Indonesia is preparing a presidential regulation on renewable energy pricing to gain the investors’ trust in the clean energy sector. The move benefits the Indonesian renewable energy landscape, particularly the geothermal sector, says GlobalData, a leading data and analytics company.

According to GlobalData, renewables (including small hydro) formed 6.8% of the overall installation in the country by the end of 2019, out of which geothermal accounted for 45.2% with over 6GW of geothermal projects in the pipeline in the nascent or advanced stages of the development.

Ankit Mathur, Practice Head of Power at GlobalData, comments: “There exist a large potential of power generation from geothermal energy in Indonesia, given the country’s geographic location in the region with high tectonic activities. Much of the 29GW+ estimated geothermal resoureces remain untapped and hence, with more structured policy initiatives and investments the segment could witness rapid expansion.

“With an appropriate pricing, the interest of the developers would help expand the clean energy base, which in turn would lead the country to achieve a sustainable generation mix in the future.”

However, considering the high risk and investment in the development of environment-friendly geothermal power plants, Indonesia plans to reimburse exploration costs and incentives for the advancement of geothermal infrastructure.

The government has provided incentives and emoluments, so the cost of renewable energy would likely be affordable for the public while still being economically feasible for the developer. Provisions such as price-competitive auctions, low local content requirement and US$ indexation to the tariffs may further stimulate the fast pace of the renewable expansion.

Mathur concludes: “The increased inclination from the Indonesian government towards the development of the geothermal sector through conducive policy environment, public private partnership model and installation of power evacuation infrastructure at geothermal resource location is the key for wider deployment of this technology for power generation. Given the policy intent and historical developmental experience in the country, Indonesia will represent around 60% of the new installations in the Asia-Pacific (APAC) region by 2025.”