Stalled Geothermal Projects in Indonesia to Get New Funding Injection

This picture shows electricity power plant supported by geothermal energy belongs to Pertamina Geothermal Energy in Kamojang on April 22, 2010. The Indonesian archipelago of 17,000 islands stretching from the Indian to the Pacific oceans contains hundreds of volcanoes, which could produce around 40 percent of the world\'s geothermal power, or 27,000 megawatts. (AFP Photo/Adek Berry)

This picture shows electricity power plant supported by geothermal energy belongs to Pertamina Geothermal Energy in Kamojang on April 22, 2010. The Indonesian archipelago of 17,000 islands stretching from the Indian to the Pacific oceans contains hundreds of volcanoes, which could produce around 40 percent of the world\’s geothermal power, or 27,000 megawatts. (AFP Photo/Adek Berry)

A high-ranking Energy and Mineral Resources Ministry official has revealed that the Indonesian government plans to inject fresh capital into stalled geothermal projects.

The construction of geothermal power plants has ground to a halt due to difficulties obtaining permits and financing, but the ministry’s director general of renewable energy, Ridha Mulyana, said in Jakarta on Tuesday that his department was committed to tackling the problem.

Ridha said that out of 59 approved geothermal projects, only nine were underway. Most of the problems were related to permits, while “less than 10” projects were dealing with financial problems.

To address cash-flow concerns, Ridha said the government planned to disburse soft loans to revive the projects under its “Geothermal Fund” scheme.

He said he would soon meet with the Finance Ministry’s head of fiscal policy, Bambang Brodjonegoro, to discuss the scheme in detail, including how to vet applicants for assistance.

“We will screen projects first to assess which developers are really experiencing financial difficulty and which are just trying to secure easy money,” Ridha said.

Abadi Purnomo, chairman of the Indonesia Geothermal Association, said that the soft loans would amount to as much as $30 million per project.

He said the fund was established some time ago, but for the benefit of mainly local government geothermal projects.

“Local governments lack the technical expertise and knowledge of geothermal projects, so we advised Jakarta to disburse the loan to developers instead,” he said. “As it turned out, they listened.”

Abadi said the problem of financing was caused by the old geothermal scheme, in which developers engaged in a competitive bidding process before acquiring licenses to develop projects.

“In order to win, they submitted the lowest price possible with little consideration of the investment required to complete the task,” he said.

The government’s move to introduce a fixed tariff rate on electricity generated from geothermal energy helped mitigate the problems, Abadi added.

“It reduces risk in geothermal projects, and helps to secure financing.”

The feed-in-tariff scheme, setting the minimum price of electricity coming from geothermal sources, was implemented last year.

Indonesia Renewable Energy Society spokesman Surya Darma said problems in the sector were entrenched beyond the geothermal concerns.

“The government’s policy on renewable energy is not comprehensive, which could create more problems in future,” he said.