Thursday, July 14, 2016

Indonesia: Opinion - Feed-in Tariff for Geothermal Electricity Considered Unattractive

Taking the Temperature of Indonesia’s Geothermal Regulatory Climate (Lexology)

Indonesia’s geothermal resources are among the largest in the world, with 299 geothermal locations and a total potential of 28,807 MW, or around 40 percent of the total geothermal resources worldwide, according to a September 2014 press release from Indonesia’s Directorate General of Geothermal.

In order to utilize this enormous energy potential, the Government of Indonesia has intensified its efforts to encourage geothermal power development. Some background to the regulatory climate will put these developments in perspective.

Despite the efforts by the Indonesian government to date, the geothermal sector in Indonesia is still underdeveloped. This is primarily the result of a number of outstanding challenges that have not yet been resolved by the government, particularly with respect to the feed-in tariff of geothermal electricity, which many investors consider unattractive in view of the high capital requirements needed to develop a geothermal working area in Indonesia. This factor alone may hinder the government’s efforts to add 35,000 MW of electricity throughout Indonesia by 2019, 4,815 MW of which is intended to come from geothermal resources, according to the Power Supply Provision Business Plan 2015-2019, as ratified by the Minister of Energy and Mineral Resources.

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