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Industry dismisses govt’s claim of geothermal energy success

30 October 2018

The government may claim that it has had great success making geothermal energy a champion of investment in Indonesia’s renewable energy sector, but business players involved in the area are not convinced as they consider no significant progress to have been made after many years.

Indonesian Geothermal Association (API) chairman Prijandaru Effendi pointed out that what was claimed as success by the government needed more than three decades to achieve.

“We started in 1980 with a 30-megawatt [MW] geothermal power plant installed in Kamojang [West Java], and after 38 years we only have around 2,000 MW [installed capacity]. Do you think that is fast enough?” he expressed his disappointment in a text message to The Jakarta Post on Monday.

His statement is in accordance with data from local energy watchdog the Institute for Essential Services Reform (IESR), showing that, from 2007 to 2017, Indonesia only booked 4.5 percent of growth in its renewable energy capacity. Meanwhile, Thailand, Malaysia, China and Myanmar achieved 9.8 percent, 10.7 percent, 15.4 percent and 15.5 percent, respectively.

Government officials often take pride in growth in geothermal energy investment. Rida Mulyana, renewable energy director general at the Energy and Mineral Resources Ministry, said on Friday that Indonesia was planning to become the largest producer of geothermal energy, which means surpassing the United States, after beating the Phillippines in terms of installed capacity.

“For geothermal energy, we know that we are currently the world’s second-largest producer. Our plan is to become the first and beating the US at the top,” he said.

Investment realization in the geothermal energy sector, which contributed around 60 to 65 percent to Indonesia’s renewable energy investment, reached US$800 million as of September. It was equal to 70 percent of the fullyear target of $1.2 billion.

As for installed capacity of geothermal energy, the country saw 1,948 MW as of September, or 94.6 percent of the full-year target of 2,058 MW. The target for this year is 13 percent higher than 1,808 MW set in 2017.

Prijandaru insisted that the government should make efforts to boost investment in geothermal energy. He said the government should ensure that the value of a project was in accordance with the risks taken by the developers, and that state electricity firm PLN should provide certainty when purchasing electricity from geothermal plants.

Prijandaru was referring to a stipulation in a power purchase agreement (PPA) with PLN that the state company would only sign an electricity purchase deal after developers had conducted costly exploration activities, hinting that such a situation created uncertainty in business planning.

“Currently, there is only a pretransaction agreement [PTA] with PLN that is not [legally] binding,” he said. “Ideally, a PPA should be agreed before developers disburse their money to conduct exploration, which is expensive.”

Recent official data show that only 30 of a total of 70 PPAs in renewable energy projects inked by the government last year reached financial close. The remainder, meanwhile, are still experiencing difficulties obtaining funding.

On Friday last week, the government announced it would put five geothermal working areas (WKP) with a total potential capacity of 784 MW on auction next year.

The five WKPs are WKP Lainea in Southeast Sulawesi, WKP Sembalun in West Nusa Tenggara, WKP Telaga Ranu in North Maluku, WKP Kotamobagu in North Sulawesi and WKP Bora Pulu in Southeast Sulawesi.

The ministry’s geothermal director Ida Nuryatin said currently PLN was preparing PTAs for the five WKPs, adding that three of them had been offered to the state company, which showed no interest in developing the projects.

Source: Jakarta Post, 30 October 2018