Indonesia: Electricity Price Rule May Hamper Geothermal Exploration

Indonesia: Electricity Price Rule May Hamper Geothermal Exploration

The Indonesian Geothermal Association (INAGA) is disappointed with the
Energy Ministry's regulation No.12/2017 on the use of new renewable energy
for electricity. INAGA fears that the rule will hamper efforts to discover
geothermal reserves.

"The clauses are so biased, they could hamper geothermal exploration," INAGA
chairman Abadi Purnomo said on Sunday, February 5.

Abadi said the 11 clauses govern that a geothermal SPA can only be signed
once the developer has proven reserves, which requires exploration that
costs US$8 million-US$10 million per well.

"Who would want to pay for the explorations? And businesses will not take
risks of drilling wells if there is no guarantee someone will buy the
electricity," he said.

Energy Minister Regulation No. 12/2017 governs the price of electricity
conjured from new renewable energy sources-including biomass, sun, wind,
water, biogas, waste, and geothermal. The Ministry's director general for
renewable energy and conservation Rida Mulyana said the sales price is based
on each producing area's costs.

Rida also said that the rule provides certainties for electricity
developers-guaranteeing that PLN will buy electricity from them. The rule,
he said, clearly mandates PLN to buy power from clean energy sources.

The government has also allowed PLN to negotiate with developers farming
energy sources in Java, Sumatera, and Bali. Abadi argues that negotiations
are a source of problems hampering power purchase agreements (PPA) between
PLN and developers.

However, Rida ensured that negotiations will not stall power plant
constructions, as the Ministry has the power to determine the final sales
price.

Indonesia has 29,000 MW geothermal potential, of which only 1,643 MW had
been used. The government is targeting to have 7,200-MW geothermal portion
in Indonesia's energy mix by 2025. Without breakthroughs, Abadi said, this
target is difficult to achieve.

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Link to Original Article:
https://en.tempo.co/read/news/2017/02/06/056843426/Electricity-Price-Rule-Ma
y-Hamper-Geothermal-Exploration-INAGA

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com