Govt sets incentives for geothermal projects
JAKARTA (JP): The government will handle the exploration of geothermal steam in the future before offering it to independent power producers (IPPs), a senior official said here on Friday.
Director General of Electricity and Energy Development Endro Utomo Notodisuryo said that the new scheme, part of the incentives now being prepared to encourage geothermal power development, would reduce investors' costs.
He said that the draft of the new policy was still awaiting the President's approval.
"We finished the draft of the new policy and it has been sent to the State Secretariat for approval by the President," Endro said in a press conference.
Endro said geothermal investors had ascribed the high price of their geothermal power to the large investment they spent on exploration activities.
The government would thus carry out the exploration with its own financial resources so that investors would not need a large investment for such projects.
Under the new policy, investors would be able to produce at lower costs, he said.
"Such a scheme has been carried out in countries like Costa Rica and the Philippines, where investors develop geothermal power projects using the resources that were explored by the government," Endro said, adding geothermal power prices were much lower in those countries than in Indonesia.
Endro noted, however, that the new policy would only be applied on new geothermal contracts.
IPPs that have signed power purchase agreements with state electricity company PT Perusahaan Listrik Negara (PLN) will still follow the terms of their contracts, Hendro said.
PLN has signed contracts to buy geothermal power from 11 IPPs at an average price of 7.4 US cents per kilowatt hour (kwh).
In comparison, PLN buys power from coal-fired power producers for 6.4 cents per kwh.
PLN staff expert Ciptono Udimulyo said at the press conference the Philippines government could reduce the price of geothermal power produced by IPPs to about 5 US cents per kwh after carrying out the exploration on its own.
Endro said under the draft presidential decree, the government would transfer the right for the exploration of the country's geothermal resources from state oil and gas company Pertamina to the Directorate General of Volcanology.
In the past, the government often tried to take over the geothermal exploration rights but it was never successful due to the strong lobby launched by Pertamina against the move.
Under the existing regulation, IPPs have to hand over 29 percent of their net operating income to the government in taxes and another 9 percent in fees to Pertamina.
Endro said the Directorate General of Volcanology was expected to carry out the exploration activities using soft loans borrowed by the government.
"The government will receive royalties in return from the IPPs in return for the exploration the directorate general has done," Endro said.
According to Ciptono, the exploration costs for the production of 50 Megawatt geothermal power amount to between US$7 million and $16 million for between 2.5 years and six years.
IPPs have to invest about $90 million to exploit the geothermal steam and produce power from it. (jsk)