By J R Ruaya
Energy and Chemistry Consultant
Indonesia is poised to overtake the Philippines in geothermal power production by 2010 based on the current program of both countries, and aims to be the world leader by 2014.
Indonesia, which lags the Philippines in power production from geothermal, has a current installed capacity at 970 MW compared to Philippines' 1931 MW as of 2007. However, with the ongoing capacity expansion in existing producing fields such as Kamojang and ongoing development at Indonesian fields of Darajat, Wayang Windu, Lahendong, Sarulla and others, installed capacity is projected to reach 2180 MW by 2010. This does not include projects which are planned to be finished by 2010 which may not come on stream on time.
Indonesian geothermal capacity has grown 35 % between 2000 and 2005.
In contrast, the Philippines does not have a firm additional capacity by 2010 in the pipeline, while the recent 49 MW power plant at Northern Negros has been generating only 4-5 MW, well below its installed capacity, according to a recent report in Inquirer.net dated March 25, and confirmed by industry insiders.
After years of foot-dragging, Indonesia may have finally found a firm base to grow its geothermal capacity. To recall, with the onset of the Asian financial crisis in 1997, almost all geothermal projects were stopped or cancelled when it became clear that PLN, the state-owned electricity generating entity, was not going to buy the produced electricity as promised, according to a report by consultancy Layman Energy Associates.
Most of the foreign investors have stopped their development projects or have packed up under severe losses. The only foreign geothermal business that was left was Chevron (the operations were previously owned by Unocal). It was able to do so because it operates on contracts signed decades ago under the then - strongman General Suharto. At present, Chevron manages two geothermal projects in Indonesia - Darajat and Salak - which generates 259 MW of electricity, the latest of which is a 110 MW Darajat unit which started commercial operations in June 2007.
In 2006, Sugiharto Harsopragitno, director of the Ministry of Energy and Natural Resources' geothermal department, said that it could take years for foreign investors to return. However, with the improvement in business climate starting in 2003, the return could take sooner than later. That year, a new geothermal law was passed which became a catalyst for renewed geothermal activities in recent years.
During the Clean Energy, Good Governance and Regulation Forum held in Singapore last March 16-18, 2008, Asclepias Rachmi Indriyanto of the Indonesian Institute for Energy Economics, cited important geothermal development progress in recent years as a result of overhauling the country's geothermal laws and regulations. These are:
2003 - Geothermal Law 27/2003 was passed which has given legal certainty in the geothermal enterprises;
2004 - Geothermal development blueprint was enacted;
2005 - The Directorate of geothermal Enterprise and the Supervision of Groundwater Management was established;
2006 - Commissioned the JICA-funded Master Plan Study for Geothermal Power Development in Indonesia; and
2007 - A regulation allowing exemption of import duties for geothermal exploration equipment and exemption of taxes for exploration activities was released.
In addition, Presidential Decree No. 03/2005 on Regulation of Electricity Supply and Utilization was issued to (1) regulate the supply and utilization of electricity and (2) to prioritize the utilization of renewable energy (including geothermal) for power generation without bidding process.
As a result of improved business climate, foreign investors have started to trickle in in recent years. Last year, eight companies have signed a Joint Operation Contract, a preferred business route, with state-owned energy developer Pertamina. The latest announced entrant is the Reykjavik Energy Invest (REI) of Iceland which signed a cooperation agreement with Pertamina Geothermal to explore and develop some three geothermal fields in Indonesia, according to the company's press release.
It must be noted that REI and another Icelandic firm Geysir Green Energy (GGE) teamed up with local energy firm FirstGen Corporation, to take control of local geothermal developer PNOC Energy Development Corporation (PNOC-EDC) from the Philippine government through the consortium Red Vulcan Holdings. However, on December 28, 2007, REI and GGE divested their total 40 % stake in Red Vulcan.
Gudmundur Thorodsson, REI President and CEO said that while REI's plans regarding PNOC-EDC have changed, REI is committed to long-term involvement in the Philippines. He said, REI remains "committed to our other projects in the Philippines, including the Biliran steam field".
PNOC-EDC itself tried to enter Indonesia in 2003 when it concluded a three-company memorandum of agreement with Marubeni Power Systems and Pertamina to jointly carry out development relating to geothermal power generation and to construct geothermal power plants in three locations in Indonesia. The chosen locations and target capacities (in parenthesis) are Lumut Balai (330 MW) and Ulubelu (110 MW) in south Sumatra and Tompaso (60 MW) in North Sulawesi. However, these projects seemed to have not taken off.
Indonesia possesses the largest geothermal potential in the world, which is estimated at 27,000 MW. There are 253 identified fields, of which 53 are ready for detailed exploration and exploitation.
I would not be too concerned about indonesia passing by anyone on geothermal power generation in the near term. The legal certainty they have given allows developers to be certain that they will not make money. No one knows how PERTAMINA will play in the new game and they have the largest portfolio of assets. The 3 areas that were tendered were all awarded to state owned enterprises, which are not likely to return much profit to the government. It will be some time before real private geothermal projects happen.
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