Weakening currency to have impact on geothermal projects in Indonesia

Kamojang 5 geothermal project, Indonesia (source: PT. Rekayasa Industri, Rekind)
Alexander Richter 31 Mar 2020

The current market conditions due to the covid-19 situation will impact geothermal investment and development in Indonesia, last but not least due to a weakening of the local currency and the mismatch of the PPAs with the price to which PLN will sell electricity.

The Indonesian Geothermal Association (INAGA/ API) recently assessed the impact the current covid-19 situation and the weakening of the Indonesian rupiah could have on geothermal projects in Indonesia.

In a statement INAGA Chair Priyandaru Effendi said that both investors and PT PLN (as offtaker) will be affected by the situation.

“The weakening of the rupiah is certainly a big issue because the selling price of electricity from generators to PLN is in US dollars, while PLN sells electricity to the public in rupiah,” Priyandaru said in an interview with Kontan publication in Jakarta.

Priyandaru continued, this condition applies to all types of plants that sell electricity in US dollars. At the same time the fall in oil prices will also make it difficult to attract investments into geothermal in the short term.

Priyandaru explained that he hoped there would be a step taken by the government in encouraging geothermal development.

Previously, the Ministry of Energy and Mineral Resources planned to provide support through government drilling where geothermal exploration would be initiated by the government.

Priyandaru ensures, through this effort the risk borne by the developer can be minimized. In addition, there is an opportunity to create a lower selling price for electricity from geothermal power plants.

“The government must continue to make geothermal development attractive to investors. Give tariffs according to the economics of the project,” said Priyandaru.

The Indonesian Ministry of Energy and Mineral Resources (ESDM) is committed to see a continued annual increase in geothermal power generation capacity in the country. In 2020, it is targeted that there will be three new Geothermal Power Plants (PLTP) that will start commercial operation (with 2020 Commercial Operation Date, COD).

ESDM Ministry’s Geothermal Director Ida Nuryatin Finahari revealed that the three geothermal plants to come online in 2020 had a total capacity of 140 MW. The details are the Rantau Dadap PLTP of 90 MW, the Sorik Merapi 45 MW PLTP and the 5 MW Sokoria PLTP.

According to Ida, the three geothermal plants are scheduled for COD at the end of the year or around the third or fourth quarter of this year.” so Ida in a statement to last week.

Ida hopes that the capacity of stun from geothermal energy will continue to increase in order to support the 23% renewable energy mix by 2025. Meanwhile, the installed capacity of PLTP currently reaches 2,130.6 MW.

Source: Industri.Kontan