Experts on Indonesia’s Targets for Geothermal Power

Friday, 12 March 2010

The Jakarta Globe

As Indonesia prepares to host an international conference on geothermal energy next month, experts are questioning whether the government will be able to meet its ambitious target to boost the amount of electricity generated from geothermal sources.

Around 2,500 technical experts, officials and investors from 80 countries will attend the World Geothermal Congress, to be held in Bali from April 25-30.

Bambang Setiawan, the Energy Ministry’s director general of coal, mineral and geothermal energy, said on Thursday that the conference was an excellent opportunity to attract global investors to the country’s geothermal sector. “We hope to attract up to $12 billion of investment at the congress,” he said.

That is the estimated amount needed to build enough plants to generate an additional 3,997 megawatts of electricity from geothermal sources, as planned during the second phase of the government’s “fast-track” electricity generating program, which has a targeted completion date of 2014.

However, energy experts have expressed doubts that the government would be able to attract that level of investment, or build the plants by that target date.

Crucial to the achieving the goals is the price that state electricity company PT Perusahaan Listrik Negara will pay the companies for the electricity generated from the plants. The government has set a recommended price of 9.7 cents per kilowatt hour.

Herman Darnell, a member of the National Energy Council, said this price is too low for power companies to make sufficient returns, particularly in “greenfield” areas where there is now no geothermal development taking place.

“It will depend on the location, but for greenfield developments, the government may need to subsidize exploration costs if the power price is to be pegged at 9.7 cents,” he said.

Bambang said PLN and the Indonesian Geothermal Association were still in the process of negotiating a price per kilowatt hour. “We hope they will conclude [talks] soon,” he said.

Bambang Praptono, a member of the electricity committee of the Indonesian Chamber of Commerce and Industry (Kadin), said the government would struggle to meet its 2014 deadline for the development of geothermal power plants.

A former director of planning and technology at PLN, he said it typically took four to seven years to get a geothermal plant up and running.

Because of the higher costs of building a geothermal plant, as opposed to a fossil-fuel plant, companies would need financial guarantees from the government before they could raise the necessary funds, he said. (The Jakarta Globe)