| Abstract |
Although Indonesia has abundant geothermal energy resources, which are known to produce clean and environmentally friendly energy, its development in Indonesia is facing many challenges. The energy market in Java is a single buyer model, so geothermal energy can only be sold to PLN, the state electric company ñ the only buyer. Under the current energy policy, the average geothermal electricity production cost is higher than the cost of electricity produced by fossil-fuelled generating plants. From a strictly economic stand point; geothermal energy appears to be less competitive. Moreover, the government has set new policies to implement an even more competitive electricity market, which commence by the year 2004. This new policy will add pressure on geothermal energy to compete. Pertamina, the state oil and gas company, acts as government representative to coordinate and facilitate the geothermal exploration and exploitation. Currently, there are two types of geothermal energy sales: direct sale of steam or sale of electricity. A Geothermal Developer works in cooperation with Pertamina through a joint operating contract to explore for and develop geothermal wells. The developer then either sells the steam to a generation company or uses the steam to generate electricity and sells it to PLN. A generation company, such as PJB-I, buys geothermal steam from developers and sells the electricity to PLN at a regulated price, which may leave no margin for profitable business. This paper discusses the current geothermal industry structure and business practice in Indonesia. It describes ways to create attractiveness and competitiveness of the geothermal energy business. The ability of geothermal plant to compete with coal, gas and oil fired electric power plants is assessed by evaluating and comparing the production cost for each type of fuel. This comparison also includes the perspective on tax or government production sharing policy in the primary energy businesses. Through this analysis, challenges for the future geothermal development are identified, classified and categorized so that each party in the geothermal business chain can develop specific plans to address their respective challenges. |