Geothermal Industry Urges Government to Revise Presidential Regulation to Boost Investment
JAKARTA – Geothermal industry players are urging the government to immediately revise Presidential Regulation (Perpres) Number 112 of 2022 to make the geothermal electricity tariff scheme more economically attractive. Certainty over tariffs is considered a key factor in accelerating investment, easing project financing, and supporting national energy transition targets.
Edwil Suzandi, Director of Exploration and Development at PT Pertamina Geothermal Energy Tbk (PGEO), stated that the characteristics of geothermal projects involve a very high level of risk and investment need, especially during the exploration phase. He noted that geothermal development currently struggles to compete with fossil energy, as the entire risk in geothermal exploration is still borne by the developer. Meanwhile, fossil energy receives government policy support through various schemes, such as the Domestic Market Obligation (DMO), making its price much cheaper.
Therefore, PGE and other industry players are proposing that the government implement a feed-in tariff mechanism, where the electricity tariff is set from the outset according to the project’s economics. “We hope the government will make this tariff economical. In simple terms, there is a kind of feed-in tariff or a tariff set in advance to achieve project economic viability, after which it can be adjusted,” he said.
Edwil added that PGE is ready to be transparent with PLN in discussing the costs required to work on geothermal projects to reach a suitable price. “We are not looking to make a huge profit, just a reasonable one. We are ready to open our books with PLN to discuss this,” he stated. He noted that this proposal is not only in PGE’s interest but also represents the aspirations of all Independent Power Producers (IPPs) and Geothermal Working Area (WKP) holders in Indonesia. He assessed that the current tariff mechanism, which relies on negotiations at each project stage, complicates project control, management, and financing.
“It is very difficult if a project uses multiple stages. It will become a burden in project control, project management, and most importantly, project financing,” he said. Edwil added that financial institutions are generally only willing to enter once a project is proven feasible and has revenue certainty. During the exploration phase, all funding comes purely from company equity.
Andi Joko Nugroho, Director of Operations at PGE, concurred, stating that the provisions in Presidential Regulation Number 112 of 2022, which only regulate the ceiling selling price to the offtaker, do not provide certainty for investors. He explained that the scheme still depends on negotiation results, making it difficult to use as a basis for calculating project economics from the start. “Currently, only the selling price is regulated. The value can still change through negotiation, so it does not provide investment certainty. What we hope for is not just a selling price, but a feed-in tariff or at least a clear formula so that project economics can be calculated from the beginning,” he said.
He added that tariff certainty would increase investor confidence while accelerating the development of national geothermal capacity. As a comparison, Andi cited the Turkish government’s policy of implementing a feed-in tariff for geothermal energy, which he said successfully spurred investment acceleration. “In Turkey, after the regulation was revised to a feed-in tariff, capacity immediately soared to 1,000 MW in just five years. That is an example of how important the government’s regulatory role is,” he stated.
Industry players hope the revision of Presidential Regulation Number 112 of 2022 will introduce a tariff mechanism that provides greater certainty for investors. This would allow geothermal projects to develop more rapidly, strengthen the new and renewable energy mix, and support the government’s target of moving towards a cleaner and more sustainable energy system.