation areas.

The government is currently moving to revoke the ban in order to enable more renewable energy development.”

For a chance to learn more on Indonesian development, don’t miss out on the Indonesia International Geothermal Convention & Exhibition, taking place June 4-6, 2014, Jakarta, Indonesia.

Source: The Jakarta Globe