JAKARTA (TheInsiderStories) – World Bank approved a US$150 million loan for Indonesia to scale up investments in geothermal energy by reducing the risks of early-stage exploration, it said in an official statement release today (09/27). The loan is accompanied by $127.5 million in grants from the Green Climate Fund and the Clean Technology Fund, said the Bank.
As reported Indonesia needs $15 billion in investment to meet its target of reaching 7.200 megawatts (MW) of geothermal power capacity by 2025. The capacity would be an increase from less than 2.000 MW of geothermal power currently.
Geothermal energy is expected to play a significant role in reducing Indonesia’ greenhouse gas emissions. As a clean and renewable energy source that provides power continuously, geothermal can reduce the country’s dependence on coal-fired power and other fossil fuels. If geothermal resources can be accessed easily, costs are competitive with coal and natural gas.
“The government of Indonesia has a strong commitment to encourage developers’ participation in exploring the geothermal potential and to provide support through this risk mitigation facility,” said minister of finance Sri Mulyani Indrawati.
Under the Indonesia Geothermal Resource Risk Mitigation (GREM) project, the financing will help public and private sector developers to mitigate risks in exploration of geothermal resources, including covering a part of the cost in case of unsuccessful exploration. The project will also finance technical assistance and capacity building of key stakeholders in the geothermal sector.
“To achieve the government’ target of 23 percent renewable energy mix by 2025 requires contributions from geothermal development of about 7 percent or equal to 7,000 MW. It is an ambitious and huge development with a total investment of $35 billion,” adds by said FX Sutijastoto, director general at energy and mineral resources ministry.
Indonesia is currently a net importer of oil and continues to rely heavily on fossil fuels for power generation. Of the total installed national power capacity, 88 percent is sourced from fossil fuels while 12 percent comes from renewable energy.
Indonesia now has 1.9 Giga-watts (GW) of installed geothermal power and plans to develop an additional 4.6 GW) to help meet the government’s target of renewable energy.
“The World Bank is committed to helping Indonesia achieve universal access to electricity as for a cornerstone for economic growth, job creation, and prosperity for the citizens of Indonesia,” said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste.
Based on government data, until now only 1,948.5 MW or 7.8 percent of the geothermal potential is utilized. To be able to boost 23 percent of renewable energy in 2025 geothermal is expected to be 7,200 MW.
“So an additional 5,000 MW is needed with funds of around $15 billion in the next 5 years,” said Sutijastoto.
Recently, Vice President Jusuf Kalla criticized the slow progress of geothermal power plants in Indonesia. Though the second largest geothermal power user in the world has quite a long experience.
“Everything has been decades, so if we can say that although the Chairman of the conference has been doing 7 times the progress is very slow. 7 times making exhibitions, the results have only reached 2,000 MW, 30 years of experience,” Kalla said.
Not only geothermal, but Kalla also assessed the development of other renewable energy is also slow. For decades the new 8,000 MW renewable energy included hydropower, including some of it, wind, but the biothermal power plant has been a long time. So basically technology is not a problem because it can be mastered more easily, he added.
Therefore, the Vice President urges the EMR ministry, state utility company PT Perusahaan Listik Negara and other stakeholders together to solve the problem. Moreover, the government has targeted the use of new and renewable energy in the electricity sector to reach 23 percent by 2025.
And, of the total energy mix in the electricity sector, contributions from geothermal energy are expected to contribute up to 11 percent by 2025. Coal currently makes up around 60 percent of the country’s energy mix versus about 5 percent from geothermal power, according to data from PLN.
The MEMR is drafting up plans to accelerate ongoing projects to meet the target, Sutijastoto said, including reviewing the possibility of the government reimbursing some part of the development costs.
“We will see, things such as infrastructure, may be possible to be reimbursed by the government,” he said, referring to items such as roads or bridges built by the company to reach the geothermal power site.
PT Pertamina Geothermal Energy, a unit of state energy company PT Pertamina, is aiming to invest $2.7 billion in geothermal power through 2026, President Director Ali Mundakir told reporters at the conference. The company aims to increase its geothermal capacity to 1.1 GW by 2026 from 672 megawatts currently.
The government has also prepared a number of regulations that support the development of geothermal energy. Among other things, Government Regulation No.79/2014 concerning National Energy Policy, Presidential Regulation No.22/2017 concerning the National Energy General Plan, and MEMR Regulation No.50/2017 concerning Utilization of Renewable Energy Sources for the supply of electricity.
In these regulations, the government established a mechanism for selling prices of renewable energy electricity that was fairer for investors and PLN. In addition to these regulations, the government has also provided a legal umbrella for the use of renewable energy sources. These rules become the foundation in the utilization and management of geothermal energy.
Sutijastoto said geothermal energy has a strategic meaning for national energy security through the substitution of imported petroleum which is around 100,000 barrels per day until 2025. Petroleum itself is used to make Diesel Power Plants. Meanwhile, products derived from petroleum include LPG, aviation fuel, avgas, kerosene or kerosene, gasoline, diesel, asphalt, and paraffin.
In terms of operational effectiveness, geothermal can be operated up to 90 percent with an operating time of 30 years. Compare with coal which is only effective 60 percent of capacity. For diesel-electric power, it is even effective only 30 percent of capacity, and the operating time is only 10-20 years.
Not only that, but geothermal energy is also from the environmental side, emissions from geothermal energy are only around 75 grams per Kwh, far lower than the fuel oil which reaches 772 grams per Kwh. It is also much lower when compared to the new electric power whose emissions reach 945 grams per Kwh, Sutijastoto ended.
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