New Bill Opens Room for Geothermal Power Development in Indonesia

In the plenary session on Tuesday, all factions within the DPR agreed to endorse a new geothermal bill to replace Law No. 27/2003. This law was the main obstacle for geothermal power development in Indonesia as it lawfully defined geothermal exploration as a 'mining activity’, which implies that it is prohibited to be conducted in protected forest and conservation areas (Law No. 41/1999), despite the fact that geothermal mining activities only have a small impact on the environment (compared to other mining activities). However, with about 60 percent of Indonesia's geothermal energy being located in soil beneath protected forest and conservation areas, it is thus prohibited to be extracted. The new bill now separates geothermal activities from other mining activities.

The passing of the new bill is an indication that the Indonesian government and parliament have fully realized the potential of geothermal energy for power generation in the world’s 16^th largest economy and the world’s fourth most populous country after China, India and the USA. The bill was first proposed by Indonesian President Susilo Bambang Yudhoyono to the DPR on 13 August 2013.

Deputy Speaker of the DPR Pramono Anang was quoted saying “Hereby, we agree to pass the geothermal bill into law.” The country’s Minister for Energy and Mineral Resources Jero Wacik was glad to see the passing of the bill as it will support further expansion of geothermal projects, particularly as the country has abundant geothermal resources. Development of geothermal power is important because this relatively environment friendly energy source (derived from the earth's inner heat) can partly replace Indonesia’s traditional dependence on fossil fuels as sources of power. Currently Indonesia mainly uses oil and coal to fire power plants. Particularly imports of expensive oil burden the financial balance sheets of the country (resulting in major pressures on the government budget balance and the current account deficit).   

The geothermal power market has grown rapidly in recent years, particularly in emerging markets where - amid economic growth - more and more people need to be connected to the electricity grid. Moreover, geothermal power is relatively cheap and clean. Although exploration costs and the capital cost of geothermal plants are higher than plants that run on fossil fuels, production costs for geothermal plants are low compared to the fossil fuel-fired plants.

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