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Wednesday 23 Aug 2017 | 12:56 | SYDNEY
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Indonesian geothermal talk is mostly hot air

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COMMENTS

17 June 2011 15:59

Peter McCawley is a Visiting Fellow at the Indonesia Project, ANU, and former Dean of the Asia Development Bank Institute, Tokyo. He is doing consulting work in Indonesia.

In Western countries, the green lobby often points to the prospects for alternative energy sources in the developing world, such as geothermal in Indonesia, as part of the answer to global climate change challenges. The Bloomberg story The Interpreter referred to yesterday about geothermal energy in Indonesia reflects these hopes.

The item had good news and bad news. The good news – which has been referred to dozens of times in the past few years in reports from Indonesia – is that in theory, the sky is the limit for geothermal in Indonesia. It has often been reported that there is at least 27,000 MW of geothermal potential in Indonesia. This means Indonesia has around 40% of the world's potential geothermal reserves. These issues were discussed in an excellent report, prepared with Australian support, issued by the Indonesian Ministry of Finance in late 2009.

Potential is one thing; getting access to geothermal energy is another. There are all sorts of technical problems involved in exploiting those 27,000 MW of reserves, not least of which is that more than half of the reserves are in Sumatra. Transmitting the power from the jungles of Sumatra to consumers in cities is likely to be very difficult and expensive.

Perhaps most important of all is the pricing regime for power in Indonesia. This is the key to energy policy, and it is a huge problem.

Just as Australians are resisting higher energy prices, so is there widespread resistance to increased electricity prices in Indonesia. The Indonesian Government is under immense pressure to provide very costly subsidies (well over $10 billion per annum) to fuel and electricity consumers. Prices are therefore suppressed, and the incentives for the development of geothermal sources of power are limited.

The most important part of the Bloomberg story was a stark observation from the former head of Indonesia's state-owned oil company. His comment goes to the heart of energy policy in Indonesia and to the prospects for geothermal energy in Indonesia. The Government’s plan is a 'pipe dream' until it's prepared to force consumers to pay more for their electricity, said Ari Soemarno, former president of PT Pertamina. The Government can't afford to keep subsidising power, yet isn't brave enough to force consumers to buy at cost, he said.
 
The future of the Indonesian power sector largely depends on pricing. And for the time being, just as in Australia, the prospects in Indonesia look difficult.

Photo by Flickr user derhypnosefrosch.

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