JAKARTA: Businesses have been reluctant to participate in geothermal projects auctioned by state electricity company PT PLN, with analysts pointing to the projects’ unattractive returns that may not sufficiently compensate for the risks faced during development.
PLN is offering nine geothermal projects with a total capacity of around 260 megawatts (MW) in March last year, including the Tulehu project in Central Maluku, Atadei in East Nusa Tenggara, Songa Wayaua in North Maluku, Tangkuban Perahu in West Java, Ungaran in Central Java and Kepahiang in South Sumatra.
Those looking to come board are to collaborate with PLN by forming a joint company and signing a contract through the Geothermal Exploration and Energy Conversion Agreement cooperation scheme.
Among those interested was publicly listed Barito Renewables through its subsidiary Star Energy. The company expressed an interest in the Kepahiang project, which boasts 180 MW potential, but later decided to pull out of the bid.
PLN geothermal executive vice-president Christyono said on June 27 that the company could not go through with the partnership because “Star Energy’s proposal did not meet what PLN was asking for”.
“PLN is reauctioning the geothermal working area,” he said, as reported by Bisnis, adding that Star Energy had yet to be announced as the official winner of the geothermal project’s auction.
Barito Renewables did not immediately respond to a request for comment.
The government aims to produce a total of 9.3 GW of geothermal-powered electricity by 2035, but the country had only realised 2.4 GW as of last year, with almost seven GW still required.
Indonesia would need roughly US$3.65mil for every megawatt of geothermal power generated, according to Senik Centre Asia in July last year. That would mean the country needs over US$25bil in investment to realise the target.
The Indonesian Geothermal Association (Inaga) secretary-general Riza Pasikki said PLN’s terms and conditions “were not attractive enough” to bring in prospective investors to develop the projects.
He said, for instance, one requirement was for participating firms to become the sole investor for the costly exploration drilling, and for the company to be fully responsible for the risk of an unsuccessful operation.
Putra Adhiguna, managing director at the Energy Shift Institute, said that one of the challenges in finding strategic partners to develop geothermal projects included balancing the risks and rewards, especially if it was still in the exploration phase.
“The questions revolve around PLN’s capital investment, risk-sharing terms and conditions as well as PLN’s tariff proposal as the off-taker,” he said.
He added that while detailed information on Barito Renewables’ withdrawal was unavailable to the public, he suggested that it could be related to PLN’s reluctance to provide economically appropriate tariffs, or a capital and risk structure.
“Development with PLN can provide more certainty in electricity sales, but PLN as a utility company does not necessarily have the appropriate risk tolerance to carry out geothermal exploration,” he said.
Businesses have long voiced that electricity prices from renewables did not make economic sense, as they were forced to compete with heavily subsidised coal plants, urging the government to provide fairer treatment to pave the way for the adoption for clean energy. — The Jakarta Post/ANN
