| Abstract |
Indonesian energy demand grows at 9 percent each year and the growth in electricity demand reaches 14% per year – this requires a strong effort to meet energy supply in Indonesia. The role of oil and gas is in excess of 47% in the national energy mix policy over the years, which is an issue due to the somewhat alarming decline in Indonesia's ability to produce oil in the country. The decline has reached 50% of the peak production. As a result, Indonesia requires the geothermal energy to provide optimum durability. Indonesia may have 29,000 MWe of geothermal resources, the highest geothermal potential in the world. However, not much additional power plant has come into operation in the last five years, with current production at 1349 MW being only a modest increase from its capacity in 2010 of about 1189MW. Because geothermal development in Indonesia has been expedited by government regulations that allow the participation of the private sector, both local and international, to attract investors to develop geothermal, the installed capacity is still low in comparison to the availability of resources and durability of the development. Changes in the regulatory environment for the geothermal industry and the resolution of the economic crisis are the major issues affecting the growth of the Indonesian geothermal industry. In spite of the issues, increasing power demand and electricity tariff in the last five years may indicate that business climate has changed and is becoming more conducive for investment. In addition, the issuance of new National Energy Policy (NEP) updating regulation No.5 Year 2006, keeps opportunities for renewable energy to contribute in supporting the energy security of the country. In this regard, geothermal will take a very important role in energy supply. The role of geothermal energy in the national energy mix will impact the improvement of the economic and national energy security activities. Therefore, Indonesia is still interested in doing business in energy and to develop mainly geothermal power. Learning from the past, developing geothermal for the energy supply is very challenging. The issuance of new NEP may attract foreign investors to meet the increase of energy demand. Finally, in regard to investment substance GOI is also expected to be able to maintain Indonesian country risk, to set up competitive basic electricity price, to determine market-demand currency rate, to arrange clear fiscal regulations, and to implement contract sanctity and of course to amend the Geothermal Law. This paper presents current Indonesian energy condition, power utilities, outlines the national energy policies, geothermal resources, energy security and the role of geothermal development and provides an overview of the challenges in the power sector in Indonesia. |