Identifying Geothermal Power Plant Institutional Barrier and External Factors in Indonesia

Abstract

Geothermal Power Plant (GPP) installed capacity has not been optimally optimized in Indonesia, although Geothermal is abundant. In fact, the institutional barrier and external factors are amongst factors determining GPP utilization and maintenance. To realize such potential, the Government of Indonesia (GoI) has conducted some initiatives to improve this condition. Particularly, it applies better and proper incentives such as fiscal incentives and conducts Preliminary Survey and Exploration Assignment (PSPE) to properly assesses the potential. The output of PSPE will provide more credible data to ease the risk and cost of the geothermal exploration phase. But there is also an inherent danger in the exploration phase, and the exploration cost tends to rise, makes the GPP less feasible. The trend of declining coal price is also a threat to GPP since it is more favorable to generate electricity from the cheap resource (coal-fired power plant). Thus, in order to lower the risk, technology adoption, and acquisition to reduce the cost and risk associated with exploration is essential. On the other hand, from the GoI’s view, Trilemma energy policy applied in Indonesia is the essential/basic consideration to regulate the energy business. For renewable energy, it is emphasized on the affordability aspect, thus in analyzing the institution’s policy, the set of the power purchase agreement and related rules remain as the decisive factors. The paper attempts to explain and assess the government initiatives on the issues mentioned above, by using SWOT and Policy Gap analysis to describe the Indonesian geothermal energy condition and analysis. Thus, this paper is constructed to provide an alternative solution to mitigate and ease such institutional barriers and external factors in Indonesia’s GPP.