Geothermal Power Projects Emerge in Indonesia

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--A consortium made up of Indonesia's Perusahaan Listrik Negara (Jakarta) and Supreme Energy (Jakarta), with Marubeni Corporation (OTC:MARUY) (Tokyo, Japan) and GDF Suez (Paris, France), has signed a power purchase agreement (PPA) for a geothermal project in southern Sumatra. The three latter companies will construct a 220-megawatt (MW) power plant.

Under the agreement, Perusahaan Listrik Negara will pay 8.86 cents per kilowatt hour (kWh) for the power output from the $2.2 billion facility. The PPA will extend over a period of 30 years. The plant is scheduled to start operational generation in 2017.

Supramu Santosa, president director of Supreme Energy, said that the Rantau Dedap plant is one of three geothermal projects that the company is currently developing.

"The investment value for the Rantau Dedap plant is around $700 million, and the total investment value is estimated at $2.2 billion," Santosa said.

Perusahaan Listrik Negara's Renewable Energy Chief, Muhammad Sofyan, said that the company planned to sign a minimum of 15 PPAs for geothermal projects in the near future, but did not specify the projects.

Indonesia sits on two volcanic chains, and is estimated to hold about 40% of global geothermal reserves. Supporting infrastructure is a major factor in the viability of geothermal power projects. Unlike other energy sources (coal, oil and gas), the potential cannot be transported, so the geothermal power plant must be sited near the source it is going to tap. This dictates a different investment and project profile for geothermal power, although it can be very sustainable and renewable after the initial investment.

In mid-2012, Pertamina Geothermal Energy, a subsidiary of state-owned power utility Pertamina (Jakarta), announced plans to develop eight additional geothermal projects after the government announced that the tariff paid for power from geothermal plants would be increased to make the sector more attractive to investors and developers.

Pertamina planned to spend $2.7 billion on geothermal projects, which is in addition to the $6 billion the company has invested in the development of 10 geothermal projects. The new projects would generate 900 MW, while the projects in development would together have a capacity of 962 MW. In terms of the end user, the national power grid, the horse trading on the purchase price per kWh continues; however, the government, state-owned power companies and independent power producers are close enough to keep driving Indonesia's geothermal power market. Tariff terms and conditions apply to projects. For related information, see May 22, 2012, article -Indonesia Invests to Power Up Project Rollout.

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