Decree on geothermal should be replaced by law

The chairman of the Indonesia Geothermal Business Association (API), Puguh Sugiharto, called on the government to draft a bill on geothermal to give legal certainty on geothermal business as it is currently governed only by a presidential decree.

Puguh said that geothermal investment had been stagnant as there was no legal certainty in this sector. A presidential decree was not enough to attract investors because it could easily be replaced by another presidential decree.

"If we have the law, it will be difficult to change it at anyone's whim," he said.

Investment in the geothermal business had been stagnant since 1993, totaling US$2 billion, in 12 locations.

Therefore, before the geothermal law is passed, the government must act quickly to attract investment in geothermal, by offering more incentives including tax incentives, Puguh said.

"The taxes are collected from geothermal companies, and then returned to the companies so that it will be able to attract more investors to come here. Or, the 34 percent tax is collected from geothermal companies and the government gives it back to state electricity firm PLN so that it will encourage PLN to use geothermal as its energy source," he said.

Puguh noted that PLN currently preferred using diesel power to geothermal power plant because using diesel oil was cheaper than using geothermal. PLN pays around 3 U.S. cents per Kwh of electricity produced by diesel power plant, but pays 4 U.S. cents per Kwh of electricity produced using geothermal as energy source. Thus, it needed the government's intervention to encourage PLN to use geothermal. (*)