T H E G E O T H E R M A L N E W S P A P E R , T H AT B R I N G S Y O U C A R E F U L LY S E L E C T E D N E W S F R O M T H I N K G E O E N E R G Y. C O M
Edition 02/ 2018
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Sarulla geothermal plant, North Sumatra, Indonesia (source: Ormat)
Geothermal Development in Indonesia After years of delay in development, are things kicking off for real this time? Indonesia, ranked as the fourth most populous country in the world, is projected to be among the top five strongest economies, alongside China, the United States, India and Japan in 2050. The anticipated economic growth is the result of the rise of the middle-income population coupled with overall population growth and extensive increase in the workforce expected to occur in 2025 – 2035. This growth will lead to growing purchasing power and expected increase in quality of life. With that, electricity demand is expected to surge and is projected to triple between 2015 to 2030. To anticipate and accommodate for the economic growth and corresponding electricity demand, infrastructure development
Small-scale Geothermal Development, geothermal plant, Beppu, Japan (Photo: ElectraTherm)
is the key highlight of the national budget allocation. With diverse and abundant natural energy resources, Indonesia often faces the paradox of choice in maximizing the trade-offs in the energy supply. The fossil-fuel sector is more mature than the renewable energy sector, and this often leads to modifications and adjustments in policies and regulations to optimize and support the development within this sector. Increasing awareness and global pressure for a cleaner future pushes Indonesia to strive for sustainable growth and development of its renewable energy sector. The country has set itself the goal to achieve 23% of renewable energy use by 2025, and to reach 31% by 2050. But there are competing forces, with the upcoming presidential election in 2019. With a current emphasis on low electricity prices, renewable energy sector in Indonesia faces an uncertain immediate future. However, it is clear that Indonesia has to maximize its national energy potential, where particularly the geothermal sector should be well positioned. With approximately 40% of the world’s geothermal reserve estimated to be found in Indonesia, there is a development potential of up to 29GW in geothermal power generation capacity. So far only 5% of the reserve potential has been tapped, leaving a huge opportunity for the geothermal sector. Geothermal installed capacity is targeted for 7,200 MW by 2025, which translates to doubling the share of geothermal in Indonesia’s energy mix from 4.4% in 2016 to 8%.
IGC Turkey 2018 – Geothermal Conference, Turkey (Picture: JeotermalHaberler)
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Currently, state-owned companies dominate the development of geothermal energy. This is one of the biggest barriers of growth as it makes the entry for private players more difficult. State-owned entities, such as PT Pertamina Geothermal Energy, PT Geo Dipa Energi and the newly established PT PLN Geothermal (subsidiary of PT PLN*) are leading developers, while a large number of private sector players such as Star Energy, Supreme Energy, Medco and other international players are working on projects or have just entered the market. The smaller pool of private sector players represents today about 1,200 MW of installed capacity in comparison to roughly 700 MW installed capacity by the state-owned companies. Nonetheless, state-owned companies have constructed more power plants with smaller installed capacity than the private sector firms. Regardless of the approach of the different players, overall development of new projects will remain relatively volatile. While there continue to be a lot of barriers and challenges for geothermal development, the general perception of the market is positive and there is careful optimism. This is highlighted by an improved collaboration between ministries in Indonesia, both national and international Independent Power Producers (IPPs), as well as PT PLN to expedite project development. PT Sarana Multi Infrastruktur (PT SMI), established in 2009 to facilitate “infrastructure financing as well as preparing project and serving advisory for infrastructure projects in Indonesia” is to play a more important role on geothermal development in the coming years. It works with international donors, such as the World Bank to support development in Indonesia. Indonesia has attracted multimillion USD investments from large multinational development banks, such as the Asian Development Bank, World Bank and others. Supportive regulations and policies, and the awareness for the potential, coupled with the steady stream of investment are all the necessary pillars to reach the government’s goal of 7,200 MW installed geothermal power generation capacity in 2025. There are some uncertainties on the feasibility of this goal. Continued dialogue between all stakeholders, implementing successful projects and further research and development are required. Further geothermal growth though requires a stable policy framework and favorable pricing schemes, as well as support and more efficient and timely negotiations on PPA deals. *also referred to as PT PLN GG (Gas and Geothermal)
EGEC European Geothermal Market Report 2017 (Photo: Exergy)