T

he government is preparing a new regulation to set the price of electricity produced at geothermal power plants with the hopes of luring more investment into the sector, a senior official reveals.

The regulation would also promote the development of geothermal technology in areas that had no other available energy resources and where using oil-based fuels was expensive, said Sugiharto Harsoprayitno, the Energy and Mineral Resources Ministry geothermal director at the Directorate General for New, Renewable Energy and Energy Conservation.

The regulation will supplement an existing ministerial regulation that requires state power company PT PLN to purchase electricity produced from geothermal plants at a ceiling price of 9.7 US cents per kilowatt-hour (kWh), applied only to the second phase of the 10,000 megawatt (MW) fast-track program.

“Our planned regulation targets projects outside the second-phase 10,000 MW program,” Sugiharto said.

Uncertainties in the price of geothermal energy is one of the factors keeping investors from pouring more money into developing the renewable resource despite its abundance. With it’s location in what is known as the ring of fire, Indonesia is home to the world’s greatest potential for geothermal energy.

The planned pricing regulation for geothermal investors is likely to be similar to the existing 2011 ministerial regulation that set the ceiling price for the entire country.

In the regulation, if the cost of power production is above the ceiling price, negotiations between PLN and geothermal suppliers must be based on PLN’s estimates, and the power purchase agreement must be approved by the Energy and Mineral Resources Ministry.

“The production cost in each area will be different, so there must be several ceiling prices as reference points. As long as the prices are still below the power production costs of oil-based fuels, PLN will buy the electricity,” Sugiharto said.

For example, the price of electricity from the Jailolo geothermal plant in Halmahera, North Maluku, is 19.1 cents per kWh, which is still below PLN’s average power production cost in the province of 25.7 cents.

In determining the price, the ministry uses the cost of generating electricity from oil-based fuels as a benchmark, which is far more expensive than the cost of producing geothermal power, Sugiharto said.

The ministry’s director general for new, renewable energy and energy conservation, Kardaya Warnika, said each area in Indonesia had its own particular traits, so the ceiling price should be different from one area to another.

“We haven’t determined the area divisions. We have to study them first to determine how many ceiling prices we should have,” he said.

He expected the new regulation to be finalized by the end of this year.