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October 19, 2015

Indonesia has significant potential to increase geothermal electricity production

graph of top geothermal electricity producers and capacity holders, as explained in the article text
Source: U.S. Energy Information Administration

Indonesia ranked third in the world in both geothermal electricity production and geothermal generating capacity in 2014, behind only the United States and the Philippines. The country is located at the convergence of several tectonic plates in Southeast Asia, giving it significant geothermal potential, although most of its potential reserves remain unexplored.

Indonesia's Ministry of Energy and Mineral Resources estimates that the country holds a potential 29 gigawatts (GW) of geothermal capacity reserves, only 5% of which is currently being used. Indonesia's current geothermal capacity of 1.3 GW consists of plants clustered around Java, Bali, North Sumatra, and North Sulawesi. Geothermal currently makes up less than 3% of Indonesia's total electricity generation capacity, but Indonesia plans to increase geothermal capacity by 2025 as part of a plan to increase electrification in the country.

Despite a doubling of its total electricity generating capacity in the past decade, Indonesia still has a low electrification rate compared to countries with similar income levels. In 2014, about 84% of Indonesia's population had access to electricity compared to less than 68% in 2010, according to state electric utility Perusahaan Listrik Negara. Indonesia's latest energy policy aims to achieve nearly complete electrification of the country by 2020. In recent years, electricity capacity additions have not kept pace with electricity demand growth, leading to power shortages in grid-connected areas. Inadequate infrastructure as a result of insufficient investment and regulatory hurdles contributes to lower electrification rates, primarily in eastern Indonesia.

Fossil fuels power most of the electricity generation in Indonesia (88%), while renewables, primarily in the form of hydropower and geothermal resources, account for the remainder. Indonesia intends to use domestic fuel sources and diversify its fuel portfolio to include more renewable power. Plans to increase renewable energy use to at least 23% of the energy portfolio by 2025 depend heavily on further developing the country's geothermal and hydropower resources.

Indonesia has included several geothermal power plants in its fast-track program, which is meant to accelerate the development of more than 27 GW of total power capacity in the next several years. Indonesia has focused on geothermal in particular, signing an agreement with New Zealand in 2012 for joint development of geothermal energy projects.

About 5 GW of new geothermal capacity is slated to come online in Indonesia by 2022, including the 330-megawatt Sarulla power plant, potentially the world's largest geothermal power plant. Successful completion of these geothermal projects could result in Indonesia becoming the world leader in both geothermal electric capacity and generation.

One impediment to unlocking the country's vast geothermal resources has been the definition of geothermal development as a mining activity, which restricted new projects in conservation areas. Indonesia passed a law in 2014 that eliminated this limitation on geothermal development while streamlining the permitting process and alleviating land acquisition issues. The law also attempted to raise private sector investment in geothermal projects by making the price more closely match development costs.

More information on Indonesia's energy sector is available in EIA's Indonesia Country Analysis Brief.

Principal contributor: Candace Dunn