The government is one step closer to reaching its power procurement target from geothermal sources this year.
Japan’s Inpex began commercial operations at the second unit of its Sarulla geothermal power plant in North Sumatra on Tuesday, dubbed the world’s largest singlecontract geothermal project.
The Energy and Mineral Resources Ministry’s geothermal director, Yunus Saefulhak, said the operation of the Sarulla plant’s second unit had brought Indonesia’s geothermal power capacity close to the 1858 megawatt (MW) target for this year.
In addition to the two units from the Sarulla plant, the government is waiting for the operation of unit I of the Karaha Bodas power plant in West Java to reach its year-end target.
Meanwhile, the Sorik Marapi power plant’s modular unit in North Sumatra and unit 4 of the Ulubelu power plant in Lampung is hoped to boost geothermalsourced power capacity.
“The total capacity by the end of the year will reach 1,858 MW. This means we will hit the target with the [commercial operation] of the Sarulla plant unit II and the Karaha plant,” Yunus told The Jakarta Post on Wednesday.
With the Sarulla power plant’s second unit in operation, the current installed capacity stands at 220 MW. A third unit is currently being developed and will bring the total installed capacity to 330 MW that is estimated to support the power generation of 2.1 million households.
Indonesia has set an ambitious target to become the world’s top geothermal electricity producer, with a goal to generate 7,241.5 MW of electricity by 2025.
According to PLN’s electricity procurement business plan, geothermal energy is expected to make up 4.6 percent of the national energy mix, rising to 9 percent by 2026.
However, Yunus acknowledged there were several obstacles to boosting power procurement from geothermal sources, of which Indonesia is estimated to have around 29 gigawatts (GW) in potential reserves.
“There are still several obstacles to developing geothermal energy, including the locations of geothermal sources that are often in protected forests, face opposition from local people, price, funding and permits,” he said.
Geothermal energy’s high risk nature has impeded its development as many investors feel the government has not given enough incentives to help mitigate the risks.
However, the government has high hopes that the tide will soon turn following a recently issued Finance Ministerial decree, stipulating that in cooperation with the Energy and Mineral Resources Ministry, appointed stateowned firms can use an existing geothermal fund for exploration activities.
Following the new regulation state-owned electricity firm PLN was awarded six geothermal fields worth 160 MW to explore.
PLN also signed an agreement with state-owned infrastructure firm PT Sarana Multi Infrastructure (SMI) to potentially obtain funding for exploratory activities at the six fields, which is estimated to cost US$640 million.
SMI manages the country’s geothermal fund worth Rp 3 trillion ($227.2 million), in addition to a grant of $55.25 million from the World Bank to fund advanced exploration activities for various geothermal projects across the country.
Separately, geothermal investors have stated that fiscal incentives would be the key to boosting geothermal development in the country.
Indonesian Geothermal Association chairman Abadi Poernomo said he hoped the Finance Ministry would consider reviewing income tax for the projects.
“Income tax currently stands at 25 percent, which is very high considering the government’s recent policies have capped geothermal tariffs to a maximum of 17.5 US cents per kWh [kilowatt hour],” he said, noting that a regulation previously issued in 2014 set the cap at 29.6 cents per kWh depending on the location and the date of operation.