New law to boost geothermal energy in Indonesia

JAKARTA, Indonesia – Indonesia’s House of Representatives (DPR) on Tuesday, August 26, passed a long-awaited law to bolster the geothermal energy industry and tap the power of the vast archipelago’s scores of volcanoes.

Made up of thousands of islands stretching from the Indian to the Pacific Oceans, Indonesia is home to some 130 volcanoes and is estimated to hold around 40% of the world’s geothermal potential. 

But while Indonesia is estimated to have more than 28,000 megawatts of geothermal potential, it is currently producing just over 1,300 MW of its electricity from the clean source, lagging far behind others such as the United States and the neighboring Philippines. Most of its electricity comes from coal and oil. 

“Indonesia’s need for energy keeps increasing,” lawmaker Nazarudin Kiemas, who headed a legislative committee on the new law, was quoted as saying on the DPR website.
“There is abundant potential for geothermal energy.”

Red tape and legal uncertainty have long held back the industry and obstructed much-needed investment, but the government hopes the new law will speed up the development of the sector.

“Geothermal energy will ensure energy independence. We are increasingly optimistic because this is a renewable energy that can replace oil, which will lead to increased energy independence,” DPR Deputy Speaker Pramono Anung said, according to state news agency Antara. 

He added the law would also accelerate the implementation of the second phase of the government’s 10,000 MW “fast-track” program to increase the national capacity to generate electricity. The program relies heavily on renewal energy, including geothermal and hydropower.

Key changes

A key aspect of the new law stipulates that exploration for geothermal energy and development of plants is no longer considered mining.

It was regarded as such previously, which meant the industry faced problems working in Indonesia’s vast tracts of protected forest, where there is much geothermal potential but mining is illegal.

This change, said state electricity company PT Perusahaan Listrik Negara (PLN) President Director Nur Pamudji, would boost the development of geothermal energy.

“Exploration activities that used to be forbidden will be allowed,” he said, according to Antara.

The law also stipulates higher prices for electricity produced by geothermal, following complaints from companies developing plants that tariffs were not enough to cover the high cost of production.

High cost has long been one of the major obstacles to geothermal development in the country. A geothermal plant costs about twice as much as a coal-fired power station, and can take many more years in research and development to get online.

But once established, geothermal plants like the one built in Kamojang on the main island of Java in the 1980s can convert the endless supply of volcanic heat into electricity with much lower overheads – and less pollution – than coal.

Outgoing President Susilo Bambang Yudhoyono has also focused on geothermal as part of his plan to slash greenhouse gas emissions by 26% from 2005 levels by 2020.

Indonesia is the world’s third-biggest greenhouse gas emitter due its use of dirty fuels to produce electricity and to rampant deforestation.

Yudhoyono must sign off on the new law, but that is expected to be a formality. – with a report from Agence France-Presse/Rappler.com