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Indonesia is the world’s 4th most populous nation, with 260 million people. The country is undergoing rapid urbanization and
industrialization, with electricity consumption projected to grow at 8.5% per year until 2025. Yet, over 80% of Indonesia’s electricity
systems are prone to frequent or sporadic power outages. Moreover, despite health and environmental concerns, Indonesia continues to generate 88% of its electricity from fossil fuels. While the nation is endowed with 35% of world’s geothermal potential, the nation is exploiting less than 6% of this potential at present. Government
initiatives to increase geothermal have seen some success, but substantial technical, financial, and political barriers prevent greater
utilization of this clean, abundant, and stable energy source.
How Can Indonesia Benefit from Geothermal Energy?
Geothermal is relatively clean, emitting only 5% of the CO2 and <1% of the SO2/NO2 of an energy-equivalent coal plant. Clean energy is especially important in Indonesia: an estimated 6,500 Indonesians die prematurely from coal pollution, and 58% of people in Jakarta (population ~10 million) are afflicted by health conditions attributed to air pollution.
Geothermal energy provides clean, safe and reliable electricity to meet Indonesia’s rising energy demand.
What obstacles are preventing its wider adoption in Indonesia? What actions can be taken to break the gridlock?
Accelerating Geothermal Development in Indonesia:
Addressing Underutilization of Geothermal Energy
Indonesia’s electricity consumption is expected to grow at 8.5% a year until 2025. With currently known Indonesian fossil fuel reserves rapidly dwindling and projected to be depleted in as little as 12 years, accelerated development of alternative energy sources is imperative to continue progress in economic development, electrification, and poverty alleviation.
1 Meeting growing electricity needs and increasing electrification
2 Reducing carbon emissions and health impacts from pollution
To meet its COP21 obligations, Indonesia must reduce its carbon emissions by 29% by 2030–a feat unachievable when 88% of electricity is generated from fossil fuels
Geothermal resources are abundant near densely-populated areas of the western islands (Java/Sumatra), as
well as in poorer eastern islands of the country
3 Reliable, baseload energy source free from fuel price fluctuations
As geothermal energy uses heat from the ground, it has three specific benefits:
1) The energy is reliably and constantly produced, compared to other renewables such as wind and solar that depend on weather conditions
2) Safe relative to coal (air pollution) or nuclear (meltdown risk)
3) As the resource is freely available below our feet, geothermal energy is not impacted by global fossil fuel price fluctuations, enhancing both domestic energy security and economic stability
Kevin Fan, University of British Columbia
Sang Nam, McGill University
Geothermal heat flow in Indonesia, in units of milliWatts per metre squared. Data has been interpolated (owing from the relatively sparse data coverage in some regions) and smoothed.
Source: Helen Smyth, SE Asia Research Group, Department of Geology, Royal Holloway University of London, Egham, Surrey (http://searg.rhul.ac.uk/current-research/heat-flow/).
Situated favourably along the Pacific Ring of Fire, Indonesia possesses the largest number of historically active
volcanoes of any country (78), in addition to one of the longest
volcanic belts. The region’s endowment with characteristically
high heat flow values (up to 2.5x the average continental value) can be
attributed to volcanic and magmatic heat sources, in addition to some
non-volcanic sources, such as extinct magmatic systems at old subduction zones, tectonic extensional domains,
and intra-cratonic basins.
Did you know?
Technical
Financial
Political
Exploration Construction
Multiple exploration wells need to be drilled to confirm the geothermal resource, at costs of US$2-6M per well
Dozens of further wells must be drilled, in addition to other
construction costs, costing hundreds of millions of dollars
Geothermal plants are often cheaper to operate than coal or oil, largely because the resource does not need to be purchased
FundingDisintegrated oversight
While Indonesia recognizes the benefits of geothermal energy, government funding for projects are limited
Multiple ministries are responsible for different parts of geothermal energy, making it difficult to coordinate a harmonious, cooperative strategy. Some ministries even have incentives to deter geothermal development. A World Bank expert we spoke with highlighted that this political situation presents a major challenge
Ministry of Energy and Mineral Resources
Operation
Coal or Gas
US$4-19 ¢/kWh
Geothermal
US$1-3 ¢/kWh
Geothermal
US$400M
Coal or Gas
US$150M
Total investment needed for 50MW geothermal
plant vs. coal plant
…but geothermal has competitive
operating costs!
Bottom Line
The Indonesian government must work closely with the private sector to reduce the inherent risk of initial geothermal exploration
Pro-Geothermal Counter-Geothermal
Wants to capitalize on abundant geothermal resources to meet increasing energy demand and diversify power mix
Ministry of Finance
Reluctant to use government funds for geothermal exploration and development, as payoff is uncertain and deferred years into the future
Ministry of State-Owned-Enterprises
Controls state companies in charge of geothermal development, but prefers to maximize profits by exploiting fossil fuel energy
Bottom Line
Geothermal energy should be
recognized as an important source of future energy and
given strong cross-ministerial support
Indonesia lacks detailed national geological survey
data; data reporting is not standardized
Lack of quality/quantity of data makes it costly to find new areas with high
geothermal potential
A World Bank expert we interviewed says more data will make it easier and
cheaper for private companies to explore for new sites
Developing geothermal energy is expensive
Geothermal energy has attractive operating costs, given that the renewable resource is freely available in the ground. However, as high exploration and construction costs make it risky to invest in geothermal energy, private companies are reluctant to develop it. Moreover, as it takes 5-7 years to begin operations, revenues are slow to materialize. Likewise, the Indonesian government lacks funds to carry out all full development of geothermal power by itself. To spur geothermal development, the government must provide incentives for the private sector to invest in geothermal energy.
Dajarat III Power Station, West Java. 290MW capacity
What are the problems and why do they persist?
The spatial distribution of heat flow measurements (blue points) in Indonesia illustrates large areas with sparse data.
Problem Landscape
Solutions Landscape
Did you know?
Iceland had a government-led
geothermal industry until the
1980s, after which it was privatized
Did you know?
Private insurers such as Munich Re
sell geothermal exploration insurance to developers
Technical
Indonesia is working with others to resolve technical issues
Did you know?
Geothermal plants can potentially
operate for centuries, with very low operating cost!
But what’s still
missing?Follow the Leader
Iceland, a leader in geothermal, set up a non-profit, state-owned institution
funded by the private sector to perform exploration and provide geological data
Kiwi Data Isn’t Free
New Zealand government provides geothermal data to private companies
and charges them for usage
Financial
But what’s still
missing?
Policy changes were implemented to alleviate financial concerns
Let’s Share It, Pal
Japanese government shares up to 40% of exploration costs with private
companies
Canadian Miners, eh?
Tax law allows investors of private mining companies to take tax credit for
exploration costs, giving them immediate cash return
Political
But what’s still
missing?
Various government policies have been enacted to prioritize geothermal
Concluding ThoughtsWhen it comes to development-related problems, there is an abundance of research on what needs to be done; what
is difficult is the gathering of institutional and popular support to implement such ideas. Developing geothermal energy in Indonesia remains a challenge, but we are confident that the Indonesian government, development
agencies, and many private companies will continue their hard work to utilize this clean, long-term supply of energy in pursuit of nationwide electrification, poverty alleviation, and mitigation of climate change in the 21st-century. We owe
much to the experts we interviewed, who generously shared their insights and experience with us.
Indonesia’s geological data remains lacking in quality and quantity. The government should improve it substantially to properly examine geothermal potential in different
areas. All or parts of the cost can be recouped from the private sector.
Due to its vast geothermal potential, Indonesia must engage the private sector to develop geothermal energy alongside the government with new incentives to reduce
and mitigate exploration risk.
The state-owned geothermal developer (Pertamina Geothermal Energy) should be given greater autonomy, budget and mandate to explore and develop geothermal energy.
DD
International Agencies: The World Bank and the Asian Development Bank provide technical expertise
Foreign Governments: New Zealand is helping to update Indonesia’s geological data, while Japan provided research on geothermal potential
Exploration Funding: Indonesia set up a US$300M Geothermal Fund to finance government-led exploration
Revamped Electricity Pricing: Provides guaranteed prices for private geothermal electricity producers, removing revenue uncertainty
Bold Commitments: Stated target to more than quadruple geothermal capacity by 2020
Faster Process: Central government streamlined and expedited the development process by taking greater control over geothermal energy from regional governments
What has Indonesia done? What’s still missing?
New Regulations: Geothermal plants now allowed in forests with government permissions, opening up >50% of country’s total geothermal potential
Academia: Establishment of a Masters Program in Geothermal Engineering at ITB* to build local industry capacity
*ITB (Institut Teknologi Bandung)