Indonesia plans to expand use of direct appointment mechanisms to award geothermal concessions, to be applicable not only for existing concessions, but also new. It also plans on improving the pricing scheme setting a higher ceiling price.
Reported yesterday, the Indonesian government “is planning to expand use of the direct appointment mechanism to award geothermal concessions in a bid to boost the sector’s development, Energy Minister Jero Wacik said.
Under the current system, the government can directly appoint a company to expand an existing geothermal concession. Wacik said that under the new regulation, such direct appointment could also be used for new concessions.
He said the move is expected to help accelerate the development of geothermal energy and reduce dependency on fossil fuels for power generation.
“We are currently preparing the government regulation [PP] that will govern the development of new geothermal concessions without having to go through tenders and use a direct appointment,” Wacik said.
He said with the new regulation, the direct appointment system could be used as long as the company involved had already developed other geothermal concessions or had prior experience in the industry.
With the direct appointment, the state utility firm Perusahaan Listrik Negara will have to automatically buy the electricity produced by the concession holder without the need to renegotiate, one factor that has been singled out as a hindrance to the development of geothermal energy.
He said the government will at the same time try to improve the pricing scheme for electricity generated from geothermal energy. At present, the ceiling for electricity pricing is set at 9.7 cents per kilowatt hour.
If the developer of a concession wants a higher price, citing particular operational costs, it would have to renegotiate with PLN as the sole buyer of the electricity.
“This negotiation can become one of the hindrances in the acceleration of the development of geothermal energy,” Wacik said. “As long as there is no pricing agreement, the two sides cannot sign a power purchase agreement.”
Source: The Jakarta Globe