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GEOTHERMAL ENERGY IN INDONESIA

GEOTHERMAL ENERGY IN INDONESIA. Fuadi Arif Nasution. Date: 17/10/2011. Key Questions. Abundant resources ~ 28,000 MW even more. Why only developed less than 1200 MW If this due to time and capital, which countries we should learn, USA ? The Philippines? Mexico ?. Characteristics.

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GEOTHERMAL ENERGY IN INDONESIA

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  1. GEOTHERMAL ENERGY IN INDONESIA • FuadiArifNasution Date: 17/10/2011

  2. Key Questions • Abundant resources ~ 28,000 MW even more. Why only developed less than 1200 MW • If this due to time and capital, which countries we should learn, USA ? The Philippines? Mexico ?

  3. Characteristics Definition : Heat (thermal) derived from the earth (geo) • Geothermal is a low-carbon option for electricity supply • Abundant resources of geothermal in Indonesia • Low electrification ratio in Indonesia (63%) • Mature technology • Reliable baseload power

  4. Life –Cycle CO2 Emission Factor Introduction

  5. Overview of Indonesia

  6. Map of Indonesia Source : CIA Overview of Indonesia

  7. Fossil-Fuels Source : MEMR, 2008 Overview of Indonesia

  8. Renewable Energy Source : Key Indicator of Indonesia Energy and Mineral Resources (2007) page 7 Overview of Indonesia

  9. Primary Energy (2006 and 2025) Source : Presidential Decree No.5/2006 and Vision 25/25 by MEMR (2010) Overview of Indonesia

  10. Geothermal Potential

  11. Geothermal Map Geothermal Potential

  12. Potential (7 big islands) MW Geothermal Potential

  13. Status Exploration (2009) Geothermal Potential

  14. Financing Geothermal Projects

  15. Component Costs Source: Hance 2005, 135 Financing Geothermal Projects

  16. Scenarios Financing Geothermal Projects

  17. Method of Calculation Benchmark Rate (Expected Rate of Return) using WACC (Weighted Average Cost of Capital) WACC = Cost of Equity * Equity + Cost of Debt * Debt Cost of Debt = Interest rate *(1-Tax) Financing Geothermal Projects

  18. Cost of Equity Cost of Equity using CAPM (Capital Asset Pricing Method) : E (Rj) = Rfc + β j ( E(Rm) - Rf) • Rfc = Country risk-free rate of return • β = Investment or sector-specific risk in correlation to the market • E(Rm) – Rf = Reward the market offers for bearing systematic risk Source : Ross et al 2008, 426 Financing Geothermal Projects

  19. Case Study : Built 120 MW Geothermal PP • Technical Assumptions: • Installed Capacity = 120 MW • Capacity Factor = 90% • CAPEX = USD3000 / kW • OPEX +Administrative Cost = 2.1 USD cents /kWh • Project Lifetime = 30 years Economic Assumptions: • Inflation – 6 %/pa • Escalation electricity price – 2 %pa • Interest rate = 5 % (tenor 15 yrs) • 12% • Debt-Equity Ratio= 60:40 • Corporate Tax = 28% • Additional CER : USD12/ton CO2 and USD 20/ton CO2

  20. Results Source : Own Calculation

  21. Barriers • High up-front costs • Current scheme of fossil-fuels subsidy • Access to funding and guarantees • Legal framework • Information and reliable data from Government • Location in protected or conservation areas • Some creditors asked for risk level / proven technology /pay-back time

  22. Conclusions • Lack of progress due to some procedures and business uncertainty • Several market mechanism for private penetration • Some barriers and challenges still exist • Disadvantages due to high investment • Still in promising in the future (abundant resources, necessity looking for new energy resources) Conclusions and Recommendations

  23. THANK YOU - QUESTIONS ???

  24. References • Al-Dabbas, M.A.A (2009). The Economic Environmental and Technological Evaluation of using Geothermal Energy. European Journal of Scientific Research. • Armannsson, Halldór (2003). CO2 emission from Geothermal Plants, page 7. Paper on International Geothermal Conference, Reykjavík, Iceland. • DGEEU (2008). Generating Dialogue Clean Energy, Good Governance and Regulation, Presentation of Directorate General of Electricity and Energy Utilization, Ministry of Energy and Mineral Resources, Jakarta • Hance, C.N. (2005). Factors Affecting Cost of Geothermal Power Development, Geothermal Energy Association, Washington DC, United States. • Geological Agency (2009). Status of Geothermal Energy Potential in December 2009. Center for Geological Resources, Geological Agency, MEMR • Geothermal Energy : Clean Sustainable Energy for The Benefit of the Humanity and the environment. 2001. Energy and Geoscience Institute University of Utah. • Ross, Stephen A ; Randolph W. Westerfield, Bradford D Jordan (2008). Corporate Finance Fundamentals 8th Ed. McGraw-Hill International Edition, page 86 • SNI 03-5012-1998. Figures Estimated Parameters in Geothermal Energy Potential in Indonesia. Indonesia National Standardization Body. • Sukhyar, R et al. (2010). Geothermal Resources and Development in Indonesia. Geological Agency, Ministry of Energy and Mineral Resources, Jakarta Indonesia.

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