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The Magic of Bali

Original page published by: ReFocus - The International Renewable Energy Magazine

NOV/DEC 2001

The Ring of Fire:
The Use of Geothermal Energy in Indonesia

For Indonesia's myriad smaller islands, as well as for rural locations that cannot be economically connected to the grid, electric power development strategy is increasingly seen more in terms of the country's abundant renewable energy resources. Hydro, biomass, solar and wind energy are being explored for their potential to generate power, to lessen national dependence on fossil fuels. Expert attention today is focused on exploiting the huge geothermal potential of the spectacular mountain ranges in Java and Sumatra, volcanic Indonesia's so-called "Ring of Fire". Richard Mogg, Lanna Blue Bangkok reports on geothermal energy production and use in the region.

Indonesia: the current situation
With a total land surface area of 1,900,000km and a population estimated at some 220 million today, the Republic of Indonesia is by far the largest member of the ten-member Association of South East Asian Nations (ASEAN). (Besides Indonesia, ASEAN membership includes Brunei Darussalam, Cambodia, Laos, Malaysia, Myanmar (Burma), the Philippines, Singapore, Thailand and Vietnam.) While some 6,000 or so of Indonesia's more than 16,000 islands are inhabited, over 60 percent of the total population is concentrated in Java and Madur

According to figures given by G.W. Huttrer at the World Geothermal Congress 2000, Indonesia's installed generating capacity driven by geothermal power had reached a level of 589.5MW, which generated 4,575GWh. Over half of this was privately owned and operated by two commercial affiliates of oil interests based in the United States (see below). Unocal and Amoseas Indonesia, which is a joint venture between Texaco and Chevron, are contractors to Pertamina, Indonesia state-owned oil, gas and geothermal enterprise.

Three more joint ventures, all partnerships between American and Indonesian commercial interests, have signed power purchase agreements and joint-operating contracts with Pertamina, to develop a further 680MW of geothermal generating capacity. Pertamina, which today styles itself the "national oil, gas and geothermal organisation", stated mid-September that it intends to invest US$5 billion in a programme to develop high-growth operations in the period 2002 to 2006. The programme focuses government policy to reorient domestic usage away from oil dependence.

Indonesia thus joins a small group of countries that have increased their installed geothermal generating capacity by at least 50 percent in the period 1995-2000. The others are Costa Rica, El Salvador, Iceland, New Zealand, the Philippines, Portugal (Azores) and Russia. Indonesia's overall installed generating capacity, of all types, jumped in 1997 by 16 percent to 33,255MW, and by a further 13 percent in 1998 to total 37,532MW. Of this, 2,881MW comprised large and small hydropower units, Indonesia's largest renewable energy generating sector.

According to an assessment made by Dr John W Lund, Director of the Geo-Heat Center, Oregon Institute of Technology, USA, and his colleagues, current total electric power produced worldwide by geothermal means is equivalent to saving an annual 83.3 million barrels (12.5 million tonnes) of oil. It results, too, in the saving of an estimated 11.03 million tonnes of carbon pollution that burning the oil would produce. Global warming, believed to be reaching an unacceptable level, should not be forgotten in the quest for sustainable renewable energy development.

RE on the sidelines?
Southeast Asia's surging 1990s economic development spawned rapid development of generating capacity fired with cheap, readily available fossil fuels. The name of the game in Indonesia was base-load and merchant generating plant fuelled by oil, gas or the country's plentiful coal reserves. The ASEAN countries generally regarded renewable energy as an interesting but rather minor sideline, lacking true investment potential. Environmental considerations were considered counter-productive, and often still are. This has resulted in the Manila-based Asian Development Bank (ADB) labeling the ASEAN nations the most polluted in the world today. Geothermal plant may emit small amounts of gas, but even this is eliminated where a binary system is installed for electric power generation.

A map of the region

Electric power throughout Indonesia is controlled by wholly state-owned (but recently incorporated) PT.PLN (Persero), a former monopoly known then as Persuhaan Umum Listrik Negara (PLN). PT.PLN invests over US$3.5 billion annually in development of the national electricity system, with prime focus on the Java-Bali grid. Indonesia's largest state-owned enterprise in terms of assets, electricity production, transmission, distribution and supply in the Java-Bali grid area provide around 80 percent of PT.PLN's revenue. Burdened with at least US$5 billion debt, PT.PLN received a government subsidy of Rp 1,929,945,502,458 (ca US$ 2million) in 1998, just to cover foreign exchange loss on fuels purchased during Asia's economic crisis.

In 1992 Indonesian state-owned enterprise (SOE) law was changed to allow private companies to produce and sell electricity in Indonesia. A programme had already begun to encourage foreign direct investment (FDI) in independent power producer (IPP) projects for high demand areas. PT.PLN was incorporated in 1998 in preparation for liberalisation of the national electricity market. Today PT.PLN remains a wholly-owned SOE, with its entire shareholding vested in the Ministry of Stated-Owned Companies, which took over control from the Ministry of Finance.

Rural electrification
Many areas of Indonesia, particularly in the outer islands, are too remote for grid connection. Rural electrification is perceived as a vital policy objective in developing national unity. Government policy is the provision of economical but efficient electric power as a strategic necessity in preventing social unrest in remote rural areas and outer islands. As well, Jakarta is keen to defuse calls for separation motivated by the example of East Timor's establishment of politically independent self-determination. Ethnic and ideological differences will almost certainly continue to fuel the growth of separatism throughout the archipelago.

PT.PLN has developed a Rural Electrification Planning System (REPLASYS), based on: Required investment; Associated operating costs; Rate of return; and Forecast net economic benefit per year. By 1995, 38,027 desas (hamlets), that is 61 percent of a national total of 61,975, had gained some sort of electricity service. Where it can, PT.PLN reaches villages from its Java-Bali grid. But many small communities install and operate their own independent generating, distribution and supply systems, sometimes with the assistance of the many local and foreign non-governmental organisations (NGO) operating throughout Indonesia.

Asia's 1990s economic boom sparked a surging need for more electricity, particularly in Indonesia's high-demand Java-Bali area. To meet the urgent need, the government of the day decided to promote foreign direct investment in private construction and operation of thermal generating stations, fired by indigenous oil or natural gas. Problems arose in finalising a suitable power purchase agreement (PPA) tariff between PT.PLN and IPPs. Put simply, a tariff level to make a project commercially viable was higher than PT.PLN could afford.

A socially suitable as well as commercially viable tariff formula, to support IPP development and attract FDI, has not yet been found. PT.PLN is obliged by government to maintain uniformed tariff structures, although power distribution and supply costs outside the Java-Bali grid area are at least twice as high as within it. The World Bank asserts that, while a social argument exists for subsidies to maintain a minimum level of consumer service, large consumers should not be burdened with them. Subsidies, when necessary, should be applied by the state, directly, not by PT.PLN.

Turning to RE?
With population averaging an annual growth of 1.4 percent, while the gross domestic product (GDP) surged each year by an average of 7.1 percent between 1994 and 1997, there is an inexorable demand for more electric power throughout Indonesia. Oil, gas and coal for export are Indonesia's most economically vital natural resources, although agriculture and manufacturing are gaining importance. Indonesia is the world's largest exporter of plywood, and the second (after Thailand) largest of rubber. Thus biomass is increasingly favoured as the renewable energy option.

Particularly difficult for the many outer islands, rural electrification has become a political as well as social and economic necessity. As well as for electricity generating, the National Energy Conservation Programme (RIKEN) covers industry, transport and domestic fuel consumption. Thus a mix of renewable energy technologies is sought, with geothermal, hydro and solar leading the field. The five main aspects of government energy policy for Indonesia are defined as: Diversification; Energy pricing; Private sector participation; Balanced regional development; and Protection of the environment.

Greater dependence on indigenous, non-tradable renewable energy sources is defined in an official programme, covering a period to the year 2019, known as PJP II. Electrification of 95 percent of the country by 2004 is defined as the goal of the current five-year (1999-2004) National Economic Development Plan (REPELITA VII). The aim is to provide electricity to towns, villages (kampungs), and hamlets (desas) throughout Indonesia, with a mixture of geothermal, mini- and micro-hydro and photo-voltaic energy. Core rationale is to refocus village generating away from diesel dependence.

Indonesia lies across the southwestern sector of the Ring of Fire, the chain of volcanoes that stretches around the Pacific Rim. There are more than 200 volcanoes around the Pacific, many of them still active. Geothermal steam-fields, in areas of volcanic and tectonic activity found in Iceland, Hawaii, Italy and Japan, convert the heat and power within the earth into electricity. Indonesia's geothermal potential is estimated to be over 20,000MW, enough to meet more than 10 percent of future electricity demand. This is equivalent to 6 billion barrels of oil, although, unlike oil, geothermal power cannot be exported.

Some sixty Indonesian volcanoes remain active, mainly in the four largest islands of Java, Sumatra, Celebes, and Borneo (which is shared with Brunei Darussalam and Malaysia). Yet Indonesia has lagged the Philippines - with which it shares Southeast Asia's sector of the Ring of Fire - in developing its geothermal potential. After the United States, the Philippines has become the world's second largest country in terms of electric power production from geothermal sources. According to a World Bank analysis, 27 percent of total electricity generation in the Philippines is derived from the country's abundant geothermal energy resources.

The World Bank points out, furthermore, that geothermal technology is suitable for small as well as large power grid systems otherwise dependent on fossil fuels. A key point is Indonesia's growing need to switch from widespread use of small stand-alone diesel generators often favoured by isolated communities. The World Bank states, "Where generation capacity growth is required because of grid expansion in growth areas or other economic development, existing thermal power plant can provide backup or peaking while new geothermal capacity is installed in stages to meet growing base-load demand."

A bonus factor exists in developing a site where there is an industrial requirement for steam, which can cost as low as US$3.5 per tonne as a byproduct of geothermal electricity generation. Suitable for both mini-grid as well as national grid applications, geothermal unit cost of power ranges from 2.5 to over 10 US cents per kilowatt-hour, according to the World Bank's analysis. Besides economic factors, such as scale of development, cost depends on depth and temperature of the resource, productivity, infrastructure, environmental and regulatory compliance.

Geothermal energy is created when groundwater is heated by molten magma rising from deep within the earth. Steam is trapped beneath an impermeable clay cap at immense pressure and temperature. Drilling down through the cap, awesome energy can be released. Industrial focus so far has been on developing base-load generating stations of up to 1,000MW capacity for continuous operation. Geothermal units as small as 100kW are feasible, although the 1-5MW range is the considered optimum for village and community operation.

The Eastern Indonesia Renewable Energy Development (EIRED) scheme consists of fifteen run-of-river (no pondage) mini-hydro projects

Amoseas Indonesia, a Texaco-Chevron partnership, has developed the world's richest geothermal dry-steam field in Indonesia. Geologically stable, the Darajat oil reservoir lies above an ancient volcano that erupted long ago. Close to the city of Bandung, West Java, Darajat is situated on the edge of a mountain rainforest 6,000 feet above sea level. Dry steam is delivered to two power plants. Darajat I, owned and operated by PT.PLN, has an installed capacity of 55MW. Commissioned in May 2000, Darajat II, owned and operated by Amoseas CoGen, generates an additional 70MW, which is sold directly to PT.PLN's national grid.

The Darajat field's development has been optimised with innovative drilling techniques, variable pressure steam control, and high-pressure, high-efficiency steam turbines. Amoseas Indonesia will eventually be able to realise the Darajat steamfield's full potential of over 400MW. Darajat's Well 21, the world's most powerful dry steam well is two miles deep and just a few inches in diameter, to produce 40MW of clean electric power. Commissioned in 2000, 300MW Amoseas Co-Gen is one of the most efficient power plants in Indonesia. Caltex produces more than 700,000 barrels of oil daily from its Sumatran fields. In the Enhanced Oil Recovery (EOR) process, high-pressure steam is injected down to the formation, 1,000 metres deep, heating and liquefying the heavy crude oil and allowing it to be pumped to the surface. But EOR systems are expensive to operate, requiring large investment. Of every million barrels pumped to the surface, Caltex had been using over two hundred thousand barrels to make the steam required for EOR. Thus the Amoseas CoGen plant is helping Caltex to reduce fuel consumption by almost 5 million barrels a year.

Unocal, another leading geothermal energy producer, operates three major geothermal power projects, Tiwi and Mak-Ban in the Philippines, and the Gunung Salak field in Indonesia. Combined installed capacity of the three is 1,100MW. Unocal began geothermal operations in Indonesia in 1982 when a subsidiary, Unocal Geothermal of Indonesia, Ltd. (UGI), signed a joint operations contract with Pertamina for geothermal exploration and development at Gunung Salak, a promising prospect about 100km south of Jakarta. UGI today produces geothermal steam from the Gunung Salak field, to power 330MW of generating capacity. Two 55MW geothermal power plants, owned and operated by PT. PLN Persero went online in 1994 at Gunung Salak.

Four more 55MW units, three built and operated by UGI, and the fourth owned and operated by PLN, entered commercial service in 1997. The UGI plants will be transferred to PLN ownership after 15 years of operation, and all four units will be supplied over their 30-year project lives by UGI, on behalf of Pertamina.

In 1993, Pertamina and Unocal North Sumatra Geothermal, Ltd. (UNSG), signed a joint operations contract for geothermal exploration in the Sarulla contract area, a 970 square kilometer prospect, about 100km south of Medan, North Sumatra. In 1995, the partnership successfully drilled a major discovery well that tested at the steam equivalent of 23MW of electricity.

Subsequent exploration has indicated a high-temperature geothermal resource at Sarulla with a potential to generate as much as 1,000MW. Just across the Malacca strait from the Sarulla field is a potential cross-border market in Malaysia's Kuala Lumpur-Klang Valley corridor.

World Bank support
In June 1998 the World Bank made a combined grant and soft loan of US$94 million available to PT.PLN for a project to improve mini-hydro and mini-geothermal implementation, and so bring renewable energy into the mainstream.

The Eastern Indonesia Renewable Energy Development (EIRED) scheme consists of fifteen run-of-river (no pondage) mini-hydro projects (0.8-4.8MW range) with an aggregate installed capacity of about 31MW. At Ulumbu, Flores, in the island province of East Nusa Tenggara, it includes a single 3MW mini-geothermal plant. Total cost of the renewable energy scheme, hydro and geothermal, was assessed to be approximately US$105 million, the balance to come from government and PT.PLN.

World Bank sources emphasise that the aim of the EIRED project is to assist PT.PLN in developing renewable energy power projects in remote areas - particularly outside of grid-served Java - that are cost-competitive with conventional mini-grid generating options such as diesel.
It will help mitigation of diesel reliance, too, to address Indonesia's appalling atmospheric pollution problems. Project implementation, the World Bank hopes, may address some of the current barriers to renewable energy development.

But the EIRED project was put on-hold when crisis hit Indonesia. While some interest remains to resuscitate it, according to the World Bank's Jakarta office, the project does not appear in its current lending programme.

There have been no recent major studies of the power supply-demand situation in Indonesia, although some internal work was done in preparation for a proposed Energy Sector Project.

At village and island levels throughout Indonesia, mini- and micro-hydropower, solar energy and biomass renewable energy technologies need priority as relatively easy, low-cost development projects.

Wind power is not considered suitable, although this view may change once a detailed wind map has been completed.

The Ulumbu and similar projects, if they can be revived once the country settles down to a new era of development, may herald a new era for base-load and village geothermal power development in Indonesia's turbulent Ring of Fire.

Contact: Richard Mogg, Lanna Blue Bangkok, 53/64 Moo10 Soi Bangkru Condo, Suksawat Road, Bangru, Prapadaeng 10130, Samutprakarn, Thailand.
Tel: +66 2819 1830;

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