Indonesia to boost geothermal energy development

Energy Minister Jero Wacik said that Indonesian government is planning to expand use of the direct appointment mechanism to grant geothermal energy concessions in a bid to boost the sector’s development, local media reported on Friday.

Under the current system, the government can directly appoint a company to expand an existing geothermal concession. According to Wacik, under the new regulation, such direct appointment could also be used for new concessions.

He said the move is expected to help accelerate the development of geothermal energy and reduce dependency on fossil fuels for power generation.

"We are currently preparing the government regulation [PP] that will govern the development of new geothermal concessions without having to go through tenders and use a direct appointment," Wacik said on Thursday.

He said with the new regulation, the direct appointment system could be used as long as the company involved had already obtained other geothermal concessions or had experience in the industry.

With the direct appointment, the state utility firm Perusahaan Listrik Negara (PLN) will have to automatically buy the electricity produced by the concession holder without renegotiation, which is a hindrance to the development of geothermal energy, the Jakarta Globe reported.

He said the government will at the same time would try to improve the pricing scheme for electricity generated from geothermal energy. At present, the ceiling price for electricity is set at 9.7 cents per kilowatt hour.

If the a concession obtainer wants a higher price, citing particular operational costs, it would have to renegotiate with PLN, the sole buyer of the electricity.