Jakarta—The Indonesian government is preparing a new regulation that allows the extension of power purchase contracts from geothermal power plants (PLTP) for up to 30 years. This policy is expected to attract more investment in the geothermal sector, whose potential has not been optimally utilised so far.
With this new policy, the government is trying to create a more stable and favourable investment climate for geothermal energy developers. Minister of Energy and Mineral Resources (MEMR) Bahlil Lahadalia revealed that geothermal development requires large investments, even up to seven times higher than coal. The high investment cost makes electricity from geothermal energy more expensive. However, according to Bahlil, geothermal development will not thrive in the national electricity system if this is left without a solution.
“We are preparing new regulations to ensure geothermal still has a place in the electricity sector. PLN will continue to accommodate geothermal energy at a more economical price, with contracts extended up to 30 years. That way, after 8-10 years of break-even point, developers still have 20 years to enjoy decent profits,” Bahlil said in an official statement at the opening of the 10th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2024 in Jakarta on Wednesday, September 18.
Geothermal utilisation is still minimal
Based on government data, geothermal utilization in Indonesia has only reached 2.6 gigawatts (GW), or around 3% of the total national power generation capacity of 93 thousand megawatts (MW). Indonesia has the second-largest geothermal potential in the world after the United States. However, this potential has not been fully utilized, mainly due to various obstacles in development, ranging from cost issues to land and licensing issues.
Bahlil acknowledged that one of the biggest challenges in geothermal development is licensing and resolving land issues. To overcome this, the Ministry of Energy and Mineral Resources will coordinate with the Ministry of Agrarian Affairs and Spatial Planning/National Land Agency (ATR/BPN) to find a solution.
The government also plans to reduce the time required for licensing and exploration to speed up the geothermal development process. The new regulations will also focus on simplifying the licensing process so geothermal developers can start their projects faster.
The government also realizes the importance of providing fiscal and non-fiscal support for geothermal developers, especially in reducing the risk of high initial investment. With the new mechanism that allows contract extensions of up to 30 years, developers are expected to earn a decent profit, so they are more encouraged to invest in geothermal projects in Indonesia.
Bahlil also emphasized that the government will continue to support the development of geothermal energy as part of the energy transition efforts towards net-zero emissions (NZE) target by 2060.
With the policy of extending contracts for up to 30 years and the government’s efforts to simplify the licensing process, Indonesia is optimistic that it will be able to attract more investors to develop geothermal energy so that the country’s huge potential can be fully utilised. (Hartatik)
Banner photo: Hartatik
