Cautionary Tales: Geothermal Case Studies

Dendi Adisuryo

Indonesia’s Geothermal Capacity is the World’s Second Largest

Geothermal energy is a relatively environmentally friendly renewable energy because it comes from the earth’s heat and only releases a small amount of greenhouse gasses. Indonesia is a country located in the ring of fire, so it cannot be denied that Indonesia has abundant natural resources, one of which is geothermal energy. As one of the countries with the largest geothermal reserves in the world, Indonesia must be able to optimally utilize these natural resources amid the current energy shift from fossil energy to renewable energy. Departing from this, business actors who carry out geothermal energy business activities through the development and utilization of power plants are greatly benefited. Indonesia currently has the second-largest geothermal capacity in the world, after the United States.

Indonesia first started developing its geothermal resources in the 1970s, and since then the industry has grown significantly. Today, Indonesia has a geothermal capacity of over 2.1 gigawatts (GW), with more than 40 geothermal power plants in operation. This represents a significant portion of Indonesia’s total electricity generation, which is currently around 65 GW. To optimize the potential of geothermal energy in Indonesia, the Ministry of Energy and Mineral Resources (ESDM) is targeting geothermal development in Indonesia to reach 9.3 gigawatts (GW) in 2030. The government has planned a strategy to boost the development of geothermal-sourced power plants through the Geothermal Drilling Program, which is a government program expected to be able to reduce the risk of upstream drilling. This program provides geothermal funds, the synergy of State-Owned Corporations (BUMN), and optimization of ground field resources. Efforts to increase and accelerate the development of clean energy require a variety of technologies and support from various entities including governments, international organizations, business actors, financial institutions and philanthropists.

Furthermore, citing data from ThinkGeoEnergy, the United States is recorded to have a Geothermal Power Plant (PLTP) capacity of up to 3,794 megawatts (MW), so the United States becomes the first country that makes the most use of PLTP in the world in 2022. In the second place, Indonesia has a PLTP capacity of 2,356 megawatts (MW) in 2022, and is hosting 4 of the 10 largest Geothermal Power Plant projects in the world as confirmed through information obtained from The Ministry of Energy and Mineral Resources (ESDM) stating that Indonesia currently has a geothermal reserve of 23.7 gigawatts (GW). The following is a graph of the 8 Countries with the Largest Installed Capacity of Geothermal Power Plants in 2022:

[8 Countries with the Largest Installed Capacity of Geothermal Power Plants in 2022]
Source: dataindonesia.id

 

Indonesia’s geothermal capacity is the world’s second-largest with significant potential to further develop its renewable energy resources. While there are challenges to overcome, the Indonesian government’s commitment to the development of geothermal energy is a positive sign for the future of renewable energy in the region and around the world.

 

Regulations Related to the Utilization of Geothermal Energy

1. Law No. 21 of 2014 concerning Geothermal as amended by Government Regulation in lieu of Law No. 2 of 2022 concerning Job Creation;
2. Government Regulation No. 7 of 2017 concerning Geothermal For Indirect Utilization as partially revoked by Government Regulation No. 25 of 2021 concerning the Implementation of the Energy and Mineral Resources Sector;
3. Government Regulation No. 26 of 2022 concerning Types and Tariffs for Non-Tax State Revenues that apply to the Ministry of Energy and Mineral Resources;
4. Regulation of the Minister of Energy and Mineral Resources No. 33 of 2021 concerning Occupational Safety and Health, Environmental Protection and Management, and Geothermal Technical Principles for Indirect Utilization.

 

Challenges of Geothermal Energy Exploration in Indonesia

According to Sanyal and Koenig, there are several risks in geothermal exploration projects, especially in terms of resources:

• The possibility of not finding geothermal energy sources in the area being explored;
• The possibility that the magnitude of the electricity reserves and potential in the area is smaller than expected or has no commercial value;
•  The possibility that successful exploratory wells are fewer than expected;
• The possibility that potential wells, exploratory wells are fewer than initially estimated;
• The possibility that exploration, field development, and PLTP construction costs may be more expensive than initially estimated.

The Indonesian government has taken steps to address these challanges and promote the development of geothermal energy in the country i.e., the simplification of regulations, and the efforts to increase technical expertise and capacity building, the establishment of a geothermal fund to support the industry. With continued investment and support, geothermal energy has the potential to become a significant source of renewable energy in Indonesia.

The State Electricity Company (PT PLN) is an Indonesian state-owned company with operational activities in the generation and distribution of electricity for the people of Indonesia. PT PLN has set several strategies for continuity of supply and transition to new energy sources, one of which is by setting a target for the development of geothermal energy in Indonesia to reach 3,355 megawatts (MW) in 2021-2030 as a National Policy. This at the same time is a challenge because the development of geothermal energy, especially in the construction of Geothermal Power Plants (PLTP), requires a large number of investors and quite high development funds. From a financing standpoint, the cost of constructing a PLTP is a real challenge for investors because the costs required are high, reaching up to US$ 4 million per MW or equivalent to 56 Billion Rupiah per MW.

Geothermal projects are one of the main backbones in providing New and Renewable Energy (EBT) because of their nature as the baseload or the minimum number of requests that must be met by an electric power system within a certain period. The development of geothermal energy certainly has a positive impact on Indonesia, one of which is in terms of finance where geothermal companies provide Non-Tax State Revenue (PNBP) income. Nevertheless, other than the risk of failure in exploration, companies developing geothermal energy business activities are facing challenges, the biggest of which are related to funding, environmental permits, and especially social environmental issues.

• Funding

Construction activities of a Geothermal Power Plant (PLTP) require high technology and detailed field research on all technical factors and consequences that must be carefully considered. Apart from requiring a very large investment, PLTP development projects also carry great risks, for instance, the direction of the flow of hot lava in the bowels of the earth as a geothermal source cannot be predicted precisely, so the construction of a PLTP is a “hit and miss”.

In addition, the selling price of electricity set by the State Electricity Company or PLN (Persero) is still the main obstacle to geothermal development in Indonesia. Chairman of the Indonesian Geothermal Association (API), Priyandaru Effendi, said that the selling price of electricity set by PLN – the sole provider of energy in Indonesia, tends to be below the economic value of geothermal projects. Even though the Government has initiated the provision of a Geothermal Fund to carry out geothermal exploration with international support, the use of this funding is still not optimal because it is still constrained by the price factor of electricity sold to PT PLN. This geothermal exploration and development activity requires high technology and large investment costs so that only a few large companies and multinational companies can invest heavily in such a project.

• Environmental Licensing

Geothermal energy exploration and development activities certainly intersect with various sectors such as the development and construction of infrastructure in general. Sectors that often become obstacles to geothermal exploration and PLTP development are the environment and land affairs. This is because geothermal sources, besides being located in the highlands, are mostly located in protected forest areas. The occurrence of overlapping regulations related to geothermal business licensing is currently still an obstacle to the development of geothermal energy. One such example is overlapping regulations between policies in geothermal and water resources, as well as ban policies regarding the development of PLTP in the Tropical Rainforest Heritage of Sumatra (THRS) Area. Forest areas are areas that must be preserved, but they often collide with geothermal energy exploration development activities because most of these energy sources are located in forest areas, especially in Sumatra. These regulatory conflicts have resulted in permits for PLTP construction to take a long time or even fail.

• Social Environmental Issues

Exploration projects in Indonesia are currently receiving a lot of resistence from the local community. This is because residents have fears and concerns about environmental pollution and their health caused by the excavation of geothermal resources area.  Related to this social environmental issue, there is a company that is developing a geothermal power plant (PLTP) located in North Sumatra which has caused detrimental losses to the surrounding community due to its business activities. This was preceded by flow tests of geothermal wells,which undoubtedly involved a risk i.e., the release of toxic gas hydrogen sulfide (H2S). That was the second incident within one month in September 2022, and the sixth in the last 2 years, which in chronological order is as follows:

January 2021

Five people died as a result of a gas leak from the PLTP development project. Dozens of other residents were also rushed to the health center.

May 2021

There was an explosion and fire at the PLTP project, which was only 300 meters from the settlement, so residents had to be evacuated until the fire was extinguished.

  March 2022

There was an H2S gas leak in Sibanggor Julu originating from a well. As a result, at least 52 people became victims and had to be hospitalized because they experienced nausea, dizziness, vomiting, and fainting. 

April 2022

Mudflow as high as more than 30 meters along with the release of toxic gas hydrogen sulfide (H2S) occurred at a geothermal drilling rig, which was then inhaled by residents and caused them to be poisoned and rushed to the hospital. The rice fields of local residents were also submerged in mud.

September 16, 2022

Around 8 indigenous Mandailing residents around the development of PLTP project were poisoned, and exposed to H2S gas. They were rushed to the nearest hospitals.

September 27, 2022

The H2S leak at PLTP. At least 79 residents were indicated to be victims and had to be treated intensively in the hospital.

This recurring incident certainly creates fear for the surrounding community. The government has only temporarily suspended the company’s operational activities after the incident on January 25, 2021.

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Strategies to Overcome Exploration Challenges

It should be noted that to mitigate the risk caused by geothermal exploration, a good and correct geothermal exploration process is needed, starting from the initial stage (Preliminary Survey), Geoscience / 3G Survey (Geology, Geophysics, Geochemistry), Pre-Feasibility Study, Determination of Drilling Targets (Sweet Zone) to procedures for carrying out Geothermal Exploration Drilling. These technical stages need to be carried out simultaneously/in line with the non-technical stages, in this case Community Environmental and Social Protection, Occupational Health and Safety, and the Procurement process, which must also be applied from the start of Geothermal exploration activities. For this reason, there are two approaches related to strategies for overcoming challenges in geothermal energy exploration and development activities: 1) strategies that can be carried out by entrepreneurs in geothermal energy utilization activities, and 2) strategies from the Government.

The following are general efforts that entrepreneurs can make to reduce the risks in carrying out geothermal energy utilization activities:

• Carry out exploration activities in detail before making field development plans
• Choose projects more carefully by taking into account the developer’s previous experience, both technically and managerially
• Review development plans carefully before signing funding agreements
• Comply with regulations related to environmental issues
• Designing and implementing programs according the objectives which are based on the schedule for the implementation of activities that have been determined
• Carry out simulations (modeling) to forecast reservoir and well performance for various field development scenarios
• Holding regular meetings to evaluate the implementation of the exploration program to assess whether or not the project activities are being carried out according to plans and applicable regulations.
• Diversify financing options, including exploring public-private partnerships; create investment funds; or establish incentives for investors.
• Capacity building and knowledge sharing.

Meanwhile, the government continues to strive to overcome obstacles and challenges in the development of geothermal energy through action and collaboration strategies. Director of New, Renewable Energy and Energy Conservation of the Ministry of Energy and Mineral Resources, Dadan Kusdiana, stated that through synergy with various stakeholders, the challenges in terms of developing geothermal energy can be overcome and the risks can be minimized. He also said that the government has established at least 7 (seven) strategies to overcome the challenges in the development of geothermal energy, as follows:

• Accelerate the implementation of joint exploration with the government
• Collaborate with ministries and agencies related to the use of natural resources in conservation areas
• Save the regulatory framework for direct-use applications
• Provide quality data and information easily accessible to the public
• Share knowledge by holding public discussions to mitigate social issues
• Develop the personnel competence
• Collaborate with related ministries and agencies to provide incentives and project funding support for geothermal projects.

Through these 7 strategies, geothermal energy exploration and development activities can be carried out more quickly and safely as there is harmonious collaboration and synergy between all relevant stakeholders, both directly and indirectly. Thus, the exploration and development of potential geothermal energy can run effectively, and the risks and challenges can be kept to a minimum.

By implementing these strategies, Indonesia can overcome the challenges of geothermal exploration and unlock the potential of its geothermal resources, leading to the development of sustainable and reliable sources of renewable energy.

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