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International partnerships key unlocking Indonesia’s geothermal potential
Geothermal power is a proven technology, which, if developed at the right scale, offers an economically competitive and clean source of energy.
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Indonesia is estimated to have some of the world’s greatest geothermal energy reserves. (Reuters/-)
T
he Indonesian government is actively leading an ambitious economic diversification program, and reforms to its labor and financial sectors are aiding overall development and increasing foreign direct investment (FDI).
By strategically harnessing its natural resources, Indonesia has been able to increase access to electricity across the country’s many islands and provide a better quality of living to its citizens. This has been a critical driver for economic success.
One underutilized natural resource that is abundant in Indonesia is geothermal energy, a resource that is renewable, non-carbon emitting, and, unlike other renewable sources of energy, non-intermittent. Developing the country’s plentiful geothermal energy resources can help meet the growing demand for energy, while also bringing economic benefits and supporting the nation’s path to net zero emissions by 2060.
Partnerships with global energy companies such as Masdar, a global clean energy powerhouse active in over 40 countries including Indonesia, will play a critical role in enabling Indonesia to continue to harness this resource and reap the benefits from its renewable resources while delivering a sustainable future for its people.
Geothermal energy harnesses heat generated within the Earth’s core to produce renewable electricity as well as provide an energy source to industrial and commercial purposes. The high-capacity factor of geothermal plants can produce dispatchable electricity, adjusting for output on demand. To date, much of the renewable energy capacity developed is attained from solar and wind, geothermal offers a clean baseload resource to help balance grid demands.
Geothermal power is a segment in which Indonesia can thrive. The country has more than 300 sites with an estimated 24 Gigawatt in geothermal reserves ready to be cultivated. Indonesia is home to the world’s largest geothermal reserves boasting over 40 percent of the world’s geothermal reserves. Geothermal power is a proven technology, which, if developed at the right scale, offers an economically competitive and clean source of energy.
The Indonesian government is already on the right track to further developing its geothermal and renewable energy resources, which are abundant. In fact, according to the International Renewable Energy Agency (IRENA), Indonesia has a clean energy potential of more than 3,000 GW which mostly comprises solar, but also includes wind, hydro, bioenergy, ocean and, of course, geothermal.
To unlock this incredible potential, the government has aims to have renewables make up nearly a quarter of its energy mix by 2025 and is targeting 6.2 GW of geothermal power alone by 2030, nearly triple from current capacity.
While developing geothermal energy offers plenty of advantages, developing the resource does bring a series of challenges that need to be overcome. Exploring and developing geothermal resources requires surveying and drilling that is complex, costly, and at times, highly risky. To achieve scale and unlock this sector’s full potential, collaboration and support from international partnerships is required.
State sovereign wealth fund, Indonesia Investment Authority (INA), is committed to ensure Indonesia succeeds in its net-zero program. INA and Masdar energy company recently invested in Pertamina Geothermal Energy (PGE), This move is the latest of many targeted placements to support the country’s economic diversification into clean energy.
To attract leading energy players to support Indonesia’s geothermal ambitions and achieve its target of commissioning 6.2 GW of geothermal energy by 2030, regulators must work with stakeholders in the electricity sector to streamline permitting processes, update renewable energy tariffs and simplify concession agreements to allow Indonesia to achieve the goals of its net-zero program.
A presidential decree issued in September 2022 identified key reforms planned to enhance the regulatory environment for developing renewable projects in Indonesia. These include setting up an adequate pricing regime for renewable energy sources, tax incentives for clean energy projects and streamlining the negotiation process to reach an agreement on pricing.
These measures will help create a more leveled playing field for clean energy projects to compete fairly with fossil fuel-based electricity, attracting industry-leading partners to enable Indonesia to step up its development of geothermal, and other clean technologies, and seize the opportunity for socioeconomic progress through a future-proof economy.
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Mohamed Jameel Al Ramahi is CEO of Masdar. Ridha Wirakusumah is CEO of Indonesia Investment Authority.
