Govt mulls offering incentives to geothermal firms

Rendi A. Witular, The Jakarta Post, Jakarta

The government plans to provide a fiscal incentive for geothermal operators to speed up the development of the underused power- generation resource amid higher prices and depleted oil reserves.

Minister of Energy and Mineral Resources Purnomo Yusgiantoro said the incentives would include the exemption of double value- added tax for geothermal operators in the upstream and downstream sectors.

The current regulations require geothermal operators to pay the tax twice because they operate on two levels -- in the upstream sector by producing geothermal energy and in the downstream sector by distributing it.

"The operators have complained about the double tax as it has caused the price of their electricity to become (comparatively) more expensive," said Purnomo while accompanying members of the Indonesian Geothermal Association to meet President Susilo Bambang Yudhoyono on Wednesday.

The incentive, said Purnomo, was being discussed with the Ministry of Finance.

Indonesia is striving to increase its use of alternative energies, including gas, coal and geothermal energy, in order to rely less on increasingly expensive and scarce oil.

Geothermal energy is produced when groundwater descends from the earth's surface and meets the molten magma rising from the earth's core.

An environmentally clean energy source, it has a carbon dioxide emission rate 90 percent lower than that produced by oil- fired power plants.

However, the energy resource is relatively untapped despite its abundance here.

Located in the "ring of fire" volcano belt, Indonesia is estimated to hold about 40 percent of the world's geothermal reserves, equivalent to a total of 27,140 megawatts (MW) of power.

While the country has several operational geothermal power plants, their combined capacity currently is only 807 MW or about 3 percent of the country's total geothermal potential.

Purnomo said the government was planning to gradually increase production of geothermal energy to 2,000 MW in 2008 and up to 6,000 MW in 2020.

Geothermal energy has long been used to create traditional medicines here, and as a heating source it is also used in dairy manufacture, food processing and in the cement industry.

Indonesia is scheduled to hold an international geothermal conference in Bali in 2010 to discuss the global development of the energy.