renewable energy investment, opportunity and risks - indonesia · geothermal potential distribution...
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Renewable Energy Investment, Opportunity and Risks - Indonesia
Montty Girianna
The National Development Planning Agency, BAPPENAS
September 2013
Geothermal Potential Distribution and Installed Capacity
Location Resources (MWe) Reserve (MWe) Installed Capacity
(MWe) Speculative Hypothetic Probable Possible Proven
Sumatera 4,925 2,076 5,983 15 380 122
Java 1,935 1,946 3,415 885 1,815 1,134
Bali-Nusa Tenggara 410 359 973 - 30 5
Sulawesi 1,000 127 992 150 78 60
Maluku 545 43 341 - - -
Kalimantan 45 - - - - -
Papua 70 - - - - -
Total 265 Locations 8,935 4,551 11,704 1,050 2,303
Total Resource/installed Capacity
28,543 1,341
2
Kerangka Dialog/Kelembagaan Indonesia – Korea
(sebagai rujukan)
3
Typical Capital Cost per MW for 200MW Geothermal Power Plant (US$)
success ratio
Replacement cost price/unit
number
Replacement cost based on success
ratio
Land acquisition/local cost 350,000
Survey cost 750,000
AMDAL/licensing 322,222
Exploration wells 62% 5,600,000 19 108,864,000
Well testing for exploration purposes 100,000 12 1,200,000
FEED 1,200,000
Feasibility study 350,000
Production wells 80% 5,600,000 60 336,000,000
Injection Well 80% 5,600,000 22 119,616,000
Steam Above Ground System (SAGS) 59,002,308
Sub Total Capital Cost Steam 627,654,530
Price escalation and contingency 10% 62,765,453
Total cost steam 690,419,983
Power plant 1 MW 1,500,000 200 300,000,000
Auxilliary electricity cost 1km 300,000 3 900,000
Sub Total Power Plant 300,900,000
Price escalation and contingency 10% 30,090,000
Total Cost Power Plant 330,990,000
Total Capital Cost (Steam and Electricity) 1,021,409,983
Cost per MW 5,107,049.91
Kerangka Dialog/Kelembagaan Indonesia – Korea
(sebagai rujukan)
4
The Size of Geothermal Power Generation Industry
Existing 19 fields (Brownfields) – 10.869 MW
In Production (7 fields )
Potential Reserve 4.984 MW
(US$ 25b)
Installed Capacity 1.231 MW
Not in Production (12 fields ) Potential Reserve 5.885 MW
(US$ 29.5b)
35 new fields Not in Production (35 fields) Potential Reserve 4.139 MW
(US$ 21b)
Investment needs (15.000 MW) is about US$ 75b. With the assumption of 30% equity, we need to tap from the world capital market about US$ 52b. To ensure the availability of equity as much as US$ 22.5b is a real challenge
5
Investment barriers in scaling up geothermal development (identified earlier)
• Inadequate policy frameworks
– Underestimated environmental benefits of geothermal energy and insufficient economic incentives for investment
• Lack of planning/management capabilities to efficiently conduct transactions of geothermal projects
– Inconsistency between blueprint and power expansion plan
– Little experience in sructuring investment transactions to be ‘bankable’
• Weak technical capability to support geothermal long-term growth
– From resource identification to operation of geothermal power
– Low domestic participation in all parts of the value chain of geothermal development – high project costs
Where Bottlenecks Occur
• Local governments lack of resources (technical and financial) – unable to develop sufficient data for tender
– Appoint business entity to undertake preliminary survey (Government Regulation 59/2007), i.e., nominated developer – Project award effectively occurs at this point if ‘right to mactch’ granted
• Local governments lack capacity
– To develop data and/or select appropriate parties to conduct the preliminary survey and tender process
• Tender Process non-standar, underminded by ‘right to match’
– No competitive tension – no incentive for nominated developer to submit competitive proposal –> Unlikely to attract competing bids
6
Where Bottlenecks Occur
• No standardized Power Purchase Agreement (PPA)
– Lead to protracted negotiations with the winning bidders
• Pricing mechanism
– Current Regulation provides ‘highest bencemark price’ but does not solve
• Cost of capital and access to long-term debt finance
– Higher cost of capital – especially equity; High capital costs means need to raise 2-2.5 times as much finance per MW of installed capacity
– Likely need to raise foreign currency financing
• Energy subsidies, conterparty credit risk & government support
– Energy subsidies undermine creditworthiness of PLN – IPP require confidence in creditworthiness of PPA counterparty
– Subsidy has significant drew on government resources
7
Kerangka Dialog/Kelembagaan Indonesia – Korea
(sebagai rujukan)
8
Geothermal Industry Structure
Initiatives/incentif Objectives Actors
Standardized Power Purchase Agreement
Facilitate the Power Purchase Agreement (PPA), with "standardized" and transparent template
MEMR PLN
Guarantee for Offtaker Performance
Provide Guarantee for PLN Performance – government guarantees that Geothermal IPP will get paid as long as it produces electricity
MOF
Tender Rules Improvements to the tender rules for field development, in order to get world-class developers to compete for the development of the geothermal
MEMR
Local Government Capacity
Increased capacity of local government in tendering and completing the EIA and forest protection (protection and conservation)
MEMR MOHA
Resource Risk Mitigation
Formulate mitigation instruments to reduce resource risk by providing facilities upstream /resource confirmation for the preliminary survey activities - private sector financed Geothermal Resource Risk Fund
MEMR MOF
Financing Support to Local Government
Financing for Local Governments to invest in exploration drilling to reduce the Geothermal Resource Risk - Enhance the existing geological data in a pre-selected area, before being offered for tendering of those WKP
MEMR MOF
Long-term Finance Provide long term finance facilities, together with local Indonesian Banks, such as Infrastructure Finance Facility, and/or bi-/multilateral donors
MOF
Feed-In Tariff Obligation is imposed to the regional or national electric grid utilities, for a set price, to buy electricity produced by the geothermal projects.
MEMR MOF
Incentives for Geothermal Power Development
Identification Exploration Development & Financing Operation
0%
20%
40%
60%
80%
100%
Des
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Rec
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Ge
op
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Exp
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Del
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Feas
ibili
ty
Inti
al p
rod
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dri
llin
g
Fin
anci
al c
lose
Pro
du
ctio
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ng
Inje
ctio
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ng
Po
wer
pla
nt
con
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Op
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Pro
bab
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of
Failu
re (
Ris
ks)
Presently, tender for WKP effectively occure here, as tender for preliminary survey
Financing provision (Geothermal Fund) of better data enables tender to be conducted here
Bottleneck/Gap: Projects (WKP) tendered too early – at preliminary survey stage, before sufficient data is available for bidders to make realistic assessment of project potential/profitability
Solution: Geothermal Fund provides finance/assistance to pay costs of preliminary survey and limited exploration
Geothermal Fund
Geothermal Fund
• Geothermal Fund Establishment
– In 2011 the GOI has provided budgeted for establishment of a Revolving Fund (Fund),
dedicated for geothermal development.
• The purpose of the fund
– to enhance the existing geological data in a pre-selected area, before being offered for
tendering of those WKP.
– the enhanced data would make the geothermal risk more defined when the WKP is
offered for tender.
• Use of fund
– to finance the geothermal exploration activities up to initial drilling exploration well(s)
and it is expected the fund will be sustainable for future project development.
– the fund will be made available to geothermal projects using the Public Private
Partnership (PPP) scheme.
Sumatera:
10 - 11,5 US$ cents/kWh
Jawa, Madura & Bali:
11 - 12,5 US$ cents/kWh South, West, Sout East Sulawesi:
11 - 13,5 US$ cents/kWh
North, Mid Sulawesi & Gorontalo:
13 - 14,5 US$ cents/kWh
West & East Nusa Tenggara:
15 - 16,5 US$ cents/kWh
Maluku & Papua:
17- 18,5 US$ cents/kWh
Proposed Feed-in Rates for Geothermal Power
(High/Medium Voltage)
The proposed prices are set depending upon the region where the field is located. Unlike the existing feed-in-tariff for other renewable surces, such as hydro, biomass, and landfill gas, the tariffs are given in U.S. dollars.
The tariff is a fixed price as opposed to a previously set as benchmark prices or ceiling prices, so it is true feed-in tariffs – guaranteed price paid for energy by state electricity company – as known internationally.
Feed-in Tariff – Tendered Price versus Capacity on 19 New Fields of Geothermal (Green) Fileds in the Process of PPA with tPLN
(Source: KESDM, July 2012)
9,40 9,50
17,95
8,10
6,90
8,86
6,63
5,62 6,29
8,09
9,47 9,09
8,39
8,58
7,55
9,50
13,17
18,18
9,65
0
5
10
15
20
0 50 100 150 200 250 300
(US$
) C
en
ts p
er
kWh
Power Plant Capacity (MW)
Sumatera Jawa NTT dan Maluku
PLN has to pay above tendered prices. The difference or gap will be reimbursed via government (Electricity Subsidy). However, MOF requires geothermal price must reflect the true potential reserve of fields, thus need exploration.
Maluku FIT
Java FIT
Sumatra FIT
9,40 9,50
17,95
8,10
6,90
8,86
6,63
5,62 6,29
8,09
9,47 9,09
8,39
8,58
7,55
9,50
13,17
18,18
9,65
0
5
10
15
20
0 50 100 150 200 250 300
(US$
) C
en
ts p
er
kWh
Power Plant Capacity (MW)
Sumatera Jawa NTT dan Maluku
High Temperature Reservoir (>220 oC)
Moderate Temperature Reservoir (150-180 oC)
Fileds with moderate temperature reservior (binary plants) have higher price relative to those with high temperature reservior (flash plants)
New Thought – Proposed price regimes taking into account a classification (Not Location) of geothermal
