Nation
plans 25 tenders for new geothermal sites next year and aims to boost
geothermal to 10 percent of power mix
Jakarta.
Indonesia has unveiled ambitious targets to triple geothermal power output this
decade, introducing a series of land and regulatory reforms aimed at becoming
the world’s largest producer of the fossil fuel alternative.
Sat atop
the volcanic Pacific Ring of Fire, the world’s fourth-most populous nation is
anxious to exploit geothermal energy as a clean and abundant power source as it
races to attract investors and meet soaring power demand.
“With
Indonesia increasingly having to import oil, coupled with a growing electricity
demand, it is critical that it diversifies it base for electricity generation,”
said Chris de Lavigne of consultancy Frost & Sullivan. “Indonesia has the
potential to become the world’s largest producer of geothermal.”
As the
world’s third-biggest geothermal producer with a capacity of 1.4 gigawatt (GW),
Indonesia lags behind the Philippines and the United States with capacities of
1.9 and 3.4 GW each. Indonesia aims to up its capacity by 4.9 GW by 2019.
Yet
progress has been slow due to red tape, uncompetitive power tariffs and
uncertainty over asset ownership. The 25 years it has taken from the planning
stage to breaking ground on its latest project show the formidable barriers the
sector faces.
The
government says reforms to curb the power of regional authorities to intrude on
projects, as well as to make it easier to build in forest areas, should
accelerate development of 25 project sites due for tender in early 2015.
“There are
no more obstacles in this sector. It’s time for us to work. It is a business
opportunity,” said Tisnaldi, director of geothermal, directorate general of
renewable energy and energy conservation at the energy and mines ministry.
Geothermal
investors hope the new government of President Joko Widodo will follow up with
plans to reform power price caps in the same way it reduced subsidies for
transport fuel, as well as tackle other obstacles.
“If you can
lift the hurdle behind land acquisition and permits, that will help,” said
Fazil Alfitri, president director at Medco Power Indonesia, a firm active in
geothermal power.
Geothermal
projects typically tap heat below the earth’s crust by pumping water into deep
wells where it is converted into steam to drive turbines.
But they
are susceptible to red-tape given they usually need long-term, complex
government policy commitments. They also came under Indonesian mining laws,
restricting developments in forest areas until recent amendments.
Indonesia’s
plans could see geothermal meet 10 percent of power demand by 2020, up from 3
percent today. Currently about half of power supplies are met by coal, a fuel
it is keen to use less in order to boost exports. Gas makes up about 20 percent
and oil 12 percent.
Many
geothermally active countries are planning new plants, with global capacity
jumping from 2 to 12 GW since 1980.
Frost and
Sullivan’s Lavigne said Indonesia’s geothermal capacity could be as high as 29
GW, almost two-thirds of the country’s current overall generation.
‘Game
changer’
The $1.6
billion Sarulla project in North Sumatra, the world’s biggest, saw construction
start this year, 25 years after it was first planned, delayed largely by a lack
of finance and red tape.
Describing
Sarulla as a “game-changer”, Shamim Razavi, an energy lawyer at Norton Rose
Fulbright, said it would mean financers would be prepared to look for new
projects.
Most of the
biggest existing plants, such as Chevron’s Salak, are on densely populated Java
island.
Sarulla
will connect to the national grid, although some plants in remote spots are
restricted to serving local areas. The 25 new sites set for tender in early
2015 are mostly in forest areas in Java and Sumatra. Sarulla will have a
capacity of 330 MW, enough to power about 330,000 homes.
If
successful, Indonesia could follow its Southeast Asian neighbor the
Philippines, where geothermal fuel meets a quarter of electricity use, reducing
pollution and fuel imports.
Reuters