New regulations on geothermal price to be issued soon
Thursday, March 6 2014 - 03:43 AM WIB
Ministry of Energy and Mineral Resources (MEMR) plans to issue two ministerial regulations setting rules on geothermal power tariffs and geothermal tender respectively, a senior official of the ministry said on Tuesday.
Director of Geothermal at the ministry Tisnaldi said that the MEMR will formulate and issue the regulation on geothermal price tariffs once the Asian Development Bank (ADB) and World Bank, which have been hired as independent consultants to study the most suitable tariffs for geothermal power, have finished their study. The study is expected to be completed in mid-March, according to Tisnaldi.
Before asking the ADB and World Bank to become consultants, the government has three geothermal electricity tariff alternatives including Feed in Tariff (FIT), ceiling price, and the combination of both. The ADB and World Bank are reportedly inclined to recommend the use of ceiling price system.
With regards the regulation on geothermal tender, he said the regulation will oblige the geothermal IUP (Mining Concession License) to provide guarantee funds to ensure they will meet their commitment to develop the projects. This is to prevent the IUP holders from leaving their projects idle, Tisnaldi said.
"For example, if they promise to drill three exploration wells, they must provide guarantee funds amounting to US$ 30 million, and if two wells, $20 million," he said, without providing details where the guarantee funds will be deposited.
Under the planned regulation, the winner of a tender will be decided not based on the lowest price it offers for the power, but on the investment and drilling of wells specified in its work program.
"We expect serious investors to develop the geothermal projects,? he said.
Indonesia has huge geothermal resources but only a small amount of the resources have been developed. In 2008, the government awarded geothermal contracts to several companies, but most of them were still unable to realize their projects, because the prices they offered during tender were too low. They are now trying to renegotiate the prices.
Editing by Johannes Simbolon