SECTOR REPORT: GEOTHERMAL
Geothermal growth driven by opportunities Indonesia is expected to overtake the US in leading the global geothermal power sector.
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espite milder growth in the global geothermal sector, Asia is slated to be one of the regions with the largest amounts of geothermal capacity installed over the coming decade alongside Central and Eastern Europe. Together, Fitch expects these regions combined to account for approximately 74% of the global total geothermal capacity additions between 2020 and 2029. However, geothermal growth will be driven by only a few key markets— particularly in Indonesia—as these resources are restricted to tectonically active areas, and remain fairly dispersed across regions. Incoming geothermal giant Indonesia is expected to overtake the US to become the largest geothermal market globally by 2022, with its geothermal capacity projected to rise from an estimated 2.1GW in end-2019 to 3.6GW by 2029. The country is situated in Southeast Asia at the intersection of many tectonic plates, giving it considerable geothermal potential, but most of its potential reserves remain unexplored. The main geothermal plants are spread
Many government policies are helping investors explore reserves of geothermal energy in Indonesia.
across Java, North Sumatra, and North Sulawesi, constituting less than 3% of the total installed generation capacity. Expanding the geothermal industry is said to be a key priority for the Indonesian government given the vast potential for geothermal power generation in the country, estimated at about 28GW, the baseload nature of the resource and continued elevated power demand across the country. Just in 2019, Indonesia added about 185MW, following the 135 MW installation in 2018. The Indonesian government has set a target of 23% renewable energy in the energy mix by 2025, meaning that its geothermal power capacity is expected to reach 7GW by 2030. “Many government policies and resolutions are helping to explore reserves of geothermal energy. Approximately 80% of the country’s geothermal reserves are in conserved forests, and the development of projects in these areas requires a presidential decree,” said Ankit Mathur, GlobalData's Practice Head of Power. According to IEEFA analysts, theseis includes changing regulations i.e. geothermal energy is not categoriszed
Asia is expected to have a significant amount of geothermal capacity installed over the coming years 20 ASIAN POWER
as part of the mining sector, hence giving it a better playing field when applying for forestry use permits. Aside from these, the Ministry of Energy and Mineral Resources is also looking to complete a regulation on electricity tariffs and geothermal drilling and exploration by the end of this year to mitigate some of the risks and encourage more investments into the sector. “The implementation of the country’s feed-in tariffs (FiT) for geothermal is expected to offset the high capital costs associated with geothermal production and promote more investment in the region and is considered a successful initial move for the geothermal sector,” said Mathur. Under its “Roadmap for Geothermal Resources,” Indonesia pursues a strategy of managing geothermal work areas (GWAs) selected by private companies and offers unique tax incentives for the geothermal industry. The programme provides incentives for the private sector to use certified emission reductions (CER) to raise carbon revenue. GlobalData estimates that the country will represent around 60% of the new installations in the APAC
