Large budget cuts to geothermal drilling program in Indonesia

With the world’s second largest geothermal potential behind the United States, Indonesia continues to lack the seriousness in tapping it effectively, so an article by CNBC in Indonesia this week. With an estimated potential estimated at around 24,000 MW, its current utilisation stands at an installed generation capacity of 2,131 MW, or only 8.9% of the total existing resources.

There have been made various efforts to push geothermal development in the country. One of those efforts to help optimize geothermal resource development and also reduce the price of geothermal electricity is that the government participates in drilling geothermal exploration wells. Geothermal drilling will be carried out by the Geological Agency of the Ministry of Energy and Mineral Resources (ESDM) using the State Revenue and Expenditure Budget (APBN).

The start of the drilling campaign was expected at the beginning of this year, but the targeted plan does not seem very sustainable. Reason is the expected cuts to next year’s budget for the drilling of those geothermal exploration wells. This was revealed in the Hearing Meeting (RDP) of the House of Representatives Commission VII with the Geological Agency, Monday, June 7, 2021.

Head of the Geological Agency of the Ministry of Energy and Mineral Resources, Eko Budi Lelono, explained that the budget for the Mineral, Coal and Geothermal Resources Center work unit in 2022 is proposed to be cut by Rp 302 billion to Rp 68 billion from this year’s budget of Rp 370 billion. The geothermal drilling budget is included in the work unit.

“If we look at this, the comparison of the decline in the 2021 and 2022 APBN per work unit which is very significant is related to geothermal development,” he explained during the RDP with Commission VII DPR RI, this week.

He further said that the Geological Agency was given a mandate to carry out geothermal drilling in two locations this year with a value of around Rp. 290 billion, but next year, according to him, the conditions were not possible, so it was cancelled.

“In 2021, we are given a mandate to drill geothermal in two locations for more than Rp. 290 billion. In 2022, because conditions are not possible, it will be eliminated, including related to data surveys, 2D seismic data acquisition, 2022 is not available, so the budget will decrease significantly,” he explained.

This budget reduction also has an impact on providing recommendations regarding the prospect of geothermal next year. He said that in 2021 it is targeted that there will be eight recommendations related to the prospect of geothermal resources and reserves, while in 2022 there will be no output at all.

“The prospect of geothermal resources and reserves is eight recommendations in 2021, while in 2022 there is no output because there is no budget and 2D seismic data. Recommendations for 2021 compared to 2022, in 2022 there are no recommendations. This is significant what happened in 2022, dropped drastically,” he explained.

He said the reduction in the geothermal drilling budget was part of the plan to cut the state budget posture for the Geological Agency in 2022.

“In 2021 it will be around Rp 767.6 billion, while in 2022 the Geological Agency’s budget will probably only be Rp. 368.8 billion. So, there is a 48% decrease from the 2021 DIPA,” he said.

Previously, Director of Geothermal at the Directorate General of New, Renewable Energy and Energy Conservation (EBTKE) of the Ministry of Energy and Mineral Resources (ESDM) Harris said, in order to reduce the price of geothermal electricity which is still expensive, the government will take part in drilling geothermal exploration wells.

He said, the price of geothermal electricity is currently still in the position of a dozen cents per kWh, much more expensive than other EBT plants such as the Solar Power Plant (PLTS), which currently ranges from 3.6-3.7 cents per kWh. We reported previously on the question if geothermal is actually fairly priced in Indonesia.

“Geothermal has not been able to get there (3-4 cents per kWh), our target is below 10 cents dollars, which is 7-8 cents per kWh,” he said in a discussion at the Indonesian Geothermal Power Forum, in May 2021.

If the price of geothermal electricity is still expensive, then this will have an impact on the government’s electricity subsidy through PT PLN (Persero). This is because electricity tariffs are currently regulated by the government.

For this reason, according to him, the government is also trying to reduce the price of geothermal electricity by providing incentives to developers.

This year, the government targets to participate in drilling geothermal exploration wells in Cisolok, West Java and Nage in East Nusa Tenggara.

Source: CNBC Indonesia