Govt prepares new rules on geothermal power

Govt prepares new rules on geothermal power

JAKARTA (JP): The government is preparing a new regulation to
boost the development of geothermal resources and lower
geothermal power prices, according to Minister of Mines and
Energy I.B. Sudjana.

Sudjana said the presidential decree would scrap the monopoly
given to the state-owned gas and oil company Pertamina to exploit
the country's geothermal resources.

The decree would also cut the taxes and royalties that
geothermal resource developers would have pay to the government,
the minister said.

"The current price for geothermal power is too expensive. We
want to lower the price (with the new decree)," Sudjana said last
week on the sidelines of a hearing with the House of
Representatives' Commission V for mines and energy, manpower,
industry and trade and investment.

In 1981, the government granted a monopoly to Pertamina on
geothermal resources through Presidential Decree No. 22/1981,
which was amended in 1991 with Presidential Decree No. 45/1991.

The 1991 decree allows Pertamina and its contractors to
explore and exploit geothermal resources as well as to generate
electricity using geothermal steam and sell the electricity to
PLN or to other industries.

Under the 1981 decree, private companies were not allowed to
generate power from geothermal steam.

The 1991 decree lowered geothermal taxes and royalties to 34
percent of the net operating income, from 46 percent under the
1981 decree.

Most of the taxes and royalties go to the government, while
part of them are retained by Pertamina.

The 1981 decree only produced two geothermal power projects:
the Salak Unit 1, 2, and 3 power plants with a total capacity of
165 Megawatts (MW) and the Darajat Unit 1 power plant with a
capacity of 55 MW. Both are located in West Java and are already
in operation by PLN's subsidiary PT Pembangkitan Tenaga Listrik
Jawa Bali I (PJB I).

Pertamina cooperated with Unocal Geothermal Indonesia to
exploit Mount Salak's geothermal resources and with the Amoseas
Indonesia Inc. to exploit Darajat's geothermal resources.

The 1991 decree has thus far produced 11 contracts to develop
geothermal power plants across the country, including in Sarulla
and Sibayak, both in North Sumatra; Salak, Patuha, Karaha,
Kamojang, Wayang Windu, Cibuni, and Darajat, in West Java; Dieng,
in Central Java; and Bedugul, in Bali.

But observers and House members are mostly concerned with the
high price charged by the contractors which is up to eight US
cents per kilowatt hour (kwh).

Tax

Sudjana did not reveal the level to which the tax and
royalties would be reduced under the planned decree, but an
informed source at the ministry said the tax and royalties would
be around 30 percent of net operating income.

Sudjana said the authority over geothermal resources would be
taken over from Pertamina by the "state" or "ministry" but he did
not reveal which agency would hold the authority.

The source said the authority would be held by the directorate
general of Geology and Mineral Resources at the ministry.

The directorate general would handle geothermal exploration
throughout the country using geothermal taxes and royalties
collected from developers.

Geothermal fields which have been explored would be offered to
developers for exploitation and power generation.

The source said this new scheme would reduce the amount of
investment for geothermal development and subsequently reduce
geothermal power prices.

"Thus far, geothermal power developers always make the large
expenses for exploration an excuse for charging a high price for
their power to PLN," the source said. "Under the new scheme, they
will not be able to use the same excuse."

The source said the new scheme was expected to lower prices
for geothermal power to five US cents per kilowatt hour as in the
Philippines which applied a similar scheme in the development of
its geothermal power plants.

According to the source, Pertamina and PLN would set up a
joint venture to develop geothermal power plants in competition
with other private developers.

According to government data, Indonesia has a geothermal
potential of up to 19,000 MW, only around 350 MW of which are
being used for power generation. (jsk)