Indonesia to speed up geothermal development to solve energy issues

With an estimated 24GW in geothermal reserves that account for 40% of the world’s geothermal resources, Indonesia is set to accelerate the geothermal power development to solve its energy issues, says GlobalData, the data and analytics company.

GlobalData’s latest report, Indonesia Power Market Size, Trends, Regulations, Competitive Landscape and Forecast, 2022-2035, reveals that Indonesia has identified over 300 sites across islands including Sumatra, Java, Nusa Tenggara, Sulawesi, and Maluku for geothermal power development. The country has created a fund of around IDR 3.7 trillion (around $275 million) for the development of geothermal technology. Managed by PT Sarana Multi Infrastruktur (PT SMI), the fund will be primarily used for lending activities, equity participation and or providing data and geothermal information.

Attaurrahman Ojindaram Saibasan, Power Analyst at GlobalData, comments: “Indonesia updated its laws on geothermal activities in 2014. The revised regulation no longer considers geothermal under ‘mining activities’ as mining activities are currently prohibited in high conservation value forest areas. The regulation also introduced a mandatory production bonus payable to the local government in which the geothermal field is located, and auctions were introduced for geothermal working areas (WKP) to encourage industry participation.”

Indonesia has made geothermal power development as one of its key priorities and has set a target of achieving 9.3GW geothermal cumulative capacity by 2035, in order to solve several energy issues and achieve its climate goals. Given the current trend, the country is expected to achieve 8.1GW by 2035.

Saibasan adds: “However, the target may still be achievable if the government succeeds in conducting WKP auctions without delays, provides incentives to overcome the upfront costs in the exploration stage, and rallies more foreign private investments.”

Geothermal power is also expected to help Indonesia overcome risks associated with its dependence on fossil fuel imports and reduce the country’s economic burden resulting from fossil fuel subsidies. In 2021, IDR 83.7 trillion was spent on fossil fuel subsidies and it is estimated that it would burden the country’s economy by IDR 77.5 trillion in 2022.

Saibasan concludes: “Geothermal holds the key to achieving the country’s target of achieving 23% of its energy requirements from renewables and cut its carbon emissions to net zero by 2060. The government also hopes to achieve 100% electrification rate in the country and geothermal is considered as a reliable source to reach it.”