ADB Supports Renewable Energy by Investing in Indonesian Geothermal Plant

ADB, 31 March 2014

MANILA, PHILIPPINES – The Asian Development Bank (ADB) has signed a $350 million financing package supporting the construction of the 320 megawatt Sarulla Geothermal Power Development Project in North Sumatra, Indonesia, an investment expected to unlock clean energy investments across the country, which holds 40% of the world’s geothermal resources.

The renewable energy project will provide clean, baseload power to an Indonesian grid currently dominated by aging coal and oil-fired power plants. It is expected to reduce 1.3 million tons of carbon dioxide emissions per year upon completion, which is estimated to be in 2018.

“Geothermal power taps into an abundant indigenous resource in Indonesia that can provide a more sustainable and secure form of clean energy while significantly lowering carbon emissions,” said Jackie B. Surtani, Senior Investment Specialist in ADB’s Private Sector Operations Department.

Indonesia currently uses coal and oil to produce 65% of its electricity and fuel its economic growth. The country has vowed to increase the share of renewable energy in its primary energy supply from 5% in 2010 to 25% by 2025, and reduce greenhouse gas emissions by 26% by 2020. Geothermal plants typically produce less than 10% of the greenhouse gas emitted by fossil-fuelled thermal plants.

Under the loan package, ADB will provide $250 million from its ordinary capital resources, $80 million from the ADB Clean Technology Fund (CTF), and $20 million from the Canadian Climate Fund for Private Sector in Asia (funded by the Government of Canada) under the Clean Energy Financing Partnership Facility. The project represents the first deployment by ADB of the Canadian Climate Fund and the first disbursal of CTF funds by ADB in Indonesia.

ADB’s climate finance capabilities were instrumental in establishing the first commercially financed, utility-scale geothermal independent power plant project in Indonesia in more than a decade. The climate funds were structured as an innovative loan tranche that bridged the financing gap between banks and investors to maintain financial viability of the project.

The project sponsors are Itochu Corporation, Kyushu Electric Power Company, Ormat International, and Medco Power Indonesia.

Six commercial banks – Bank of  Tokyo-Mitsubishi UFJ, ING Bank, Mizuho Bank, National Australia Bank, Société Générale, and Sumitomo Mitsui Banking Corporation – will also co-finance the total $1.17 billion loan package, which ADB and Japan Bank for International Cooperation (JBIC) acted as Lead Structuring Banks.

The project will be developed and implemented under a 30-year energy sales contract with Perusahaan Listrik Negara, the national electricity utility company, a 30-year joint operating contract with Pertamina Geothermal Energy, and a 20-year guarantee from the Ministry of Finance.

Activists Rally Against Nuclear Power in Blackout-Prone Indonesia

Plans to construct a nuclear power plant in Indonesia have received global attention as anti-nuke activists from Japan meet with local campaigners

Jakarta Globe,  Cory Rogers, Mar 11, 2014

The installation of a nuclear research reactor at an operation hall of the
 National Nuclear Energy Agency (Batan) complex in Serpong on April 23,
2013. (AFP Photo)

Yogyakarta/Jakarta. A government-backed plan to construct nuclear power plants in Indonesia has been met with backlash by several local groups in the archipelago, highlighting the tensions nuclear power projects face in a post-Fukushima world.

Recently announced plans to make the West Java district of Subang the site of Indonesia’s fourth nuclear reactor has pushed a decades-long conflict back into the spotlight, pitting those who view the establishment of nuclear power plants as a valuable addition to Indonesia’s energy portfolio against others who say the social and environmental risks of radioactive contamination outweigh the potential benefit.

Critics point out that Indonesia’s geologic position atop the “Ring of Fire” makes it particularly vulnerable to earthquakes and volcanic eruptions — events that drastically increase the odds of a nuclear tragedy. These concerns are augmented by fears that rampant corruption and graft will undermine the government’s ability to implement and then manage costly safety protocols.

In January, Japanese representatives from No Nukes Asia Actions (NNAA), a Tokyo-based anti-nuclear coalition, gathered with Indonesian activists in Balong, Central Java, to discuss resistance strategies and the prospects of an international partnership to thwart the prospect of nuclear power in Indonesia.

“With Fukushima, the whole world witnessed the terrible effects of nuclear disaster,” NNAA rep Seung Choo told some 200 residents in Balong over two days of talks. “Now, we must say no more nuclear plants — not here in Indonesia or anywhere else.”

Balong provided a fitting backdrop to the event: in 2007, growing fears over a proposed nuclear power plant cohered into an alliance of local residents, business owners, religious groups and students that eventually thwarted government plans to break ground in 2014.

In 2007, the Jepara branch of Nahdatul Ulama (NU), Indonesia’s largest Muslim organization, even issued a fatwa against the proposed plant, drawing the ire of state officials who had been courting the group for support.

But nuclear plans in Indonesia have been on the table for a large chunk of the nation’s modern history.

Nuclear power plays

The National Nuclear Energy Agency (Batan), created by former President Sukarno in 1964, has been Indonesia’s most strident nuclear energy advocate. The organization has aired hopes to establish three fully operational nuclear power plants in the country by 2025, a plan that has been embraced as part of Indonesia’s Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI).

Batan spokesman Eko Madi Parmanto says claims of public resistance to nuclear power have been greatly exaggerated in Indonesia.

“We’ve periodically conducted surveys to measure people’s acceptance of the nuclear plant plan,” Eko told the Jakarta Globe last week. “The latest national survey in 2013 indicates that 67.6 percent of respondents support the plan.”

The agency views nuclear energy as an alternative to Indonesia’s addiction to unsustainable fossil fuels that pollute the environment and contribute to climate change. Indonesia has a wealth of potential in safe, renewable energy sources such as solar, hydro and geothermal, but oil, coal and natural gas still provide more than over 80 percent of the nation’s power. Only 12 percent of the country’s energy is provided by renewable sources.

In geothermal power alone, Indonesia is operating at a mere 4.2 percent of its potential output, despite sitting astride 40 percent of the world’s geothermal resources.

Oil, which accounts for about 30 percent of the country’s current energy supply, is now mostly imported, leaving the country vulnerable to unhedged price volatility together with currency fluctuations. In addition, oil — along with coal and natural gas — powers an electrical grid still suffering from chronic energy shortages throughout the country. Millions of poor, rural Indonesians, especially in eastern Indonesia, remain without electricity, and struggles to meet existing electricity needs are made worse by an 8 percent annual rise in demand.

The situation requires huge government subsidies in fuel and electricity just to keep up, consuming 41 percent of all government expenditures; more than what is budgeted for education, environmental protection, health, and housing combined. In 2013, some 13 percent of the nation’s subsidized fuel was used at power plants, according to government agency data.

According to Batan, nuclear power plants would play only a minor role in addressing these multi-pronged energy woes, adding just 5 percent to Indonesia’s total energy production if the government’s 2025 energy diversification goals were met.

Gus Nung presents in front of the Japanese representatives of No Nukes
Asia Actions (NNAA) on January 12, 2014. (JG Photo/Cory Rogers)

Resistance to Batan-led advocacy

At the local level, Batan has drawn criticism for its attempts to win support among populations living near proposed plants, which over the years have included sites in Balong, Bangka-Belitung, Kalimantan and Madura.

The promotional efforts carried out by Batan were key in galvanizing opposition to the proposed plant back in the mid 2000s, said Daviq, the secretary of the Balong Community Union (PMB), a local anti-nuclear energy group.

That advocacy campaign, which called for annual outlays of $2.5 million to fund scholarship programs, social events and a host of other activities, highlighted the benefits of nuclear power while, according to Daviq, making scant mention of its risks. When public queries about the program failed to produce useful information, many grew skeptical of the plan.

“We finally made the decision that OK, if the government is not willing to give the information to us, then we must seek it for ourselves,” he said.

Iwan Kurniawan, a lecturer at the Jakarta-based Institute of Archipelago Business, recalled similar transparency concerns at play in Madura, East Java, where in 2003 Batan was busy promoting another nuclear plant. Formerly a nuclear physicist with Batan who left the agency over an undisclosed dispute, Iwan said that in order to assuage safety concerns voiced by locals, Batan made spurious claims regarding its capacity to install the latest and safest model plant in Madura.

“The kind of plant being discussed was still in its research phase in South Korea,” Iwan said, explaining that such a plant could not be promised. He added that localities targeted by Batan-led nuclear advocacy were frequently vulnerable to this kind of misinformation.

“When Batan comes and discusses the benefits, I come and discuss the risks to create a more balanced perspective,” he said.

As in Balong, once the risks of nuclear contamination became apparent, public opposition stymied construction of the proposed plant in Madura. Activists argued that given the amount of untapped alternative energy sources that existed, the risks of nuclear disaster were avoidable and unjustifiable.

The nation’s nuclear power agency denied the allegations, explaining that Batan attempts to inform the public about leakage, natural disaster, and operators’ negligence risks as well as detailed information on how plant operators would ensure safety.

“We’ve also developed an information system on our website, and people can ask us via email about this safety technology,” Eko said.

Socialization campaigns remain crucial to successful implementation at proposed sites “only if the government has seriously designed the nuclear power plant program,” Eko explained.

“There are currently no plans for research at other locations,” he said.

The global business of nuclear power

If domestic resistance to nuclear power has hinged on countering Batan’s campaigns, the international strategy advocated by the NNAA seeks to shed a critical light on the corporate interests driving nuclear energy.

According to NNAA representative Seung Choo, business-friendly regulations in Japan that reallocate risk to nuclear operators encourage investment by companies like Toshiba, GE and Hitachi — the companies that build the plants. Japan’s 1961 Act of Compensation for Nuclear Damages mandates that the nuclear power operators, as opposed to the suppliers, assume exclusive accountability for any nuclear damage caused by an accident, making taxpayers ultimately responsible for damages.

This creates what Seung Choo calls a “crisis of liability,” where corporations that stand to profit from construction have less incentive to prioritize safety.

These laws work to promote “the sound development of the nuclear industry,” the NNAA said in a statement, and the group fears such business-friendly regulations will be replicated elsewhere as nuclear suppliers seek to access markets like Indonesia.

According to Indonesia’s 1997 Nuclear Power Act, if the country were to successfully establish a nuclear power plant, the suppliers would be responsible for up to Rp 900 billion ($76 million) in damages to be doled out over a maximum period of 30 years, regardless of the actual cost of damages.

Recent studies have shown that radiation-induced cancer can take as long as 40 years to develop, and the financial recovery of the Fukushima Daiichi Nuclear Power Plant disaster will approach $250 billion dollars.

Attempts to contact the Ministry of State-Owned Enterprises for clarification on current regulations were unsuccessful.

In response to the situation in Japan, where the corporate builders of nuclear power plants are shielded from restitution, the NNAA is challenging whether the 1961 act in court was constitutional.

Armed with 22 lawyers, their recently filed suit seeks redress for Japanese victims, and to inspire citizens in other nations to “abolish special legal provisions that protect nuke businesses all around the world,” the group said in a statement.

The suit seeks 10,000 plaintiffs worldwide to sign over power of attorney so that the NNAA can represent them in court. “Anyone can be a plaintiff,” Choo said. “Even someone traumatized by the media coverage qualifies as a victim.” If the NNAA wins, these foreign plaintiffs will receive a symbolic, one-dollar payout.

In Balong, the NNAA made hundreds of documents available for signing. Many, including Nuruddin Amin, the head of the Hasyim Asy’ari Pesantren (Islamic boarding school) in Bangsri, Central Java, and a longtime supporter of the anti-nuclear cause, expressed enthusiasm for the strategy.

“The Fukushima accident is not only a tragedy for the Japanese,” Nuruddin said. “It is a tragedy for the whole world, and I hope we all will join to sign this power of attorney so that we can work on this issue together.”

Many Indonesian activists, however, remained mindful that the first battle remains on the home front, helping provide balanced information to communities earmarked for nuclear power plant development.

For Iwan, the resistance coalitions that fought a successful battle in Balong ought to provide guidance and direction as the drive for domestic nuclear power progresses.

“Here we have a model of resistance that can be delivered elsewhere,” he said.

— Erwida Maulia contributed to this report in Jakarta

Women shout slogans in front of the National Diet in Tokyo

on March 9, 2014 as they take part in a rally denouncing nuclear

power plants (AFP, Toru Yamanaka)

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Indonesia Geothermal Sector Attracts Panax, Mitsubishi, BP, Chevron

Renewable Energy World, Leslie Blodgett, GEA, October 18, 2012

WASHINGTON, D.C. -- Indonesia has had the lowest volatility in economic growth of any OECD or BRIC economy over the past decade, while its economy in the short term is conjectured at close to 7% growth per year, according to Proactiveinvestors.com.au.

Concurrently, recent efforts by the Indonesian government to attract geothermal companies seem to be having an effect. At a September meeting in Washington DC on Renewable Energy Opportunities in Indonesia, hosted by the US-ASEAN Business Council, speaker Joel Kopp (U.S. Embassy Jakarta) recounted the efforts of Indonesian leaders, who have set a separate feed-in tariff for geothermal at between 10 and 18.5 cents-per-kWh. Also, projects under 10 MW are required to be purchased by state-owned utility Perusahaan Listrik Negara (PLN). Kopp added that PLN has made improvements to their reliability, as well.

Australian Panax Geothermal is making strides in Indonesia. With three key geothermal projects scheduled to begin production in Indonesia over the next three to four years, Kerry Parker, managing director, commented to press on the company’s growth in Indonesia: “Panax has long recognized the investment potential in Indonesia, having launched several projects within the region and with plans to expand on our current interests,” Parker said. Projects for Panax include the recently negotiated power purchase agreements for its Sokoria and Dairi Prime geothermal projects, each with a planned initial capacity to generate 30 MW. Agreements are with Indonesian electricity regulator PT PLN and the Indonesian Government.

One company with increasing interest is Mitsubishi Corporation, which has agreed to acquire 20% shares of Star Energy Geothermal Pte Ltd ("SEGPL"). SEGPL manages operation of the 420-MW Wayang Windu Geothermal Power Project Plant in Java Island, one of the world's largest geothermal resources. This acquisition is the country’s “first entry into the Indonesian power industry and its first operation of a geothermal power plant,” according to the release. Mitsubishi could develop and operate multiple geothermal power plants in Indonesia in the future, including an expansion of Wayang Windu.

Additionally, oil and gas giant BP (UK) could expand its business in Indonesia, it said recently. Energy and Mineral Resources Minister Jero Wacik told The Jakarta Post the government was curious as to whether BP would enter the geothermal energy sector after US-based Chevron “had successfully become the world’s largest geothermal power producer after years of operating in Indonesia.”

Chevron Geothermal’s policy, government and public affairs manager, Ida Bagus Wibatsya was quoted that the development could create healthy competition among geothermal energy developers: “It will be very positive for the development of the geothermal energy industry as well as supporting the government’s programs on renewable energy resources.”

This article was originally published in GEA's Geothermal Energy Weekly and was republished with permission.

A geothermal energy project in Tibet. (Photo/Xinhua)

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China's geothermal energy could run the country for 260,000 years

"Recalibration of Free Choice"–  Mar 3, 2012 (Kryon Channelling by Lee Caroll) - (Subjects: (Old) Souls, Midpoint on 21-12-2012, Shift of Human Consciousness, Black & White vs. Color, 1 - Spirituality (Religions) shifting, Loose a Pope “soon”, 2 - Humans will change react to drama, 3 - Civilizations/Population on Earth,  4 - Alternate energy sources (Geothermal, Tidal (Paddle wheels), Wind), 5 – Financials Institutes/concepts will change (Integrity – Ethical) , 6 - News/Media/TV to change, 7 – Big Pharmaceutical company will collapse “soon”, (Keep people sick), (Integrity – Ethical)  8 – Wars will be over on Earth, Global Unity, … etc.) - (Text version) 

“…  4 - Energy (again)

The natural resources of the planet are finite and will not support the continuation of what you've been doing. We've been saying this for a decade. Watch for increased science and increased funding for alternate ways of creating electricity (finally). Watch for the very companies who have the most to lose being the ones who fund it. It is the beginning of a full realization that a change of thinking is at hand. You can take things from Gaia that are energy, instead of physical resources. We speak yet again about geothermal, about tidal, about wind. Again, we plead with you not to over-engineer this. For one of the things that Human Beings do in a technological age is to over-engineer simple things. Look at nuclear - the most over-engineered and expensive steam engine in existence!

Your current ideas of capturing energy from tidal and wave motion don't have to be technical marvels. Think paddle wheel on a pier with waves, which will create energy in both directions [waves coming and going] tied to a generator that can power dozens of neighborhoods, not full cities. Think simple and decentralize the idea of utilities. The same goes for wind and geothermal. Think of utilities for groups of homes in a cluster. You won't have a grid failure if there is no grid. This is the way of the future, and you'll be more inclined to have it sooner than later if you do this, and it won't cost as much….”

China's geothermal energy could run the country for 260,000 years

Want China Times, Staff Reporter 2012-10-07

A geothermal energy project in Tibet. (Photo/Xinhua)

China holds potential geothermal energy between 3,000 and 10,000 meters below the surface of the earth equal to 860 trillion tons of standard coal, a storage which is estimated to have a lifespan of 260,000 years using current figures for energy consumption.

The Ministry of Land and Resources underwent a national survey on the distribution of geothermal energy over the country between 2009 and 2011, re-evaluating the storage of shallow geothermal energy in 287 cities, geothermal energy in 12 sedimentary basins and 2562 hot springs regions, as well as the potential hot-dry-rock geothermal power at between 3,000 and 10,000 meters below the surface of the earth, reports our sister newspaper the China Times.

The results showed that the total shallow geothermal energy storage is commensurate with 9.5 billion tons of standard coal. The usable part is about 350 million a year, which can save 250 million tons of standard coal and reduce 500 million tons of carbon dioxide emissions in a year if the energy is fully exploited and used.

The geothermal power in sedimentary basins is commensurate with 853 billion tons of coal, while the usable part for a year is equal to 640 tons of standard coal, which can reduce 1.3 billion tons of carbon dioxide emission a year.

The survey found the total geothermal energy stored between 3,000 and 10,000 meters below the surface of the earth is about equal to 860 trillion tons of standard coal, which is 260,000 times China's total energy consumption a year.

Geothermal energy is a kind of renewable energy, originating from the original formation of the earth and radioactive decay of minerals. The ministry said the country is moving slowly to exploit the rich energy and need to push the reusable project soon.

A report by Massachusetts Institute of Technology said the United States only has to exploit 2% of its geothermal energy between 3,000 and 10,000 meters below the surface of the earth, which is able to offer electricity equal to 2,500 times the country's total electricity consumption a year.

Related Article:

"Recalibration of Free Choice"–  Mar 3, 2012 (Kryon Channelling by Lee Caroll) - (Subjects: (Old) Souls, Midpoint on 21-12-2012, Shift of Human Consciousness, Black & White vs. Color, 1 - Spirituality (Religions) shifting, Loose a Pope “soon”, 2 - Humans will change react to drama, 3 - Civilizations/Population on Earth,  4 - Alternate energy sources (Geothermal, Tidal (Paddle wheels), Wind), 5 – Financials Institutes/concepts will change (Integrity – Ethical) , 6 - News/Media/TV to change, 7 – Big Pharmaceutical company will collapse “soon”, (Keep people sick), (Integrity – Ethical)  8 – Wars will be over on Earth, Global Unity, … etc.) - (Text version)

“…  4 - Energy (again)

The natural resources of the planet are finite and will not support the continuation of what you've been doing. We've been saying this for a decade. Watch for increased science and increased funding for alternate ways of creating electricity (finally). Watch for the very companies who have the most to lose being the ones who fund it. It is the beginning of a full realization that a change of thinking is at hand. You can take things from Gaia that are energy, instead of physical resources. We speak yet again about geothermal, about tidal, about wind. Again, we plead with you not to over-engineer this. For one of the things that Human Beings do in a technological age is to over-engineer simple things. Look at nuclear - the most over-engineered and expensive steam engine in existence!

Your current ideas of capturing energy from tidal and wave motion don't have to be technical marvels. Think paddle wheel on a pier with waves, which will create energy in both directions [waves coming and going] tied to a generator that can power dozens of neighborhoods, not full cities. Think simple and decentralize the idea of utilities. The same goes for wind and geothermal. Think of utilities for groups of homes in a cluster. You won't have a grid failure if there is no grid. This is the way of the future, and you'll be more inclined to have it sooner than later if you do this, and it won't cost as much….”

Geothermal Takes a Step Forward in Indonesia With Sumatra Drill

Jakarta Globe, Tito Summa Siahaan, September 24, 2012

This 2010 file photo shows an Indonesian worker of PT Pertamina Geothermal
 Energy checking a production well in Kamojang. The government has announced
 it will raise the price of three types of renewable energies for electricity needs,
saying the move is necessary to encourage Indonesia's overall renewable
energy production. (AFP Photo/FILES/ ADEK BERRY)

               

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Nearly a decade after government set the rules for geothermal energy, a developer on Friday undertook the first exploration drilling for the much-vaunted resource that could help power the nation.

Supreme Energy Muara Laboh has started drilling at its working area in South Solok, West Sumatra. The activity is expected to take up to nine months to complete, and will be followed by the construction of a 220 megawatt geothermal power plant should the exploration be successful.

The geothermal energy director at the Energy and Mineral Resources Ministry, Tisnaldi, hailed the project as an historical landmark because it was the first such activity conducted since the government issued the Law on Geothermal Energy in 2003. He added that it was one of the largest energy projects in Sumatra.

“Geothermal projects are crucial in order to make our energy more environmentally friendly in the future, especially considering that our oil, gas and coal resources are in decline,” Tisnaldi said.

If the power plant goes ahead, the project is estimated to cost Rp 7 trillion ($722 million), according to a company statement received on Sunday. “The power plant construction will start in 2014 and is expected to begin commercial operation in 2016,” the statement said.

The electricity generated from the power plant will be dispatched to state utility Perusahaan Listrik Negara’s power grid based on a 30-year power purchase agreement, it said.

Surpeme Energy Muara Laboh is jointly controlled by local company Supreme Energy, France-based International Power-GDF Suez and Japanese firm Sumitomo Corporation.

This project is a part of phase II of a government program to add 10,000 megawatts in generating capacity across the country. While phase I consisted largely of new coal-fired power plants, phase II concentrates on renewable energy.

By 2025, the government expects the portion of electricity generated from renewable energies to reach 17 percent, while diesel fuel will stand at 20 percent, gas at 30 percent and coal at 33 percent.

At present, 5.7 percent of electricity is from renewable sources, 24.5 percent is from coal and 20.1 percent from gas.

To encourage investment, the government this month raised the price floor for renewable energy.

Geothermals Boosted by New Price Floor

Jakarta Globe, Tito Summa Siahaan, August 30, 2012

A geothermal power plant in Wayang Windu, West Java. (GA Photo/M. Defrizal)  

      

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s debate rages on the legacy likely to be left by President Susilo Bambang Yudhoyono when he leaves office, one contender is his efforts to encourage Indonesians to embrace a lower-carbon economy.

The president is aiming to bring the contribution of renewables to the national energy mix to 25 percent by 2025 and 35 percent by 2050.

Those renewables are likely to be sourced largely from the country’s vast geothermal potential, which some estimates put at 40 percent of the world’s reserves, and hydropower.

State funding alone will not be enough to achieve such an energy mix, so private investors must be lured to participate.

Energy and Mineral Resources Minister Jero Wacik said on Wednesday that he had signed a decree that will increase the tariff for electricity generated from geothermal power plants. The decree will soon be made official in the form of regulation, probably this week, the minister added.

He said that the decree will set the minimum tariff for geothermal electricity at 10 cents per kilowatt hour in Sumatra; 11 cents per kWh in Java and Bali; 12 cents per kWh in Central, Southeast and North Sulawesi; 13 cents per kWh in North Sulawesi and Gorontalo; 14 cents per kWh for East and West Nusa Tenggara; and 18 cents per kWh for Papua.

Jero said the government realized there was a need to massively develop the nation’s geothermal potential and that investors had shown excitement toward the sector when the plan to raise the tariff was announced.

“We only utilize around 5 percent of geothermal potential. I estimate that around 6,000 megawatts of electricity can be generated [from geothermal],” Jero said.

While a more attractive tariff will increase private investor interest in geothermal projects, investment returns are just one of the limitations curbing activity.

Motofumi Kohara from the Japan International Cooperation Agency, a government body involved in Indonesia’s infrastructure development, said the issue of complicated permits and the risk that investors must carry acted as constraints on the development of geothermal projects.

Speaking at the Indonesia International Infrastructure Conference and Exhibition 2012 currently taking place in Jakarta, Kohara said the government needed to mitigate the risk borne by independent power producers during the exploration stage of geothermal projects.

Furthermore, he noted, half the geothermal projects in the second phase of a government program to fast-track the development of electricity generators require permission to use forests, another concerning issues.

While investors in geothermal projects may soon enjoy a higher return, a cautious approach is still evident in the hydropower sector.

Josef M. Ullmer, the president director of Andritz Hydro, an equipment distributor for hydropower plants, called on the government to show more commitment in its push for hydropower projects.

“Hydropower is the cheapest of all energy sources and has a 90 percent efficiency rate,” he said.

Related Article:

Pertamina’s Geothermal Push Gets a Price Boost

Pertamina’s Geothermal Push Gets a Price Boost

Jakarta Globe, August 15, 2012

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Pertamina Geothermal Energy, a subsidiary of state energy firm Pertamina, plans to develop another eight geothermal projects after the government announced that the electricity price from geothermal power plants would be increased to make the sector more attractive.

Work on the projects is expected to begin next year but there was no information on where they would be located.

Slamet Riyadhi, president director of PGE, said the company planned to spend an additional $2.7 billion on geothermal projects. That is in addition to the $6 billion it has invested in the ongoing development of 10 geothermal projects.

The new projects would generate 900 megawatts of electricity, he said. The 10 projects already in development would have an estimated combined capacity of 962 megawatts once completed.

The energy and mineral resources minister, Jero Wacik, announced last month that the purchase price of electricity produced by geothermal sources would be increased from 9.7 cents per kilowatt hour to between 10 cents and 17 cents per kilowatt hour, depending on the location.

“If the government makes this price increase official this year, we can start the process of surveying for the new projects next year,” Slamet said.

He said the internal rate of return, a measure of profitability on investment, for geothermal projects under the current price of 9.7 cents per kilowatt hour was 9 percent.

“That is well below the ideal 11 to 14 percent rate for investment in renewable energy,” Slamet said. He added that an 11 to 14 percent rate of investment return could be reached under the proposed new price.

He said the current price structure left investors reluctant to develop geothermal projects, particularly with the additional upstream risks they faced.

“Now they will have no more excuses,” he said.

Slamet said the Energy and Mineral Resources Ministry and the Forestry Ministry had signed a memorandum of understanding on the utilization of forest areas for geothermal projects that could speed up the process of obtaining permits.

“Now we can secure a permit for a geothermal project a month or two faster than usual,” he said. “This is good. Now we can achieve our target of generating 2,000MW of electricity in 2018, ahead of our previous timeline of 2020.”

Indonesia is said to hold some 40 percent of the world’s geothermal energy potential. Unlike other energy sources, however, geothermal energy cannot be transported so a power plant must be built near the source to tap it, making investment more expensive.

Investor Daily

Indonesia 's PIP allocates Rp1.8 trillion for geothermal investment

Antara News, Sat, July 14 2012

Jakarta (ANTARA News) - Government investment agency Pusat Investasi Pemerintah (PIP) has allocated around US$192 million for investment in the geothermal sector in the second semester this year, PIP chief Soritaon Siregar said.

"A total of US$132 million of the funds will be for exploitation activities and US$60 million for two projects now still under exploration," he said in Banten on Saturday.

He said the investment for geothermal projects is indeed huge because the government is striving to increase electricity supply from renewable sources.

On the other hand, he said, the geothermal investment is also risky as only three out of ten explorations could be continued to a exploitation stage.

In view of that it is difficult to expect private parties to develop the business by themselves, he said.

"To reduce risks PIP is now setting up a team of the best consultants in the world hailing from Japan, Norway, Australia and the US," he said.

They will be assigned to appoint technical, legal and financial consultants and supervisors to analyze the investment risks seen from various fields.

Regarding mini hydro-power projects (PLTMH) PIP meanwhile has allocated around Rp649 billion distributed to 29 applicants for investment loans, he said.

"All the applicants for the PLTMH projects are private because the value of the project is too small to be carried out a state-owned enterprise," he said.

He said the PLTMH projects are located in Sumatra, Java and Sulawesi.

Besides geothermal and PLTMH projects PIP also plans in the second semestet to purchase securities worth Rp1.5 trillion and carry out a public-private partnership project worth Rp100 billion.

Total funds provided for investment in the same year is Rp13.280 trillion.

Editor: Suryanto

Indonesia, Germany team on geothermal energy

Deutsche Welle, 12 July 2012

Indonesia is said to have the world's largest geothermal energy reserves but their potential remains mostly untapped. That could soon change with German know-how.

With 240 million people, Indonesia is the biggest and fastest growing market in Southeast Asia. And as the country's economy grows, so, too, does its demand for electricity.

President Susilo Bambang Yudhoyono is a self-acclaimed fan of "green energy." In a meeting with German Chancellor Angela Merkel during her recent visit to Indonesia, Yudhoyono talked about one of his major goals: to give greater focus to alternative energy resources such as wind, solar and, in particular, geothermal heat.

Untapped resources

Volcanic areas, like Indonesia, are a rich source of geothermal energy. The island nation is situated on the so-called "Ring of Fire" volcanic belt, which encircles the Pacific Ocean, accounting for 40 percent of the world's geothermal reserves - more than any other country. 

Indonesia lies in Pacific's volcanic
'Ring of Fire'

The government has pinpointed 250 locations where geothermal energy can be produced, including Seulawah on Sumatra, Ijen on Java and Tomohon on Sulawesi. Today, just 15 geothermal plants are in operation, with the last one going live in 1997.

Not all geothermal fields, however, are suited for commercial energy use because they don't have the right temperature, pressure or permeability.

"With geophysical, geochemical and geological tests, you try to get a picture of what it looks like inside the Earth," says Thorsten Schneider from Germany's KfW Entwicklungsbank in Jakarta.

After the test, drilling begins, representing a huge financial risk, according to Schneider. "A typical drilling costs between 3 and 5 million US dollars," he says. "And if you find nothing, the money is gone."

Expensive undertaking

Building a geothermal power plant is an expensive undertaking. Its costs are estimated to be two to three times more than that of a coal power facility, according to Schneider. 

Volcanic areas are ideal sites for
geothermal energy plants

In addition to costs, Indonesia's excessive bureaucracy, tough regulations and strict government price controls add to the challenges. So the country, concedes Schneider, "has a bit of a problem at the moment."

Most of the geothermal power plants in operation in Indonesia today are run by the state-owned natural gas and oil company PT Pertamina.

But in a move to tap into the country's vast geothermal reserves, the Indonesian government has opened the doors to foreign investment and know-how.

German money and know-how

Today, Germany is one of the biggest supporters, together with Japan, Australia and the US. The German government has earmarked 300 million euros in aid. 

Although Germany is not a "volcanic country," it has extensive geothermal expertise, admits Professor Ernst Huenges from the German Research Center for Geosciences in Potsdam.

"Currently in Indonesia, only geothermal steam is used," he says. "In Germany, by comparison, we're also able to utilize the energy from hot water" to significantly increase power production "by as much as 60 gigawatts."

'Demanding target'

Potential business opportunities also exist for German companies, points out KfW's Schneider. "Building power plants, with all the electronics and other technical equipment involved, is certainly of interest to German businesses," he says.

Merkel and Yudhoyono have agreed to collaborate in increasing Indonesia's share of renewable energies to 25 percent by 2015.

Schneider calls the target "utopian." Merkel, on the other hand, prefers more diplomatic language, referring to the agreement as a "demanding target," which Germany can help Indonesia achieve.

Few will disagree, however, that there is plenty of work to be done - and some risk involved - if Indonesia wants to tap its vast reservoirs of geothermal energy deep down.

Author: Monika Griebeler / jrb

Editor: Sarah Berning

Related Article:

Geothermal Power Could Help Bridge Indonesia's Energy Gap: WWF

Geothermal Power Could Help Bridge Indonesia's Energy Gap: WWF

Jakarta Globe, Fidelis E. Satriastanti,  July 06, 2012

An employee of Indonesia Power walks near a thermal pipe at Kamojang
 geothermal power plant near Garut, in Indonesia's West Java province in this
 file photo. Indonesia invested in green energy like geothermal power at a greater
rate than G20 countries like the United States, India and Japan. (Reuters Photo)      

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WWF Indonesia launched a report on Thursday which mapped out the country’s geothermal resources in a bid to promote the use of alternative energy sources.

The report, titled “Igniting the Ring of Fire: A Vision to Develop Indonesia’s Geothermal Power,” said Indonesia had the world’s biggest geothermal potential as the country sat on the world’s most active volcanic belt, the Ring of Fire, which frames the Pacific Ocean.

There could be up to 29 gigawatts of electricity produced if Indonesia was into tap all of its geothermal resources, the report said.

That is more than enough energy to fulfil the needs of two of Indonesia’s most populated islands, Java and Bali, where demand peaked in April at 20.1 gigawatts.

Currently, Indonesia only uses 1.2 gigawatts of geothermal power, the environment group said.

“The WWF, globally, has launched a mission of 100 percent renewable energy by 2050. It is an ambitious mission but hopefully serves as an inspiration. [The] Ring of Fire [project] wants [to accomplish] that mission,” WWF project coordinator Indra Sari Wardhani said.

Indra said that Indonesia must harness geothermal energy by not overlooking environmental, social and economic impacts as well as the capacity of the regional administrations and local residents.

“Challenges for developing geothermal [power] start with regulation and governance. In terms of regulation, there is an overlap between geothermal areas and forest areas,” the WWF coordinator said. “Ways need to be found so forest conservation is not sacrificed. There needs to be best practices [of geothermal harvesting] which can serve as benchmarks.”

The government has said it wants 25 percent of power used in the country to come from renewable energy sources and a 25 percent drop in carbon emissions by 2025. But the WWF said Indonesia could exceed that by harnessing geothermal energy, which now only contributes 1 percent of the country’s energy needs.

Last month, Energy Minister Jero Wacik said the government planned to directly award more concessions to companies to speed up the sector’s development.

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