Jakarta Globe, Nayantara Bhat, Aug 09, 2015
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Indonesia holds 40 percent of the world's geothermal potential at sites such
as the Patuha Geothermal plant in Bandung. (JG Photo/Rezza Estily)
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Jakarta.
Despite Indonesia already having several plants and government plans to develop
the geothermal industry, progress has been stalled by legal protocols and a
lack of funding, the World Bank says.
Indonesia’s
position on the Pacific Ring of Fire – the intersection of three tectonic
plates – means that the country is a hotbed of seismic activity. The Indonesian
Energy and Mineral Resources Ministry estimates that the country might have the
potential to generate almost 28 gigawatts of energy this way – 40 percent of
the world’s geothermal energy resources.
The recent
Indonesian Economic Quarterly published by the World Bank in July highlighted
geothermal energy production as an area of great potential. Despite a 2012
Finance Ministry fund to develop the geothermal energy sector and capital
seeding of more than $200 million, the sector has not expanded as expected.
Plans to
build 44 new plants and triple production capacity to 4000 MW were included in
the National Energy Policy last year. However, only 175 megawatts were added
between 2010 and 2014. The World Bank attributes this to several factors,
including a hesitancy to invest, and a feed-in tariff that has discouraged the
market.
Additionally,
the country’s legal framework protecting forest areas from mining activities
was only amended to allow geothermal mining in August 2014, toward the end of
then-president Susilo Bambang Yudhoyono’s term.
The feed-in
tariff, a subsidy scheme between geothermal energy suppliers and government-run
electricity monopoly PLN, failed to be implemented as sellers and buyers were
not able to agree on a fixed price.
The high
level of upfront investment required for geothermal projects also means that
pricing needs to be able to cover the costs. The government-regulated returns
made by PLN, said the World Bank, were too low to cover the risks of geothermal
development.
Aside from
PLN, other major finance institutions such as the Asian Development Bank and
the World Bank’s International Finance Corporation are often reluctant to fund
geothermal projects from the get-go, preferring to invest once the project has
been proven to have at least 50 percent of its potential.
The World
Bank has recommended improvements to the tendering process for development,
including not allowing areas to be put to tender without certified proof of its
geological potential. The institution also suggests a tariff reform based on a
continuous review process, so that present tariff can be readjusted to future
rates.
With
electricity demand growing at almost 4.8 percent annually and 35 percent of the
country’s inhabitants living without electricity, according to the
International Energy Agency, geothermal power could be the solution, especially
as it is free from the price uncertainty associated with traditional fuels.
“Geothermal
power represents an energy source that is not subject to volatility as the
price remains flat. It will also free up other resources such as coal and oil
for export,” says Rahul Shah, chief financial officer at Sorik Merapi
Geothermal Power.
Geothermal
energy is widely understood to be a proven technology that is more
environmentally friendly, with fewer resultant greenhouse gas emissions.
Development in the industry means generating power is becoming easier and more
efficient.
“This
energy is replenished through natural means and therefore does not lead to
concerns of energy security for our future generations,” Shah said. He added
that with new developments in technology, geothermal plants were now able to
generate power at much lower temperatures than before.
Another
development in the sector is a technology known as Enhanced Geothermal Systems
(EGS), which artificially cracks hot rocks to release steam to power the
turbines without the need for a nearby water source.
Geothermal
plants are often located in forest areas and displace nearby inhabitants,
raising concerns over the land space needed as well as the impact on
biodiversity.
However,
with research and new technology, pinpointing potential geothermal spots can be
space-efficient, says Indra Sari Wardhani, climate and energy manager at WWF
Indonesia. She cites the plant in Salak as an example, saying that the
facility, which has a capacity of 330 MW, takes up around 175 hectares of land.
“When you
have determined the amount of capacity and the potential points, the area that
is used is not big,” she says.
The WWF
developed guidelines last year for sustainable development of the geothermal
sector in forest areas, highlighting environmental considerations such as
maintaining biodiversity and mitigating deforestation and social disruption.
Indra Sari
says geothermal energy is likely to be a huge part of Indonesia’s move toward
renewable sources of energy.
GlobeAsia
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