Sarulla: 330 MW Geothermal Project, Key Success Factors in Development

Abstract

Located in the Tapanuli Utara District, North Sumatra province in Indonesia, the 330 MW Sarulla power plant is set to be the world’s largest geothermal power plant when its construction is completed in 2019. While the construction has already started, the story of the development of this power plant is a long and interesting one on various levels; this story, demonstrates the challenges and risks that geothermal developers face on the road to success, from regulatory through economics, technical, legal and financing aspects. Many people and organizations have worked tirelessly for years to bring the plant to fruition and this paper shall outline the history and the various challenges the project has faced, highlighting the major criteria for overcoming such challenges, while ensuring successful development. The project originally started development by Unocal in 1993, and in 2004 was retendered by PLN (the Indonesian national electricity company). PLN took over Unocal interest in the JOC (Joint Operation Contract) and the PPA (Power Purchase Agreement). In 2006, the Medco-Ormat-Itochu Consortium has been awarded the tender to develop the project. Today the Consortium consists of Medco Energi Internasional Tbk, Ormat Technologies, Inc.; Itochu Corporation and Kyushu Electric Power Co. Inc. Based on the above considerations, SOL (as contractor to PT Pertamina Geothermal Energy, "PGE") formally provided notice for its intention to develop a geothermal power plant of approximately 330 MW capacity in the Sarulla Contract Area. This will be comprised of the following units (or stages) as set out in Appendix IV of the JOC. • First Unit and Second Unit - the SIL Plant: approximately 83-110 MW in 2016 (possibly in several increments) • Third Unit and Fourth Unit - the NIL I Plant: approximately 76-110 MW in 2017 (possibly in several increments) • Fifth Unit and Sixth Unit - the NIL II Plant: approximately 76-110 MW in 2018 (possibly in several increments)