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NEWS UPDATES 26 July 2010

Indonesia: Energy on the boil

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Indonesia is to tap into vast reserves of geothermal energy to help meet its power needs for coming decades, with plans to invest more than US$10 billion over the next 15 years in the renewable power source, according to the Jakarta Post.

Estimates put the geothermal potential of Indonesia, which hosts hundreds of active and extinct volcanoes, at around 28,000 MW or 40 percent of the world's total. A clean energy source, geothermal power is generated by heat extracted from the Earth's core.

Only a fraction of the country's full potential, just 1,100 MW, is currently being utilized, compared to 4,000 MW in the US and 2,000 MW in the Philippines.

In late April, while addressing the opening of the World Geothermal Congress in Bali, President Susilo Bambang Yudhoyono said Indonesia aims to become the world's largest user of the energy source. Some 5 percent of national energy needs will be met by geothermal energy by 2025, he said.

In order to achieve Indonesia's goal, some 10,000 MW in capacity will need to be added over the next 15 years. The government has estimated that this will require at least $12 billion in investment, much of it to come from foreign sources.

To encourage investors, the Finance Ministry has introduced incentives for investment in renewable energy such as exemptions in value-added tax, income tax and import duties. It has also guaranteed that state utilities firms will buy electricity produced from geothermal and other alternative energy sources, and a recent regulation caps the price of geothermal energy at $0.097 per KWh.

Indonesia has been touting the investment potential of its geothermal energy sector overseas, with one of the most recent approaches made by Yudhoyono in the Turkish capital Ankara on June 30.

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