Bret Mattes, CEO of Star Energy, talking about harnessing geothermal energy.
Big Focus on Geothermal
There are many bright sides to the fact that Indonesia lives on the “Pacific Ring of Fire.” Among them is that the country holds more than 40 percent of the world’s proven geothermal reserves, mostly on Java, and could meet all of its power needs by accessing them.
But that’s easier said than done, says Bret Mattes, chief executive officers of Star Energy, a company that, he says, has a “big focus on geothermal.”
“Indonesia’s current electrical production is 27.5 gigawatts, and now there are 25 to 30 gigawatts of potential geothermal,” he says. “Keep in mind that not all of that is easy to get to.”
But physical and engineering challenges are only part of the problem. The Indonesian government to date has not provided any incentives for the geothermal industry, despite President Susilo Bambang Yudhoyono personally backing its potential and the country even hosting the World Geothermal Congress on Bali in April 2010.
“Incentives always help, and the quicker, the more Indonesia can develop geothermal,” Mattes says, noting that development is crucial for low carbon growth because geothermal is a substitute for coal and oil. “The government definitely recognizes the issue.”
Star Energy operates a geothermal plant in Wayang Windu, West Java, and supplies power to the West Java Power Grid. Mattes speaks excitedly about the efficiency of geothermal, noting that it’s clean, extremely reliable and therefore constantly available.
However, he says there are obstacles to development. Chief among them is that project developers are chosen by tender, with tariff as the key criteria for success. After selection, developers must then negotiate the real price at which they will sell electricity to the ultimate buyer, state utility PT Perusahaan Listrik Negar (PLN), as part of the negotiation for a power purchase agreement for their project.
But the current expectation is that this tariff negotiation will only happen after the developer has sunk very significant costs into exploration to prove that there is an acceptable resource present. This is a risk that is unacceptable to most developers, Mattes says.
Also, since PLN is not part of the tender process to choose geothermal project developers, he says, PLN can be a resistant buyer if they can’t directly choose who they purchase power from and at what price.
“This has to change. It’s a fundamental flaw,” Mattes says. “It’s one of the biggest barriers to development at present.”