Geothermal Business Participants Are Anticipating Derivative Laws About The Cost Of Renewable Energy

 

The Indonesian Geothermal Association is anticipating a derivative rule in the form of a Ministerial rule in order to execute Presidential Regulation Number 112 of 2022 about the Acceleration of Renewable Energy Development for the Provision of Electricity. (Permen).

The implementation of Presidential Decree 112, which includes geothermal energy, essentially helps advance renewable energy, according to Prijandaru Effendi, chairman of the Indonesian Geothermal Association (API).

In the INDEF Public Discussion webinar "Quo Vadis Geothermal Indonesia" on Wednesday (5/4), he said, "After the Perpres was issued, there were several Ministerial Regulations as guidelines for the implementation of the Perpres."

The price indicated in Perpres 112, according to Prijandaru, was not the price API had suggested in the proposal. He contends that the government has the authority to set prices that are not in line with those suggested by the group that stands in for the developer.

However, Perpres 112 contains a number of government commitments that act as inducements and are detailed in a different ministerial regulation.

"As a result, I'm unable to say whether the tariff is appealing or not. We are anticipating another Perpres derivative whose price, when coupled with incentives, can be compelling.

In order for geothermal development to go as swiftly as anticipated, Prijandaru expects that the rules developed from Presidential Decree 112 will be made public and put into effect soon.

He emphasized that the growth of geothermal energy in Indonesia is actually being hampered by two major issues.

First, PLN's capacity to purchase the electricity produced by a PLTP generating facility is directly impacted by how affordable energy rates are. Here, PLN represents the purchasing power of the average Indonesian.

The government supports the affordability of power bills since the state is mandated to provide electricity to the public by ensuring the price is within their means. The problem is that even if there shouldn't be a surplus of energy, many people cannot be electrified because of financial limitations.

The second difficulty is the regulation of policy. Prijandaru admitted that there is one factor that is quite demanding for geothermal business operators, namely the certainty of electricity purchases by PLN because investment in the building of the PLTP demands a sizable sum of money. 

He used the example of one corporation drilling six wells in a large hole in an area for exploration. Spending on exploration was roughly $150 million USD. Given that PLN is a single buyer and has access to that much cash, business actors naturally demand assurances on future purchases from PLN. Even Nevertheless, PLN will consider affordability when determining the price of the electricity it will purchase.

If we don't obtain a Power Purchase Agreement (PPA) up front for such a significant investment commitment, this causes uncertainty for us. This is what makes developing the new exploration request for PPA talks with PLN difficult, he said.

On the other side, API requested that the government be present while setting a deadline for discussing electricity pricing with PLN on a business-to-business (B2B) basis. Geothermal discussions can currently take up to two to three years.

The cost of obtaining electricity from geothermal energy in Indonesia is still comparatively prohibitive when compared to the average national electricity supply, according to Komaidi Notonegoro, executive director of the ReforMiner Institute.

Data from the Ministry of Energy and Mineral Resources' Directorate General of EBTKE shows that the average cost of geothermal electricity is currently more than US$ 10 cents per kiloWatt hour. (KWh). According to current information, the average cost of non-geothermal NRE electricity is less than US$ 10 cents/KWh. For instance, the cost of electricity generated by hydropower is between US$6 and US$7/Kwh.

"The relatively high cost of geothermal electricity is partially a result of the geothermal industry's high level of risk during the exploration phase or before to production. Up to 50% of the risk comes from the exploration stage, he said at the time.

Meanwhile, the cost of PLTP electricity in Indonesia is roughly 69% to 83% more expensive when compared to global geothermal electricity costs. The government's support for geothermal development is the cause of this.

 

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