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o help boost the development of renewable energy in Indonesia, the government has provided a geothermal fund facility for regional administrations and geothermal mining license holders to support exploration activities.

The facility, which is explained in detail within the 2012 ministerial regulation on the geothermal fund facility, will cover funds for seeking data on reserves of geothermal working areas that are expected to be verified by internationally renowned geothermal consulting companies.

The highest value that would be covered by the facility could be as much as US$30 million.

For regional administrations, there will be no additional cost to access the facility. The administrations must submit a proposal to the State Investment Agency (PIP).

After the data on working areas has been attained, the administrations can use them in the auction process for the geothermal working areas. The auction winners will be required to pay back the funds.

Companies holding geothermal mining licenses can also apply for the same facilities with almost the same procedures. However, they have to repay the debt, plus interest, which will be set at the Bank Indonesia rate the time the agreement is signed.

According to the regulation, at the latest, the repayment of the geothermal fund facility must be conducted five years after commercial operation of the geothermal power plants.

To ensure the transparency and accountability of the disbursement facility, the Government Investment Agency must submit periodical reports to the Finance Ministry’s fiscal office. The reports will be audited by public accountants and published on the agency’s website and the national media.

The facility will supplement the government guarantee over state power company PT PLN’s ability to pay its financial obligation to geothermal developers. The two legal tools aim to accelerate the development of geothermal power for electricity in the country.

The first guarantee was issued last month for two geothermal projects in Muara Laboh in West Sumatra and Rajabasa in Lampung. The two geothermal power plants will be built by Japan-based Sumitomo Corporation, which will team up with International Power GDF Suez and PT Supreme Energy.

The power plants will have a total capacity of 2x110 megawatts (MW) each. State power utility PT PLN will then buy the electricity at the price of 9.4 US cents per kilowatt-hour for Muaralaboh and 9.5 cents for Rajabasa.

Indonesia is home to 40 percent of the world’s geothermal reserves with the potential of producing more than 27,000 MW of power. However, as of today, the country can only generate 1,341 MW of power from geothermal power plants, or only 4.6 percent of its total potential.