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NEWS UPDATES Asean Affairs  23 October 2010

Indonesian government urged to back geothermal

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The Indonesian Geothermal Association is pushing the government to demonstrate its commitment to renewable energy by forcing the state electricity utility to purchase geothermal energy to help spur investment in the lagging sector.

Otherwise, investment might be delayed and phase two of an ambitious government plan to add an extra 10,000 megawatts to the country's generating capacity might not be finished by 2014 as scheduled, according to the association, also known as the API.

Since 2009, 10 investors have won tenders from state utility Perusahaan Listrik Negara to build geothermal power plants that would generate about 800 MW.

But none has progressed beyond research and planning, saying PLN has failed to sign the power-purchase agreement that would compel it to buy electricity from the private-sector plants.

Of the 10,000 MW expected to come on line by 2014, 4,000 MW are to come from geothermal power, including 3,600 MW from the private sector.

The remainder will be produced by Pertamina Geothermal Energy, a unit of the state-owned oil and gas producer.

Suryadharma, API's chairman, earlier complained that the government had so far failed to commit to boosting geothermal energy production.

He said the Ministry of Energy and Mineral Resources had set the purchase price for electricity generated by geothermal at 9.7 cents per kilowatt hour. "And we were agreed on the price," he added.

But the private-sector projects have been left in a state of financial uncertainty.

"We need the PPA to guarantee that our electricity will bought by PLN," Suryadharma said, referring to the power-purchase agreement.

"Who will cover our operational costs if we don't get the guarantee from PLN?" said Supramu Santoso, chief executive of Supreme Energy, which holds contracts for two geothermal plants in Lampung.

Supramu said his firm was reluctant to develop the projects beyond field research.

Ali Herman Ibrahim, CEO of Bakrie Power, which is developing a plant in East Nusa Tenggara, said drilling at its field should have begun at the beginning of the year, "but this is already the end of October."

At the current pace, Ali said it would take more than four years to get the field producing at full capacity, including the drilling of wells and construction of the plant.

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