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STRATEGIC VALUE OF GEOTHERMAL ELECTRICITY AND THE IMPACT OF ITS PRICING

STRATEGIC VALUE OF GEOTHERMAL ELECTRICITY AND THE IMPACT OF ITS PRICING. Anang Yahmadi PT PLN (Persero) – Directorate of Construction and New/Renewable Energy – New/Renewable Energy Division INDONESIA INTERNATIONAL GEOTHERMAL CONVENTION AND EXHIBITION 2014 Jakarta, June 5 th , 2014.

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STRATEGIC VALUE OF GEOTHERMAL ELECTRICITY AND THE IMPACT OF ITS PRICING

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  1. STRATEGIC VALUE OF GEOTHERMAL ELECTRICITY AND THE IMPACT OF ITS PRICING Anang Yahmadi PT PLN (Persero) – Directorate of Construction and New/Renewable Energy – New/Renewable Energy Division INDONESIA INTERNATIONAL GEOTHERMAL CONVENTION AND EXHIBITION 2014 Jakarta, June 5th, 2014 Assembly Hall JCC

  2. AGENDA

  3. The Significance of Geothermal for Electricity (Geothermal share of4 % ) Existing Total Capacity 38,320 MW • Power Plant Capacity (PLN + IPP): • Non RE has share 86 % • REhas share 14 % (geothermal 3,5 %) • Generation (PLN + IPP): • Fossil power plant is dominant by 91 % (Coal, Oil and Gas ). • Share of RE only 9 % (geothermal 4%) Generation Share (2013)

  4. The Role of Geothermal for Electricity • Strengthening the power capacity and energy supplied to meet the electricity demand • To reduce the dominant of Coal Fired Power Plant in Java Bali and Sumatra or large systems • To replace the fossil fuel oil consumption in the system with fossil fuel oil generation (mostly in the small systems) • To achieve more competitive the generation cost of electricity • To increase energy security due to its highest capacity factor LNG Gas Coal HSD MFO Geothermal Hydro

  5. Policieson Geothermal Development for Electricity • To support the National Policies on utilizing RE development (including geothermal) such as : Geothermal Law (UU 27/2003), Government Regulation for Geothermal Development (PP 59/2007), President Regulation for Contribution of RE (Perpres 5/2006), President Decree for Fast Track Programs II (Perpres 4/2010) and also related Ministries Regulation. • Consistently increasing the role of RE as capacity expansion: to supply electricity demand growth, to meet the electrification ratio target and to achieve the target of Fossil Fuel Consumption Reduction Program • In line with policy of prioritising the utilization of local energy source and vision on environmental perspective • The development of geothermal is not based on “least cost” but on the readiness of the scheme but should comply with the concept of demand – supply balance to avoid over capacity of base loader power plant in the system. • Expected to reduce the electricity generation cost in the related system or less than the electricity tariff. LNG Gas Coal HSD MFO Geothermal

  6. PLN’s 10 YEARS ELECTRICITY DEVELOPMENT PLAN (RUPTL 2013 – 2022)( Expected share of Geothermal increase from 4 % to 11 % by 2022 ) Capacity Expantion Plan Fuel Mixed Projection LNG Gas Fuel Oil • Total 60 GW additional capacity in the period of (2013 – 2022) consisting of: • Coal fired : 38 GW • Hydro : 6.5 GW • Geothermal : 6.0 GW • Combined cycle : 5.0 GW • Gas Turbine/Engine : 3.7 GW • Other : 0.3 GW • Coal will be more dominant and geothermal is expected to increase significantly (from 4% to 11%) Capacity Expantion Plan Coal Geothermal Hydro

  7. Geothermal Capacity Expansion Plan (2013-2022) • Total 6060 MW • Expected commissioning years mostly after 2016. • Geothermal development will be dominated by IPP (96 %) • Majority is part of the Second Fast Track Program (FTP II) by 4965 MW (82 %) • Mostly, 93%, developed in Java Bali and Sumatra system with base load operation mode to reduce the dominant of CFPP.

  8. Demand and Supply Typical Curve of Java – Bali System Typical Daily Load of Java Bali System Hydro Res & LNG/CNG GTPP GothermalPP CCPP CFPP

  9. COST OF ELECTRICITY FROM GEOTHERMAL • Geothermal power plant operated : total 1313 MW (566 MW of PLN and 747 MW by IPPs) • Energy produced from geothermal (realization and projection): • Energy cost from geothermal (at power plant) : • National cost of electricity production (at power plant) : 9.23 c USD/kWh (RKAP 2014) • Average tariff of electricity : 7.97 c USD/kWh (RKAP 2014) LNG Gas Coal HSD MFO Geothermal Hydro 8

  10. The Impact of Geothermal Tariff to PLN Subsidy • The contract of IPP Geothermal will increase PLN subsidy since the generation cost of geothermal electricity higher than coal fired electricity, except in small system, which the electricity mostly supplied by diesel oil. For example in Flores system, IPP Geothermal expected to reduce subsidy. • Referring to Geothermal Tariff study by consultant of World Bank – ADB (2014), PLN avoided cost for geothermal tariff based on coal power plant : 6.92 c USD/kWh (2014) escalated to 8.50 c USD/kWh (2019) • With assumption the average tariff of 3.5 GW IPP geothermal at 11.5 c USD/kWh in 2020, additional subsidy through PLN (estimate) : 0.78 bill USD in 2020. If the contract of IPP Geothermal about the ceiling price (14.7 c USD/kWh – WB/ADB study) the subsidy will be more than double. LNG Gas Coal HSD MFO Geothermal Hydro

  11. The Factor Impact to Geothermal Tariff LNG Gas Coal HSD MFO Geothermal Hydro

  12. Conclusion • The contribution of geothermal for electricity is more to support the government policy on RE and more in line with PLN vision to doing business with environmental perspective and • Geothermal power plant will reduce the high dependency on coal as power plant with base load operation mode, in which the GPP commonly have a higher security of supply than CFPP. • Geothermal power plant will increase PLN cash out therefore, it is important to clearly defined and transparency disclosed the portion of geothermal tariff will be responsible cost of PLN, government incentive or pass trough to the consumer. LNG Gas Coal HSD MFO Geothermal Hydro

  13. Thank you 12

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