The government has set the benchmark selling price for geothermal power generated by independent power producers at between 5.9 U.S. cents to 10 cents per kilowatt hour (kwh).
Director General of Electricity and Energy Utilization Purwono told The Jakarta Post on Tuesday the calculation of the prices was based on the formula generally used by state power firm PT PLN.
"We have agreed the tariff is equal to 80 percent of the total costs PLN usually spends to produce power," Purwono said.
Based on the prices already set by the government, the power producers can only sell the electricity to PLN, as the sole power distributor for households and most businesses.
However, prices for the geothermal power vary between regions, with power plants located in remote areas getting higher prices due to higher production costs, Purwono said.
"Based on our calculation, the power produced in Java will get the lowest price of 5.9 cents, while those located in remote areas (outside Java) will get the highest ceiling of 10 cents," he said.
Purwono said the calculation of the prices excluded potential proceeds geothermal developers could tap from global carbon trading.
Energy and Mineral Resources Minister Purnomo Yusgiantoro has called on geothermal energy companies to take benefit from the global carbon credit program in order to compensate for their huge investment costs.
By taking part in the program, the producers can eventually sell the power at reasonable prices to PLN.
PLN, which usually sells electricity to consumers at an average price of 6 U.S. cents per kwh, has opposed benchmark prices of between 7 cents and 8 cents per kwh proposed by geothermal developers.
Purwono said PLN had already agreed with the prices set out by the government.
"They (PLN) won't mind with the prices as they are relatively feasible, even for (geothermal) development in remote areas," he said.
The Indonesian Geothermal Association, however, says the benchmark prices are too low and are unfeasible for investment in geothermal sector to gain the maximum result.
"The system used by the government to determine the prices based on PLN production costs can create uncertainty as the costs can fluctuate," Alimin Ginting, the association's chairman, told the Post.
Power production costs can change overnight based on the fluctuation of global oil prices.
Indonesia, Southeast Asia's largest economy, holds 40 percent of the world's geothermal reserves.