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Indonesia to provide incentive for geothermal exploration

A geothermal power plant in an area in Indonesia. (The Indonesian Ministry of Energy and Mineral Resources)

Jakarta (Indonesia Window) – The Indonesian Ministry of Energy and Mineral Resources is preparing an incentive scheme in the form of reimbursement costs for exploration and development of other geothermal infrastructures.

The scheme aims to improve the geothermal investment in the archipelagic country, given the development of electricity from renewable energy sources is risky and requires high investment costs.

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The compensation is intended to make the selling price of electricity from geothermal power plants more affordable, the Director General of Renewable Energy and Energy Conservation of the Ministry of Energy and Mineral Resources, F.X. Sutijastoto, said in a statement quoted by Indonesia Window here on Thursday.

According to him, one of the obstacles in the development of the geothermal sector is uneconomical selling price of electricity.

“Incentives and compensation make the electricity price affordable for people, but it is not economical for developers,” Sutijastoto said.

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The ministry projected that the regulation regarding incentives and compensation will reduce geothermal-sourced electricity prices around 2.5 to 4 U.S. cents per kilo Watt hour (kWh).

The regulation will be included in the Presidential Regulation draft on the purchase of electricity for Renewable Energy (EBT) by the state-owned electricity company (PLN).

In the future, the government will return the costs expended by the developers in the exploration of geothermal in their working areas.

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To supervise the reimbursement costs mechanism, the Directorate General of Renewable Energy and Energy Conservation will establish a monitoring and processing team together with the Geological Agency and professionals, including academics.

“We will have a technical team from the Directorate General of Renewable Energy and Energy Conservation in collaboration with the Geological Agency. We will also be supported by professionals and experts from universities, such as University of Indonesia and Bandung Institute of Technology,” Sutijastoto said.

According to him, the proporsl to provide incentives for developing renewable energy-sourced electricity, and compensation for geothermal electricity exploration have been received a green light from the Fiscal Policy Agency (BKF) of the Ministry of Finance.

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The exploration cost incentive will be funded by the state budget

Indonesia’s renewable energy sources potential for electricity is around 442 Gigawatts (GW), and so far, only 2.4 percent or 10.4 GW have been utilized.

Indonesia’s geothermal potential reaches 23.9 Giga Watt (GW). Of this number, 8.17 percent or 6,494 Giga Watt hours (GWh) have been exploited until May 2020.

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Reporting by Indonesia Window

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