It may seem like fresh air amid difficulties faced by private renewable developers in Indonesia in finding financial support from domestic banks, which tend to provide short-term loans with only a relatively high interest rate at around 12 percent.

The Finance Ministry is conducting a joint study with the World Bank over the latter’s plan to come up with a soft loan worth up to US$600 million, with an interest rate of only 1.5 percent, an official at the Energy and Mineral Resources Ministry said.

State-owned infrastructure financing company PT Sarana Multi Infrastruktur (SMI) would manage the loan program, of which assessment was expected to be completed soon this year, said Yunus Saefulhak, geothermal director at the Energy and Mineral Resources Ministry.

“All business entities, whether state-owned or private, will later be allowed to submit proposals to SMI to access the soft loan,” he said recently.

Indonesia already has the geothermal fund facility, which consists of $55.25 million worth of grants from the World Bank and Rp 3 trillion ($222.6 million) from the state budget, to fund the advancing of geothermal exploration in five selected geothermal working areas across the country.

The government plans to start the first drillings in July or August in the Wae Sano area in East Nusa Tenggara (NTT), which has potential geothermal reserves of 30 megawatts (MW).

Then, it will explore the Nage area, also in NTT, and the Bittuang area in South Sulawesi, each with possible reserves of 30 and 38 MW, respectively. There is also the Jailolo area in North Maluku and the Bonjol area in West Sumatra with potential reserves of 75 and 200 MW, respectively.

In total, the government plans to drill 15 wells at those five working areas by using the grant from the World Bank. Each well is estimated to cost around $3 million.

If the exploration is successful, the five working areas will be offered through tender, in which the winner will repay the cost SMI has disbursed. With the program, there will be revolving funds available for the government to drill other working areas in the future.

Furthermore, the government aims to offer five other geothermal working areas with a total capacity of 130 MW through an open auction, expected to be held in the first quarter of the year.

The five areas are: Wapsalit in Maluku, Telaga Ranu in North Maluku, Gunung Pandan in East Java, Suwawa in Central Sulawesi and Lainea in Southeast Sulawesi.

Yunus said the government was still formulating a ministerial decree for the auction, which could be held in February if the rule could be issued in January.

He said the decree would also carry stipulations on direct assignment for state-owned companies to develop geothermal working areas.

In 2017, the government assigned state electricity firm PLN to develop eight geothermal working areas with a combined capacity of 300 MW, while state geothermal producer PT Geo Dipa Energi was appointed to develop two areas with a total capacity of 220 MW.

Investment realization in Indonesia’s geothermal sector is projected to reach around $1.35 billion this year, up from $1.04 billion in 2017.

Indonesia aims to increase the installed capacity of its geothermal power plants from 1,838.5 MW last year to 2,058.5 MW in 2018 and 7,200 MW in 2025.

This year, the government plans to assign the PLN the development of four other areas with a total capacity of 140 MW, namely Gunung Endut in Banten, Ria-Ria Sipoholon in North Sumatra, Danau Ranau in Lampung and Bora Pulu in Central Sulawesi.

Moreover, various geothermal developers have committed to drilling 50 geothermal exploration wells in 2018, each with a cost of around $7 million. The government has also estimated that those developers will disburse around $1 billion for the engineering, procurement and construction of several geothermal power plants this year.

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