Indonesia issues new regulation to entice investments on geothermal power plants

Jakarta at Night (Source: Flickr, CC, By: basibanget)

Indonesian President Joko Widodo has officially issued Presidential Regulation Number 112/2022 in a bid to attract more investors to develop geothermal power plants in the country. The new regulation with the title “Acceleration of Renewable Energy Development for the Provision of Electricity” sets the prices for power from renewable energy sources sold to local utility PT PLN (Persero).

Better prices for geothermal power

The purchase price of electricity from geothermal power plants is listed in Appendix I of the regulation. The prices are as follows:

Geothermal power plants (wholly built by business entities and wholly or partially built by the central and regional governments)

• 10 MW capacity, the highest benchmark price is 9.76 cents/kWh x F (location), in the first 10 years. Meanwhile, the price for the 11th – 30th years reaches 8.30 cents/kWh.
• Capacity 10 – 50 MW, the price is 9.41 cents/kWh x F in the first 10 years, while in years 11 – 30 years the price becomes 8.00 cents/kWh.
• Capacity 50 MW – 100 MW, the price is 8.64 cents/kWh x F in the first 10 years. While the 11th – 30th years are only 7.35 cents/kWh.
• Capacity of 100 MW and above, the price is 7.65 cents/kWh x F in the first 10 years. While the 11th – 30th years are only 6.50 cents/kWh.

Geothermal steam power equivalent to electricity:

• Capacity – 10 MW, the highest benchmark price is 6.60 cent/kWh x F (location), in the first 10 years. While the price for years 11 – 30 reaches 5.60 cent/kWh
• Capacity 10 – 50 MW, the price is 6.25 cents/kWh x F in the first 10 years, while in years 11 – 30 years the price becomes 5.31 cents/kWh
• Capacity 50 MW – 100 MW, the price is 5.48 cents/kWh x F in the first 10 years. While the 11th – 30th years only 5.31 cents/kWh.
• Capacity of 100 MW and above, costs 4.48 cents/kWh x F in the first 10 years. While the 11th – 30th years are only 3.81 cents/kWh.

The magnitude of the location factor F depends on the location. The lowest values are in Java, Madura, and Bali (1.00) and the highest are in Papua (1.50).

According to PT Supreme Energy President and CEO Nisriyanto mentioned that the current selling price of geothermal electricity was based on the Basic Cost of Supply (BPP) of electricity on  the island of Java. This is currently set at a maximum of 6 cents per kWh. This means that geothermal power prices under the current regulation are higher and better. However, Nisriyanto said that it still has to be seen whether this will affect the feasibility of geothermal projects.

Other development incentives

Aside from setting the selling price of electricity from geothermal power plants, the new regulation also has other provisions that incentivize geothermal investment. Under Article 27, the government can provide support to the implementation of geothermal development through the following means:

• Assignment of additional geothermal data and information;
• Assignment of preliminary and exploratory surveys;
• Risk bearing (derisking), and
• Financing facilities

The announcement comes at the conclusion of the 8th Indonesia International Geothermal Convention & Exhibition (IIGCE) 2022. During the event, Minister of Energy and Mineral Resources Arifin Tasrif unveiled the target of 3.3 GW installed geothermal capacity by 2030.

Source: CNBC Indonesia