Govt told to get behind geothermal energy plants

JAKARTA (JP): Indonesia's geothermal energy industry needs a boost from government incentives in order to help the nation meet its energy goals, an industry leader said.

Prijanto, chairman of the Indonesian Geothermal Association, said yesterday that without incentives, it would be difficult to meet the government's target of developing a geothermal energy generation capacity of 1,500 Megawatt (MW) by the end of the sixth five-year development block in 1999.

High capital costs and high risks are two main factors discouraging investors from developing energy resources, he said, addressing reporters after the opening ceremony of the association's annual scientific meeting.

Tax incentives, he suggested, could be given in the form of an acceleration of capital depreciation.

If the government gives tax incentives to geothermal energy investors, the cost could be reduced by two U.S. cents to about five U.S. cents, he said.

The cost of electricity generated by geothermal steam is still more than seven U.S. cents, compared with an average of six cents for electricity generated by using coal and gas.

Currently, only 309.5 MW of Indonesia's total potential energy capacity of 20,000 MW have been developed.

The 309.5 MW are generated by five geothermal power stations: Sibayak in North Sumatra (by Pertamina); Kamojang (by PT Latoha); Gunung Salak (by Unocal Geothermal Indonesia); Darajat (by Amoseas) in West Java; and Lahendong (by Pertamina) in North Sulawesi.

"Relatively speaking, geothermal energy is not yet competitive compared with other energy resources, such as coal and gas, in generating electricity," he said.

Another challenge facing the geothermal energy industry is the transport cost, which is higher than other energy sources because most geothermal energy is located in remote areas far away from the consumers.

The development of the geothermal energy sector is also limited by technology, Prijanto said. Geothermal power plants must be developed in stages, making the return on investments much slower than for other energy investments.

"Those factors have made the development of geothermal energy slower than for other energy resources, such as gas and coal," he noted.

Minister of Mines and Energy I.B. Sudjana told the meeting that the government has been trying to diversify its commercial energy away from oil, which still dominates the country's energy portfolio.

Sudjana said that 41 percent of Indonesia's total generation capacity of 13,129 MW is produced by using fuel oil.

"We aim to reduce the oil-fired power plants, so that we can save our fuel oil for exports," he said in his written speech, which was read by Adjat Soedradjat, the director general of geology and mineral resources.

Geothermal energy is a priority because it is renewable, the minister said, urging the geothermal association to help accelerate the development of the geothermal power plants around the country.

According to Prijanto, using geothermal energy to produce 1,000 MW of electricity can save about 300 million barrels of oil.

Meanwhile, Indonesia's electricity demand grows at 12 percent a year.

The state-owned electricity company PLN, which has offered private investors the opportunity to develop power stations under the build-operate-and-transfer or build-operate-and-own schemes, plans to raise its generating capacity from the current 13,129 MW to around 39,000 MW by 2004. (bnt)