Indonesia to tap its geothermal supply

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JAKARTA, May 30 (UPI) -- Indonesia plans to spend $367 million to finance the construction of geothermal power plants to diversify its energy sources.

Soritaon Siregar, chairman of the State Investment Agency known as PIP, said his office received several proposals from companies seeking loans for geothermal projects, the Jakarta Globe reports.

Indonesian President Susilo Bambang Yudhoyono announced last week that BP has agreed to participate in the development of multibillion-dollar geothermal energy projects in the country.

Yudhoyono didn't disclose the amount of the investment but said, as part of the agreement, BP will transfer 230 cubic feet of natural gas per day from its Tangguh field in Papua to domestic industries.

In announcing the BP deal, the Indonesian president admitted that geothermal power hasn't been exploited sufficiently because of investment challenges.

"Geothermal-project developers face high upstream investment cost and land-acquisition issues, uncertainties on government guarantees and regulations," Edward Thiessen, president of French engineering group Alstom SA's Indonesian operations told The Wall Street Journal.

Indonesia is believed have 40 percent of the world's geothermal energy resources.

While it has the potential to produce about 28 gigawatts of geothermal energy -- about equal to 12 billion barrels of oil -- it is only making use of about half a gigawatt of that.

But last year geothermal accounted for most of the $1 billion investment in renewable energy in Indonesia, says the Pew Charitable Trusts. That's a 520 percent year-on-year increase.

Pertamina Geothermal Energy, the geothermal arm of state-run oil and gas company, has started construction of two geothermal power plants in Ulubelu, Lampung, with a combined capacity of 110 megawatts for a combined cost of $270 million. Completion is expected in 2014.

The power plants represent a model that will be rolled out across the country, says PGE Chief Executive Officer Slamet Riadhy.

"It takes very little money to operate a plant to produce geothermal power. But it requires huge investments up front," Riadhy told National Public Radio. "The price has to be high enough to help us recover that and give us a return on our investment of more than 10 percent."

Riadhy says the government plans to introduce feed-in tariffs aimed at making geothermal more competitive with fossil fuels and PGE aims to double or triple its geothermal capacity before 2017.

Mike Allen, a New Zealand geothermal consultant, told NPR that geothermal provides a constant supply of energy that isn't subject to weather conditions.

"It just runs 24 hours a day, seven days a week," he said. "It provides you a good underlying input of energy which doesn't exist in Indonesia at the moment; that has to come from coal or oil."