Geothermal law won?t boost investment in sector: Report
Monday, September 29 2003 - 06:43 AM WIB
Riki F Ibrahim of the Indonesian Renewable Energy Resources Society (METI) also said that a lack of government fiscal support in the sector would not lure investors.
?Unlike oil or natural gas, geothermal could only have commercial value when it turns into secondary energy, for example power,? Riki told The Jakarta Post over the weekend.
On the other hand, oil, natural gas and coal have immediate commercial value even when they were still in the form of raw materials, he said.
The House of Representatives last week endorsed the geothermal law, with the government saying it should provide legal certainty in investing in the sector and thus boost investment.
Geothermal energy refers to underground steam that can be used to generate power. It is considered an environmentally clean source of energy.
Indonesia has the highest geothermal resources in the world. Data from the Indonesian Geothermal Association (INAGA) says 40 percent of the world?s geothermal resources are located in Indonesia. It could potentially produce 20,000 megawatts (MW) of electricity.
But Riki said that the physical features of geothermal make it less attractive than oil, natural gas or coal.
?For example, geothermal cannot compete with natural gas because gas is more efficient. It can be shipped across the nation through pipeline or containers,? he said.
In addition, natural gas can be turned into various lucrative products such as liquefied petroleum gas (LPG) or fuel. It can be used by the petrochemical industry to produce a number of products, including fertilizer.
?Geothermal in this country could only be used for generating power, unlike abroad where it can be used for home heaters, green houses, etc,? Riki said.
Geothermal energy could not be transported, which means that the processing plant and power plant must be located closely to the fields.
At present, Indonesia only has a handful of geothermal power plants with, a combined capacity of 747.5 MW located in West Java (Kamojang, Salak, Darajat and Wayang Windu), North Sulawesi (Lahendong) and North Sumatra (Sibayak). The domination of oil, natural gas and coal as primary energy sources in Indonesia ? just like in any other part of, the world ? would undermine the development of geothermal energy Riki said.
?Ten years from now when geothermal is ready to be used, natural gas pipelines have criss-crossed the country,? he said.
Herman Darnel Ibrahim, chairman of the, Indonesian Geothermal Association (API), said that the low interest among investors to invest in the geothermal sector was also due to the lack of ?fiscal support from the government.
He suggested that since investing in the geothermal sector was highly risky, the? government should provide tax incentives to investors.
Herman also criticized the new law, which allows investors to exploit geothermal energy resources for 30 years from the time exploration begins.
He said that to allow investors to obtain decent returns from investing in the geothermal sector, investors must be allowed to exploit geothermal resources for 30 years from the time commercial operations begin, instead of exploration.
Red tape in obtaining licenses to exploit geothermal, and to sell power produced by the energy would further undermine commercial development of geothermal energy.
The new law requires two licenses for geothermal exploration and sales of power. As a consequence, one geothermal operator must apply for two licenses.
?It, would be better if both exploration and power sales use one license,? Herman said.
Riki added Investors need assurance that their geothermal energy resources would have buyers because geothermal could only be used for power. It means there should be a guarantee ?that state utility firm PT PLN would buy power produced by geothermal companies. (*)