Geothermal in Indonesia – Developers’ Perspective
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Geothermal in Indonesia – Developers’ Perspective
IIGCE June 5 2014
Dr. Bret Mattes
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The opportunity cost of not developing geothermal in Indonesia is massive. So why has development been allowed to lag…..?
• Average lead time for new projects in Indonesia has been > 12 years
• Fundamental issue – petroleum-scale capital at risk upstream for a utility rate of return downstream
• Is Sarulla the breakthrough project that will give the industry momentum??
• Where does the blame lie – public or private?
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What’s holding us back?
• Demand issues• Accessibility • Resource quality• Pricing• Industry structure• Finance• ??
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Demand• Market is clamoring for base-load electricity• Government has outlined clear electrification and
renewable energy targets; but…• Market is distorted – energy subsidies soak up
almost 20% of annual national budget• Lack of coordination within government• Risks are not shared equitably• Government guarantee is inadequate• No national database• License rules not rigorously enforced
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Accessibility• Extractive mining activity• Cumbersome tender process• IUP commitments that don’t reflect:
– Paucity of data– Delays with PPA– Delays with forestry approvals and other consents
• High drilling costs– Onerous treatment of drilling cuttings
• Land acquisition issues• Limited talent pool• Lack of coordination within government• Exploration Fund is ill-conceived
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Resource
• Inconsistent definition of resources at time of gazettal
• Mix of high/low temperature; deep/shallow• Geography
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Pricing• Bidding requires nominal tariff at COD to be
specified before resource data is available• National cap versus FIT; avoidable cost versus
project-specific B to B outcome• Post-COD escalation reflects inequitable risk
sharing
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Industry Structure
• Single buyer– Also a developer– Can’t choose its suppliers
• Plant versus unit commissioning – encourages irresponsible development strategies
• Coordination across and between levels of government• Who builds/owns/operates connection infrastructure?• Needed: experienced, persistent developers willing to
risk upstream capital• “Fast track” was a rhetorical turn of phrase
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THANK YOU