Geothermal Energy Indonesia: Great Potential, Low Utilization
Indonesian Vice President Jusuf Kalla has high hopes for the development of renewable energy, such as geothermal energy, in Indonesia. Given that fossil fuels are exhaustive and dirty, clean and renewable energy sources are the future. Therefore, Indonesia should make more use of its huge geothermal energy potential. Southeast Asia's largest economy is estimated to contain 40 percent of the world's total geothermal reserves. However, it only utilizes 5 percent of its geothermal energy capacity.
At the 4th Indonesia Geothermal Convention & Exhibition (IIGCE), held between 10 - 12 August 2016 in Jakarta, Vice President Kalla said Indonesia needs to move toward the utilization of clean energy sources, both for environmental and commercial reasons as exhaustive sources should only become more expensive as time goes by. Renewable energy should therefore become a significant portion of the nation's energy mix which is currently still dominated by crude oil and coal.
The government holds the ambitious target to increase the nation's power capacity by 35,000 MW in the next couple of years as demand for electricity is continuously growing amid the expanding economy and growing population (which has already passed beyond the 255 million level). Businesses frequently complain about blackouts (especially outside the more developed islands of Java and Bali), while Indonesia's electrification ratio is currently only around 81 percent, implying that there are millions and millions of Indonesians who are not connected to the electricity grid.
Geothermal energy should be exploited by Indonesia to overcome the nation's power deficit. Indonesia's total installed capacity of geothermal power is currently around 1,500 MW while an additional 750 MW is being constructed. However, within a decade the government targets to raise the country's installed capacity to 7,200 MW of geothermal power. To achieve this target much more geothermal power development is required.
Archandra Tahar, who recently replaced Sudirman Said as Indonesia's new Energy and Mineral Resources Minister, informed that the government targets renewable energy to account for 23 percent of the nation's energy mix by 2025. Within the renewable energy sources, geothermal has great potential to contribute a significant portion. He added that the state-owned enterprises will have a big responsibility for the development of geothermal energy in Indonesia as private investors are hesitant to invest.
Rida Mulyana, Director General of Renewable Energy at Indonesia’s Ministry of Energy and Mineral Resources, came with a more optimistic message saying that geothermal development in Indonesia is on the rise. This year, four geothermal power plants have become operational with a combined total capacity of 215 MW and a combined total investment value of USD $860 million. Furthermore, the government awarded two geothermal work areas (through tenders) to state-owned Pertamina Geothermal Energy (Gunung Lawu) and to the consortium consisting of Optima Nusantara Energi and Enel Group Power Energy (Way Ratai). The Indonesian government also tasked state-owned utilities company Perusahaan Listrik Negara (PLN) to develop two geothermal areas (Ulumbu and Mataloko) in eastern Indonesia.
Issues that block more rapid development of geothermal energy in Indonesia, and make the private sector uncertain, include the high exploration costs, the lack of experienced developers licensed for the concession, the lengthy negotiations with PLN for the feed-in tariffs, and the weak infrastructure in Indonesia, especially in the more isolated areas.
Alex Doyla, Boston Consulting Group's Principal, added that the Indonesian government has also succeeded in implementing some measures that have improved the investment climate for geothermal development. For example, it has centralized tender processes and permit issuances and introduced penalties fort those that block geothermal activities. The Indonesian government also decided to offer production bonuses for local governments, and introduced a price ceiling system. In 2014 Indonesia finally defined geothermal exploration as a "non-mining activity" through Geothermal Law No. 21/2014 (replacing Law No. 27/2003) separating geothermal from other mining activities and thus paving the way for geothermal exploration in the country’s protected forest and conservation areas. The passing of this law was considered an important breakthrough.
The IIGCE, which has the theme “Innovative Breakthrough to Achieve 7000 MW Geothermal Development by 2025” in this year's edition, is the event where policymakers, investors, developers and specialists assemble to discuss the future development of geothermal energy in Indonesia and abroad.
Between 2016 and 2018 the Indonesian government aims to tender a total of 30 geothermal working areas in a bid to speed up development of this clean energy source.