Tue, 27 Apr 2010

From: The Jakarta Globe

By Reva Sasistiya
President Susilo Bambang Yudhoyono on Monday declared that Indonesia would surpass the United States and the Philippines to become the world’s largest user of geothermal energy by 2025 - a goal experts said was achievable but would require some changes in the way the government operates.

“Indonesia is currently only using 1,100 megawatts [of geothermal power],” Yudhoyono said. “This is only 4.2 percent of our geothermal reserves, which constitute about 40 percent of the world’s geothermal potential. This is going to change. It is my intention that Indonesia will become the largest user of geothermal energy.”

In 2025, the government wants Indonesia to be generating 9,000 MW from geothermal sources, or about 5 percent of its electricity needs.

However, the development of the environmentally friendly energy source over the past two decades has been painfully slow, mostly due to the low prices paid to geothermal producers by state-owned electricity company PT Perusahaan Listrik Negara and the lack of government-guaranteed returns for geothermal investors.

Jim Blackwell, president of Asia-Pacific exploration and production at Chevron, said changing Indonesia’s legal and regulatory frameworks would be necessary if Yudhoyono’s goal was to be met.

“The 2003 Geothermal Law fundamentally changed the legal basis for development of new areas,” Blackwell said. “The law also preserved the original legal and contractual terms of those fields already under development.”

However, while new contract areas are being offer ed, regulations need to be implemented to unlock the many benefits geothermal can deliver, Blackwell said.

He said it was critical to designate a single body that could bring together various ministries to regulate the geothermal sector.

There also needed to be a stronger and better aligned partnerships between the government and investors, Blackwell said.

“There needs to be a stable legal and regulatory regime, which allows for long-term development rights, open markets created by long-term contracts and long-term prices with certainty of payment.”

Yudhoyono acknowledged that it would not be easy for Indonesia to meet its geothermal goal and said he would be instructing ministries to make it a priority. “To facilitate the investments by the local governments in exploiting this resource, I am pleased that the International Finance Corporation has started to assist Indonesia with tendering some of their geothermal working areas,” he said.

“The possible use of geothermal in pristine forest areas has already been resolved, and the first licenses for development [of geothermal projects] in Kamojang [in West Java] and Lumut Balai [in South Sumatra] have been released last month,” Yudhoyono said, referring to a recent government regulation allowing geothermal wells to be drilled in conservation forests.

To help it meets its goal, Indonesia plans to invest in a network of geothermal centers of excellence, to develop the know-how and expertise required to accelerate geothermal development.

“The network of centers of excellence, which will bring together Indonesia and world experts, can be the base camp of a worldwide effort, to enhance the use of this renewable and sustainable source of energy,” Yudhoyono said.