Geothermal in Indonesia with new regulation
By: Tasnim Ilmiardhi
By: Tasnim Ilmiardhi
Increased economic growth and increasing population of Indonesia has led to an increase in energy demand, but the increase in energy demand is not matched by energy supply. Availability of fossil energy resources dwindling and can not be updated, and can cause environmental problems.
Total installed capacity of power plant is almost 30,000 MW. Average growth of energy consumption is 7% per year. The fossil fuel is still fulfill energy national demand until now, but the reserves are progressively decreasing. These situations have forced to perform two things, efficiency in the use of fossil fuels and find out new alternatives energy which are relatively cheaper and environmentally friendly.
There needs to be an increase in the utilization of renewable energy, particularly geothermal as power generation. Utilization of Geothermal as a powerhouse into are very strategic in supporting national energy security. Utilization of electricity generated from geothermal power plants are cross administrative boundaries. In the long run the price of electricity generated from geothermal more competitive and more reliable when compared with electricity generation from fossil. Indonesia sees the need and focus on doing the utilization of geothermal energy as the fulfillment of national and provides support for the national economy more competitive in the global economic competition.
Indirect used as power generation. The implementation Geothermal Direct Use of Local Governments divided according to their authority. In order to accelerate the development of geothermal energy to meet national needs, the Government in addition given the authority to conduct Preliminary Survey and Exploration also given the authority to do Exploitation and Utilization.
Additionally, Geothermal is environment friendly energy in the utilization few elements that produce a negative impact on the environment or remain within the limits of applicable regulations. Utilization of Geothermal is the utilization of clean energy that can reduce greenhouse gas emissions.
Geothermal in Indonesia
- Indonesia have potential on geothermal energy around 29 GW (28,617 MW) as the largest geothermal resources in the world, distributed in 299 locations along the country, only less than 5% have been utilized. Total installed capacity of geothermal energy is 1,341 MW, in position #3 after U.S with installed capacity of 3,039 MW and Philippines 1,904 MW.
- Government of Indonesia targeted an additional 4,925 MW installment of geothermal power plant in 10,000 MW Fast Track Electrification Program Phase II. This program to support ‘Energy Vision 25/25’, targeted in 2025 the energy utilization based on new and renewable energy 17% of total national energy mix. Geothermal targeted to contribute 5.7% or about 9,500 MW in 2025.
No
|
ISLAND
|
TOTAL LOCATION
|
POTENTIAL / ENERGY (MW)
|
TOTAL
|
INSTALLED
CAPACITY
|
||||
RESOURCES
|
RESERVE
|
||||||||
Speculative
|
Hypothetical
|
Possible
|
Probable
|
Proven
|
|||||
1
|
Sumatera
|
90
|
3089
|
2427
|
6849
|
15
|
380
|
12760
|
122
|
2
|
Jawa
|
71
|
1710
|
1826
|
3708
|
658
|
1815
|
9717
|
1134
|
3
|
Bali-Nusa Tenggara
|
28
|
360
|
417
|
1013
|
0
|
15
|
1805
|
|
4
|
Kalimantan
|
12
|
145
|
0
|
0
|
0
|
0
|
145
|
|
5
|
Sulawesi
|
65
|
1323
|
119
|
1374
|
150
|
78
|
3044
|
80
|
6
|
Maluku
|
30
|
545
|
97
|
429
|
0
|
0
|
1071
|
|
7
|
Papua
|
3
|
75
|
0
|
0
|
0
|
0
|
75
|
|
Total
|
299
|
7247
|
4886
|
13373
|
823
|
2288
|
28617
|
1336
|
|
12133
|
16484
|
||||||||
TOTAL :
28617
|
|||||||||
*source: Geological Agency of Indonesia Dec 2012
Policies
Government of Indonesia makes Geothermal as one of the agenda in program 10.000MW Phase II and targeted an additional 4,925 MW installment of geothermal power plant.
Constraints
There are several obstacles in geothermal development, including:
1. Investment Risk
Geothermal has a high investment risk, both technical and non-technical risks.
• technical risks in the form of technology risk, construction risk, environmental risk, operating risk and management, as well as the possibility of not finding geothermal energy sources (small reserves that do not meet the economic value).
• The risk of non-technical form on the market and price changes, the risk of legal certainty and government policies, as well as the risk of exchange rate changes and inflation.
2. The value of large investment
Geothermal energy development is capital intensive activities and technologies, so it takes a significant investment.
3. The value of the economic
A high level of risk and the value of large investment, requiring careful calculations in determining the economic value. The price offered in the Power Purchase Agreement / Energy Sales Contract, still does not meet the economic value expected by the business Geothermal energy.
4. Few business enthusiasts.
A high level of risk, investment and economic value is not appropriate, applicants blocking efforts in the field of geothermal energy.
There are several obstacles in geothermal development, including:
1. Investment Risk
Geothermal has a high investment risk, both technical and non-technical risks.
• technical risks in the form of technology risk, construction risk, environmental risk, operating risk and management, as well as the possibility of not finding geothermal energy sources (small reserves that do not meet the economic value).
• The risk of non-technical form on the market and price changes, the risk of legal certainty and government policies, as well as the risk of exchange rate changes and inflation.
2. The value of large investment
Geothermal energy development is capital intensive activities and technologies, so it takes a significant investment.
3. The value of the economic
A high level of risk and the value of large investment, requiring careful calculations in determining the economic value. The price offered in the Power Purchase Agreement / Energy Sales Contract, still does not meet the economic value expected by the business Geothermal energy.
4. Few business enthusiasts.
A high level of risk, investment and economic value is not appropriate, applicants blocking efforts in the field of geothermal energy.
Policies
Government of Indonesia makes Geothermal as one of the agenda in program 10.000MW Phase II and targeted an additional 4,925 MW installment of geothermal power plant.
Target for Geothermal Power Plant Development
10,000
MW Fast Track Electrification Program Phase II
|
|||
1
|
Development on Existing Area (production)
|
:
|
465
MW
|
2
|
Development on Existing Area (not yet
in production)
|
:
|
1535
MW
|
3
|
New Development Working Area
|
:
|
2925
MW
|
Total
Development
|
:
|
4925 MW
|
|
To achieve the targets of the program, estimated to need more than US$ 14 billion for the investment requires to development of 4,925 MW electricity from Geothermal in 10,000 MW Fast Track Electrification Program Phase II up to the year 2014. Indonesian government to invite and provide an opportunity for private businesses / private investors, domestic and foreign, to come to invest in the development programs of electric power supply to meet the rising demand / load electric power and energy diversification program.
In an effort to address the constraints and challenges in the development of geothermal energy, the Indonesian government has done some things that are considered necessary and were able to reduce these constraints. The Government of Indonesia intends to enhance the investment climate for the geothermal sector ini Indonesia. To achieve these objectieves, the Government of Indonesia has made various efforts as follow:
1. Improvement and harmonization of regulation in geothermal business
The Indonesian government has made the Law No. 21 of 2014 on Geothermal which replaces Law No. 27 of 2003 on Geothermal to answer the challenges in the development of geothermal energy. The Act provides the legal basis for measures updates and realignment activities Geothermal. This law is expected to provide legal certainty to the Geothermal sector actors in a balanced and non-discriminatory.
2. Permit process
The Government of Indonesia coordinating with all relevant parties, to accelerate and simplify the permit process in geothermal business
3. Tariff dan economical value
In order to encourage the utilization of geothermal in national electricity supply, the Government of Indonesia has made and improvement on geothermal energy price structure through Feed in Tariff (FIT) mecanism. This mecanism will be expected to reduce the main obstacle in geothermal development related to price uncertainly that usually requiresa long time for negotiation.
Besides making new laws, the Indonesian government also issued Decree EMR regarding electricity rates of geothermal power plants (PLTP). Determination of rates per kWh will depend on when the project will undertake the operation of commercial (commercial operation date / COD), in the sense that the purchase price of geothermal power by a certain year. In addition, the tariff depends on the location of the geothermal working area (WKP).
4. Fiscal incentives, incentives on financing, market support incentives
The Government provides incentives in the form of:
- Minister of Finance Decree No.3/2012 on Geothermal Facilities Fund (GFF). GFF is given to the Local Government, holder of the Geothermal Mining Business Permit.
- Minister of Finance Decree No. 21/PMK.011/2011 on Taxation and Customs Incentives for Utilization of New Renewable Energy Sources Activities
- Minister of Finance Decree No. 139/PMK.011/2011 on Procedures for PT PLN (Persero) Feasibility Guarantee for the Development of Power Plant Using Renewable Energy, Coal and Gas through Energy and Mineral Resources for People Welfare Partnership with the Private Power Developer.
5. Geothermal Fund
The Government of Indonesia has provided ‘Geothermal Fund’ for geothermal exploration to reduce risk that may exist in early stages and also to increase the bankability of a certain geothermal project.
6. Government Guarantees
In Geothermal development, the government has guaranteed the feasibility of state electricity company. (PLN). The Government has issued Decree No. 22 of 2012 EMR on Assignment to PT PLN (Persero) to purchase electricity from geothermal power plants and the reference price of electricity purchased by PT PLN (Persero) of geothermal power plants.
7. Mechanism of Independent Power Producer (IPP)
In its use as a Geothermal power plant, will use the mechanism of Independent Power Producer (IPP), as a form of cooperation Business to Business to business owners geothermal with PT PLN (Persero) to participate in the development of geothermal energy to fulfill national electrical energy.
8. Human Resources
The Government of Indonesia improving the ability, competency and profesional of human resources through training, short cources and advanced level education in collaboration with local and international education institution.
Conclusion
6. Government Guarantees
In Geothermal development, the government has guaranteed the feasibility of state electricity company. (PLN). The Government has issued Decree No. 22 of 2012 EMR on Assignment to PT PLN (Persero) to purchase electricity from geothermal power plants and the reference price of electricity purchased by PT PLN (Persero) of geothermal power plants.
7. Mechanism of Independent Power Producer (IPP)
In its use as a Geothermal power plant, will use the mechanism of Independent Power Producer (IPP), as a form of cooperation Business to Business to business owners geothermal with PT PLN (Persero) to participate in the development of geothermal energy to fulfill national electrical energy.
8. Human Resources
The Government of Indonesia improving the ability, competency and profesional of human resources through training, short cources and advanced level education in collaboration with local and international education institution.
Conclusion
- To fulfill current shortage in electricity supply while anticipating the growing electricity demand and considering reducing use of fossil fuel and greenhouse gas emission, development of new and renewable energy must be accelerated and fully supported by all the stakeholders involved
- Government of Indonesia targeted an additional 4,925 MW installment of geothermal power plant in 10,000 MW Fast Track Electrification Program Phase II.
- More than US$ 14,000 millions for the investment requires to development of 4,925 MW electricity from Geothermal in 10,000 MW Fast Track Electrification Program Phase II up to the year 2014
- The development plan of MW Geothermal Power Plant up to the year 2025, supports are needed.
- To accelerate geothermal energy development, overall economic incentives system needs to be improved, which includes further reforming energy prices so that they reflect true market prices. Geothermal energy prices should be bankable to improve its access to fund and consider project risk, which will be different in each location.
- Stimulate commercial financial institutions to support renewable energy including geothermal and also formulate financial instruments that can reduce resource risk and accelerate Indonesia’s geothermal energy development.
- Reduce exploration and other early stage development risks by improving completeness and reliability of exploration data and implementing risk-mitigation measures.
- Coordinating efforts between business, government, education institutions and civil society to ensure geothermal development in Indonesia
- Providing regulatory input to the government that is transparent and streamlined to ensure development
- Coordinate and support capacity building programs that includes core capacity building for the geothermal industry and also for supporting industries and institutions which includes government, finance institutions, NGOs
- Assist in introducing an accreditation program for geothermal expertise, work with government agencies and educational institutions to stimulate geothermal research.(*)
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