Indonesian geothermal advances
The geothermal plan uses 315 degree Celsius heat to spin turbines 24 hours per day, generating electricity for Jakarta, a four-hour drive to the north. The oil driller, which pioneered Indonesian geothermal energy 20 years ago, is about to see competition.
Companies from General Electric to India’s Tata are leading an investment boom that may climb to more than US$30 billion, anticipating that President Susilo Bambang Yudhoyono will honor his promise in February to boost clean-energy subsidies. The pledge has spurred the biggest geothermal spending spree in Asia.
“There’s great momentum in Indonesia’s geothermal market, and demand for power is there,” said Mark Taylor, a geothermal analyst in Washington at Bloomberg New Energy Finance. “But there are regulatory risks for developers.”
Chevron was burned by Indonesia in the late 1990s, when state-owned utility Perusahaan Listrik Negara forced it to renegotiate a power-purchase accord. The California-based oil company is now planning to expand its geothermal operations, helping Yudhoyono eliminate energy shortages that threaten his target for as much as 6.6 percent economic growth through his term’s end in 2014.
Geothermal is central to the country’s push for alternatives to fossil fuels such as oil, which the country once exported and now must import, driving up costs and curbing growth.
The nation plans 9.5 gigawatts of capacity by 2025. That is more than triple the United States’ geothermal use and about 33 percent of Indonesia’s electricity demand.
Indonesia straddles the Pacific Ocean’s volcanic “ring of fire,” making the country to geothermal power what the Middle East is to oil The country has tapped about 4 percent of its potential and has orders for 2.3 gigawatts, second only to the United States, New Energy Finance data show.
“There’s a remarkable opportunity for Indonesia to increase the amount of power generated from geothermal,” said Stephen Green, former head of Chevron’s Indonesia and Philippines operations and now its vice president of policy, government and public affairs.
Indonesia hasn’t always appealed to foreign investors, and skepticism still goes beyond questions of how to uncork the boiling water that is trapped miles below the surface.
After the Asian financial crisis, PLN canceled power purchase agreements with companies including Paiton Energy, which is 40 percent owned by the California-based Edison Mission Energy, because it couldn’t afford the contracts after the collapse of the rupiah.
Unocal Inc., which built the plant in the rainforest and was acquired by Chevron in 2005, was forced to renegotiate a deal to sell its power at 4 to 5 cents per kilowatt-hour instead of 6 to 7 cents.
The rainforest plant was opened in Mount Halimum Salak National Park in 1992. Together with another about 100 miles west in Dajarat, Chevron lights homes for 4 million people. To capitalize on the new tariffs for geothermal electricity, the company is planning new plants including a potential 200-megawatt facility in South Sumatra.
Indonesia began consuming more oil than its domestic production capacity in 2004 as its economic growth surged. Higher oil prices give the government further incentive to promote geothermal power, Chevron’s Green said.
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