Geothermal power plant in Indonesia. (Photo: API)
The latest report from the Indonesian Geothermal Association (API) reveals that the geothermal power generation capacity is projected to increase by only 43MW by 2023, falling significantly short of the 190MW target. Experts attribute this shortfall to challenges in obtaining development licenses, excessive localization requirements for components, and prolonged negotiations with the state-owned electricity company (Perusahaan Listrik Negara, PLN) over the Power Purchase Agreements (PJBL).
API General Secretary, Riza Passiki stated that the these issues have significantly impacted on obtaining financing from financial institutions.
Among the newly added geothermal power generation capacity in Indonesia last year, the largest contributor was the Sorik Marapi Unit-4 power plant with a power generation of 27MW, followed by the Dieng Small Scale power plant providing 12.8 MW, and the Sokoria Unit-2 power plant supplying 3 MW. Geothermal power is mainly sourced thorough power purchase agreements signed between PLN and the power plants. Riza mentioned, “Only a small portion of geothermal field power is obtained through competitive bidding auctions.”
Muara Laboh Geothermal Power Plant in Indonesia. (Photo: Inpex)
Due to increase in power demand, Indonesia’s Ministry of state-owned enterprises (BUMN) hopes that PLN will purchase over 1 GW of new and renewable energy (EBT) in 2024. Kartika Wirjoatmodjo, the deputy minister of state-owned enterprises, stated at a public forum last year, “We want to bid but not in a small scale like 50 MW or 100 MW, instead, we are targeting 1 GW and 2 GW to increase the capacity of new and renewable energy generation to 24 GW within the next 10 years.”
However, Kartika also mentioned that large-scale geothermal power procurement requires significant funding. Considering the financial condition of PLN and the limited borrowing capacity in Indonesia, there is a reliance on foreign investments to provide long-term financing and substantial participation from major EBT players with abundant financial resources.
According to Indonesia’s National Electricity Supply Business Plan (RUPTL 2021-2030), the anticipated increase in geothermal power installation capacity by the year 2030 is expected to reach 3,355 MW. The targets for 2024 and 2025 are set at an addition of 141 MW and 870 MW, respectively.”
Indonesia, located within the Pacific Ring of Fire, possesses 40% of the world’s geothermal reserves. According to the data from Ministry of Energy and Mineral Resources Geological Agency, as of December 2021, the country’s total geothermal potential is approximately 23.6 GW, ranking second globally. Geothermal Power Plant (PLTP) projects are pivotal for Indonesia’s energy transition. As per the National Energy General Plan (RUEN), Indonesia aims to increase the share of renewable energy in electricity generation to 23% by 2025 and further elevate it to 31% by 2050.