The government will invite bids in August for five geothermal projects as part of the effort to boost electricity supply in less-developed regions, says an official.
The projects will have an estimated combined capacity of 455 megawatts (MW), comprising 160 MW in Seulawah, Nanggroe Aceh Darussalam, 75 MW in Maluku, 120 MW in Telaga Ngebel, East Java, 50 MW in Ungaran, Central Java, and 50 MW in Tampomas, West Java.
The Energy and Mineral Resources Ministry's director general of geology and mineral resources, Simon Sembiring, said Tuesday that the ministry was awaiting a ministerial decree that would set out general provisions and tendering procedures for the geothermal business as a whole.
The decree was likely to be issued next month, Simon said, and after that the Finance Ministry was expected to complete its discussions on how much geothermal energy promoters would have to pay in royalties.
The government has also formed a team tasked with coming up with a formula to determine an economically feasible ceiling price for both investors and the sole power purchaser -- state-owned electricity firm PT PLN.
The establishment of the team comes in response to investor complaints about the price set by PLN, which stands at around 4.5 U.S cents per kilowatt. They argue that this price is significantly lower than the estimated minimum economic price of 6.5 U.S. cents.
Simon said that the investors would be able to reopen negotiations with PLN based on the price determined in accordance with the new formula.
However, Herman Darnel Ibrahim, PLN transmission and distribution director, insisted his firm would not be able to offer a higher price.
"We could consider offering a higher price only if the government decides to subsidize the distribution of electricity generated from geothermal energy," Herman said.
Also in relation to the pricing issue, the promoters are also concerned about the designation of PLN as the sole purchaser, thus placing the promoters in a weaker position.
"We don't have anything to offer. If they (PLN) want it at that price, what can we do? We can't sell it to anyone else as PLN is designated the sole buyer.
"We also need a return on our investment," said Dan Johnson, the president director of geothermal firm Binatek Reka Energi, which own a 10-megawatt project in Gorontalo, Central Sulawesi.
Indonesia, which has the geothermal energy potential to produce over 27,700 megawatts of electricity, or 40 percent of the world's reserves, has only seven geothermal plants with a combined capacity of a mere 852 megawatts.
The U.S. boasts geothermal plants with a combined capacity of 2,100 MW, the Philippines 1,775 MW and Mexico 975 MW.
Meanwhile, Pertamina director for geothermal energy Bambang Kustono said the state oil and gas firm is set to spend $22.5 million on drilling two new wells at a geothermal plant in Lumutbalai, South Sumatra, and three wells in Ulubelu, Lampung.
The drilling work is scheduled to be completed in 2008.
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