Notes on the Development of Notes on the Development of Geothermal in IndonesiaGeothermal in Indonesia

Generating DialogueClean Energy, Good Governance, and Regulation Forum

Singapore, 16-18 March 2008

Asclepias Rachmi S. IndriyantoIndonesian Institute for Energy Economics

Geothermal DevelopmentGeothermal Development (1) (1)

Large estimated potential, low realization

Most of existing capacity was the result of PD 45/91, which targeted to develop 4500 MW

During the Asian Financial Crisis, various geothermal development contracts and price agreements were suspended.

They were later renegotiated or cancelled; eventually negotiation agreed on lower price; but still many projects are not progressing.

27,000 MW potential970 MW installed capacity

253 Identified field53 Ready for detailed

exploration & exploitation

Unexploited Geothermal Power Potential1,000 MW under private control3,000 MW under SOE

Around 50% are in geothermal fields currently producing electricity or with

confirmed reserves

Geothermal DevelopmentGeothermal Development (2) (2)

Recent progress:2003: Law 27/2003, the only RE governed by its own law2004: Geothermal Blueprint2005: Establishment of Directorate of Geothermal Enterprise

Supervision & Groundwater Management, to strengthen sector

management2006: Master Plan Study for Geothermal Power Development

in Indonesia (funded by JICA)2007: Exemption of import duties for geothermal exploration

equipments and exemption of taxes for exploration activities

But SOE are still facing significant hurdles, and low participation of commercial financing and private sector

Geothermal DevelopmentGeothermal Development (3) (3)

Challenges:– Economics:

• High initial costs to develop geothermal energy– Remote areas, limited infrastructure– Drilling deep wells

• Subsidized prices of fossil-based energy (petroleum fuels, and electricity mostly generated from fossil energy)

• Environmental benefits are not included in cost calculation– Regulations:

• Alignment of upstream and downstream regulations• Required set of implementation regulation for Law 27/2003• Alignment with Forestry regulation (national parks, boundary of

various forest categories, overlap uses)• Role of local government in geothermal undertakings• Procedure for tender & licensing• Incentive for research & development, improve capacity of local

contents• Road map & master plan on energy mix is not binding