Indonesia Moves Forward on Solar, Geothermal

Indonesia is supporting its renewable energy agenda with updated incentives for geothermal projects and a new manufacturing plant to advance the country’s solar program.

The island nation ranks third among the world’s top greenhouse gas polluters primarily because of carbon emissions related to deforestation for palm oil and peatland degradation. 

Renewables account for just 5-6% of the country’s energy mix. The government has been calling for 17% renewables by 2025, but the Minister of Energy recently indicated this will be raised to 25% and geothermal will be a big part. 

Geothermal Feed-In Tariff

To support geothermal expansion, the Indonesia government is raising the feed-in-tariff (FiT) for geothermal-generated electricity from $.097 cents to $0.10 -$0.17 cents per kilowatt-hour (kWh), depending on the region where a plant is located.

The government also plans to offer other incentives such as tax holidays during exploration.

The move is puts a geothermal "crash" program into place for the archipelago, which aims to more than double existing capacity with 4,000 to 5,000 megawatts (MW) of geothermal development by 2014-2015. By 2025, it plans to have 10 gigawatts (GW). The expansion will employ as many as 800,000 people.

Among the nations with huge geothermal resources, Indonesia comes in third, with 1,200 MW in place, after California (3,100 MW) and the Philippines (1900 MW), and with twice as much as New Zealand (600 MW) and Iceland (600 MW).

The country has the potential for 29 GW of geothermal. 

Indonesia’s FiT diverges from other programs, like Germany’s, in setting benchmark prices or ceiling prices for geothermal power.

"We need to change the perception because previously geothermal has been considered a mining activity," says Kardaya Warnika, Director General of New, Renewable Energy and Energy Conservation. "Besides, in the area of geothermal generation automatically will be planted by trees because if there is no tree, there won’t be absorbed water. If there is no absorbed water, there won’t be steam out."

Indonesia already offers FiTs for biogas, hydro, municipal waste, and landfill gas, and plans to soon add FiTs to incentivize investments in solar and wind projects. 

Indonesia’s other renewable energy goals:

  • 2,000 MW of solar PV by 2014
  • 300 MW of wind by 2014
  • 1,300 MW of new hydro by 2015
  • 400 MW of new biomass by 2015

Solar Venture Fills Manufacturing Gap

Two state-owned companies announced they will build a solar PV manufacturing plant to establish the solar industry in Indonesia. 

Oil and gas company Pertamina and electronics group PT LEN Industry are building a plant that produces solar cells. Once that’s done, the country will be able to produce solar modules from start to finish.

The companies see an opportunity to support the addition of at least 65 MW of new domestic solar capacity a year.

Off-grid power is important in Indonesia, with its distant islands, many not connected to the grid, and they see a market for road and airport lighting, in addition to homes and buildings. 

Last year, the US committed over $600 million to Indonesia’s "green prosperity" program. Besides assisting with renewable energy development much of that aid is funding projects aimed at reducing the rampant deforestation that fuels almost 85% of Indonesia’s emissions, such as guiding future palm oil plantations away from pristine rainforests and toward abandoned, degraded lands, which are abundant. 

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