Institutionalized Public-Private Partnership for Geothermal Power Generation in Indonesia

Abstract

Recent portfolio of energy generation in Indonesia is mostly based on fossil fuels, and the growing of energy consumption go on opposite direction of the government’s goal for climate change mitigation. Indonesian government plans to achieve 23% share of renewables in national energy mix in 2025 where geothermal power as one of the largest contributor. As single off taker, PLN expects to develop geothermal power plant in close collaboration with the private sector, not only in a contractor-supplier relation but also in deep partnership where both PLN and the private sector have substantial responsibilities in managing and running the business. This model is acknowledged as institutionalized public–private partnership (iPPP) / joint venture. This work will look at structure of how the risk is allocated, transferred and managed in PLN Geothermal iPPP Initiative to develop its Geothermal Working Areas (up to 400 MW). Portfolio construction is simulated to assess risk reduction, optimizing the benefit and its impact on project feasibility. This structure also integrates the frame and scheme of various available project financing that meet with government policy. In order to value and manage the project, Real Option Analysis (ROA) is undertaken. The sequence and interconnection of available Real Option are developed to assure flexibility of the project.