How is METI working towards promoting renewable energy use in Indonesia?
First, we produced the renewable energy roadmap. We already discussed internally among members of the Indonesia Renewable Energy Society (METI), because the government will be changing in only four and a half months. We held focus group discussions with presidential candidates.
What we have already produced is the roadmap of renewable energy, in which we see what the resources are in Indonesia, what has happened in the last decade in geothermal. Geothermal actually started in Indonesia 1918. They drilled one exploration well, which still produces now. The depth is 60 metres, but it is open to the air and following these they didn’t continue exploration.
In the modern era, geothermal explorations started actively again in 1974, when the first oil crisis happened in the Middle East. At that time everybody tried to diversify their energy from oil towards renewables. However development was very slow, and today national capacity is less than 1.4 gigawatts. If we compare this to the potential of the resources, about 29 gigawatts, we can see how much there is left to develop.
There are 48 total projects right now with only 10 producing. The others are in progress. They already have licenses and some only have the permit but not the PPA (power purchase agreement). These license holders have tried to negotiate PPA but were not yet successful because of pricing and terms and conditions.
From the 10 that are producing, the biggest one is Chevron. It produces 377 megawatts. The second largest plant is also operated by Chevron and produces 260 megawatts, and the third produces 280 megawatts, plus 110 in another project; the fourth one is 227 megawatts. Chevron is still the leader. They also have another project in South Sumatra.
Can you talk about the Sarulla project and its significance to the country and the development of geothermal?
The electrification ratio is low in Sumatra, and the electricity crisis is a daily issue. They produce for 8 hours and then stop, dividing every 24 hours into three periods. Sometimes power production is unexpectedly stopped for three or four hours, and that is not good. The core problem is the electricity supply in North Sumatra is very limited. Mainly, it comes from hydro, diesel, gas, and some from coal power plants. This capacity is limited and there is a big gap between supply and demand.
When the Sarulla geothermal plant, with a capacity of 330 megawatts, is up and running it can meet today’s current demand. But for the next year, and until Sarulla is producing, they will have to build more power plants to make up the short fall. They have a huge energy deficit, and the continuation of gas supplies for the region is not guaranteed.
Sarulla is one commitment. It is a good chance and opportunity for geothermal. We also have a next project from (19:39) in (19:50). That is 110 megawatts. The problem for them is the power purchase agreement is not agreed between the developer and PLN. We don’t know until when this will be like this.
The bigger problem of geothermal is seeing a business is certain. Delays can defy the viability of projects and actually cost projects. It is very hard to say if we have uncertainty of the business. The second thing is legal certainty. Bali Energy, in Bali, already has PPA, but the legal uncertainty costs the project a big delay. That has happened since 2006-2007. It has been almost 8 years already. That is not good. What we proposed to the new candidate was legal certainty, business certainty, and if they can simplify permits.
What do you refer to when you say legal uncertainty?
I mean changes in regulation, from the central or local government. If they change regulations, it is fine if the new one is better, but you don’t know what is going change. There is a geothermal law, and the authorization was transferred to the local governments. The last law is number 27, year 2003.
The geothermal law says all of the energy should be prioritized. Geothermal is also prioritized. But in the forest law, they say all activities in forests should be based on deforest law. They are contradictory. It is very hard to solve, because they have different levels, they have rights, but who is going to solve this? Normally, a law is political commitment. Government and parliament agreed to prioritize this, and synchronize laws, and they are going to amend the geothermal law. Still, we have the problem because they amend the geothermal law but they are not managing the forest law. That law should also be synchronized.
We expected and pushed from METI to synchronize between laws, and also local laws, which also have authorization. If not, then each of the governments has authorizations and rights to do. That is what we put in our roadmap. This roadmap says that we plan, and assess resources of renewable energies. What kind of confidence levels the resources have. Then, how we are going to do, what purpose, what for. We say that in our roadmap. And finally our final target. And then, what we should do in order to get there. How fiscal conditions should be, what should the government do. We are going to send this to the government.
We are going to submit it to the new government.
If we look beyond geothermal, to other technologies like solar, hydro, or biomass. Where do you see that the best potential is, based in the performance of companies?
We still have very limited company to work with biomass. Mainly hydro and geothermal.
When it comes to geothermal, Indonesia has the biggest potential in the world. What countries in the world do you look up to when you look for role models? Who is the number one producer?
Number one is the US, the second is Philippines, the third one is Indonesia, the fourth one is México, the fifth is Italy, and sixth is New Zealand, I think. The rest is small.
US is about 2 thousand something, and Philippines 1900 bigger than us. We have 1300.
What is the difference between PPAs and legals?
Pricing policy is better than ours. At least that might attract investors to come. In terms of resources, it is quite the same. Philippines and Indonesia are located in the ring of fire. The main problem is that price is very low. The price right now is 9.7 for selling. The buyer wants to buy for less than 5 cents, and the developer needs 7 to 8. In Philippines, the price is already 11 cents.
What would you say the US has to offer Indonesia when it comes to geothermal technology?
The challenge right now is the knowhow. We already have more than 30 years of experience. The problem is that when we try to increase our capacities from 1300 to 9 thousand hundred, we must increase nine times. We should have finance, and technology. I don’t think we have a usual technology. We need efficient technology to lower risks and increasing capacity building and technology. Of course, the numbers of the experts, once you increase the capacity, the number of experts should also increase. The problem is to increase human resource. It is very hard. Even to increase nine times from now to 2025, that is only 11 years. How to increase the human resource 9 to 10 times is hard. That means scientists, engineers, etc, not the new comers. That is very challenging. Even in the world. Kenya right now wants to increase their capacity to 5 thousand megawatt by 2025 also. That is fantastic also, because Kenya is not so big right now. Iceland is also big, I forgot! It is bigger than New Zealand, actually. Then Kenya, I think the World Bank, KFW, EFD from France, want to give some aid, some help to Kenya. I visited Kenya and they need transfer of knowledge.
Soon we will have a new president, a new cabinet, and a new minister of energy. When that new government is ratified, what would you say to the new president?
The first thing is “congratulations”, and the second that a lot of challenges are going to come. Then we’ll send him our road map. That is our point of view.
Have you got a final message for our readers in the US?
Obama is a very good president for enabling energy commitments. I spoke in GRC in 2008, just before his election, when Obama proposed for the renewable energies, and mainly geothermal. He said that if he was elected, his first program was going to be to develop geothermal. When he was elected, I just went to California, and Obama gave 375 million USD for R&D in geothermal. What I want to say is, US should also give support to Indonesia. We have anything here. The political situation here is better, democracy is stable, and the economic growth is also good. So, I think we need support and transfer of knowledge from the technology-side, knowhow, their experience, etc, to Indonesia.
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