Dec 13

A power purchase agreement has been signed for a geothermal power plant in southern Sumatra, helping to increase Indonesia’s source of alternative electricity production.

State-utility firm Perusahaan Listrik Negara signed the pact with Indonesia’s Supreme Energy, Japan’s Marubeni and France’s GDF Suez — three companies that will build the $2.2 billion facility. The plant will have two 110 megawatt generators.

Under the agreement, PLN will pay 8.86 cents per kilowatt hour to the consortium for 30 years, said PLN’s president director, Nur Pamudji on Monday.

He added the agreement was based on an old regulation, at a rate significantly lower than the price of 11 cents per kilowatt hour recently set by the Energy and Mineral Resources Ministry.

Supramu Santosa, president director of Supreme Energy, said that the South Sumatran Rantau Dedap plant is among three geothermal projects the firm is currently developing.

“The investment value for the Rantau Dedap plant is around $700 million, and the total investment value is estimated at $2.2 billion,” he said.

Supramu added that the plant is expected to start generating electricity in 2017.

“Currently we are still building supporting infrastructure like roads, because the geothermal site is very remote,” he said.

PLN renewable energy chief Muhammad Sofyan, said that the firm planned to sign at least 15 power purchase agreements for geothermal project in the near future. He did not provide any names.

“The generation capacity [from these geothermal power plants] is no more than 2,000 megawatts,” he added.

Geothermal energy is a big part of the government’s program for the country’s electricity capacity to reach 55,000 megawatts by 2020.

By 2025, the government expects the portion of electricity generated from renewable energy to reach 17 percent, while diesel fuel will stand at 20 percent, gas at 30 percent and coal at 33 percent.

In order to encourage private investors, the ministry has increased the feed-in tariff — the price that PLN must pay for electricity — to between 11 and 18 cents for geothermal power depending on the location.

Indonesia, which sits on top of two volcanic chains, is rich in geothermal power where it is estimated that some 40 percent of the world’s geothermal reserves are located in Indonesia.