Feed-In Tariff for Indonesia's Geothermal Energy Development - Current Status and Challenges

Abstract

Given an acute electricity shortage and global warming and climate change, electricity market in Indonesia is expected to move from a monopoly fossil-fuel generation base to a more competitive structure with an increasing share of renewable energy (RE) by the private sector. In addition to hydro power, the abundant and commercially viable RE resources in Indonesia is the geothermal resource. In order to boost the development of geothermal resources and other renewable resources in Indonesia, the Government of Indonesia (GOI) has introduced the application of Feed-in Tariff (FIT). A feed-in tariff is a guarantee that renewable energy producers will be able to sell the electricity they generate at a price set in advance by the government under the long-term contract (15 – 20 years). Under the FIT scheme, providers of energy from renewable sources will receive a price for what they produce based on the generation costs. This purchase guarantee is offered generally on a long-term basis, ranging from 5 to 20 years. This report discusses the implementation of FIT for geothermal energy in Indonesia, its current status and challenges. The report concludes that Government of Indonesia (GOI) has made a breakthrough in the development of renewable energy such as with the FIT regulation to develop geothermal and other renewable energy resources. However, inconsistencies in the law and regulations and heavy subsidies for energy consumption, have forestalled the development of a cleaner energy infrastructure. Indonesia needs to review the structure of renewable energy transactions, while the GOI needs also to provide assistance in securing the land and streamlining permit applications, in particular for geothermal projects that have been included in the GOI Accelerated Power Plant Projects.