JAKARTA Feb 10 (Reuters) - Indonesia's energy ministry said on Thursday it will issue a decree ordering state-owned utility PT Perusahaan Listrik Negara (PLN) to buy electricity generated from geothermal power plants at a ceiling price of 9.7 U.S. cents per kilowatt hour.
The regulation is expected to pave the way for 31 geothermal power projects that have been hampered, because PLN has previously not signed power purchasing agreements with geothermal developers, saying it is still waiting for a legal basis to buy the electricity.
"We expect to sign the decree soon and we hope that PLN can be confident to buy geothermal," Luluk Sumiarso, the director general for renewable energy at the ministry, told reporters.
With hundreds of active and extinct volcanoes, Indonesia holds an estimated 28,000 megawatts (MW) of geothermal energy potential, but only produces 1,189 MW in geothermal power. The country aims to produce another 3,967 MW by 2014.
The potential remains largely untapped so far because the high cost of geothermal energy makes the price of electricity generated expensive.
PLN says it pays around 9 U.S. cents per kilowatt hour for power from small conventional energy plants but only around 6.5 U.S. cents for power from bigger plants.
According to the Japan Internatioanl Cooperation Agency, the price for geothermal power should be set at 11.9 cents to make projects economically feasible.
The Indonesian Geothermal Association says the developers of the 31 projects have secured geothermal concessions, but cannot further develop them as the market for the power has not been certain.
"We hope the ministerial decree will be effective soon and will provide legal clarity for the geothermal developers," said the association's chairman Surya Darma.
Firms interested in developing geothermal power in Indonesia include India's Tata Power , Indonesia's Medco Energi and global major Chevron .