Indonesia is expected to accelerate the development of its geothermal energy sector but its total capacity may not meet its target of 9.3 gigawatts (GW) of installed capacity by 2035 and may only reach 8.1GW based on the current trends, according to GlobalData.
In a report, GlobalData said the country is prioritising and accelerating the development of the geothermal sector to solve energy issues and achieve its climate targets.
“However, the target may still be achievable if the government succeeds in conducting WKP (geothermal working areas) auctions without delays, provides incentives to overcome the upfront costs in the exploration stage, and rallies more foreign private investments,” said Attaurrahman Ojindaram Saibasan, Power Analyst at GlobalData.
It will also help Indonesia reduce its dependence on fossil fuel imports and cut the economic burden from fossil fuel subsidies as it has spent IDR83.7t for such and is expected to shell out IDR77.5t in 2022.
“Geothermal holds the key to achieving the country’s target of achieving 23% of its energy requirements from renewables and cut its carbon emissions to net zero by 2060. The government also hopes to achieve 100% electrification rate in the country and geothermal is considered as a reliable source to reach it,” Saibasan said.
GlobalData the country has identified more than 300 sites in Sumatra, Java, Nusa Tenggara, Sulawesi, and Maluku for the development of geothermal power. A fund of around IDR 3.7 trillion (around $275 million) was also created for the development of geothermal technology.
Saibasan noted that the country updated its law on geothermal activities in 2014 and does not consider it under “mining activities” which are prohibited in high conservation areas.
The analyst added that the regulation requires a production bonus for the local government where the geothermal field is situated. Auctions for WKP were also introduced to encourage the participation of the industries.