The Challenges of Geothermal Development in Indonesia
Indonesia, located within the Earth’s Ring of Fire, is the second-largest country in the world for geothermal potential, with an estimated capacity of 23,965.5 MW. However, only 10-11% of this vast resource is currently utilized, leaving an untapped potential that could meet the nation’s growing energy demand. While this presents a lucrative opportunity for investors, several challenges must be addressed to fully harness Indonesia’s geothermal energy. From high development costs and regulatory hurdles to environmental and social concerns, overcoming these barriers is key to realizing the country’s renewable energy ambitions and achieving its net-zero emissions target by 2060.
Radin Raihanda
1/6/20252 min read
The fact that Indonesia is located in the Earth’s Ring of Fire makes it the second country in the world with the highest geothermal potential. Approximately 23,965.5 MW could be utilized to supply Indonesia's community energy demand. Currently, only 10 to 11% of geothermal energy is utilized, there's still 90% geothermal potential that needs to be studied. This gap is appealing to investors if comprehensive information is prepared. However, some challenges need to be addressed to ensure that Indonesia is able to maximize the potential of this reliable energy resource.
The first challenge is the Levelized Cost of Electricity (LCOE) for geothermal energy. The high LCOE is caused by the significant investment required to develop geothermal power plants. Exploration risks, drilling challenges, and complicated infrastructure delivery in remote areas create high financial risks. Although fossil fuel energy resources negatively impact the environment, their low LCOE makes this "dirty energy" highly demanded by the community.
Secondly, the complexity of Indonesia's regulations could endanger geothermal development. The lengthy and complex process creates uncertainty, making geothermal projects unappealing in the eyes of investors. The regulation maker need to simplify and ensure the transparency of the process in order to unlock Indonesia's geothermal potential.
Lastly, environmental and social issues need to be considered while designing and planning geothermal projects. Project sustainability needs to be measured to determine whether the benefits are higher than the environmental costs incurred during development; otherwise, the project will be considered a failure. Opposition may also come from local communities that see geothermal projects as a threat to their society. Therefore, a detailed investigation and strong negotiation skills are necessary.
These are three examples of challenges that need to be addressed when developing geothermal opportunities in Indonesia. Despite these challenges, the benefits of a successful geothermal project could play a pivotal role in contributing to renewable energy in Indonesia. With strategic planning, the application of sustainable practices, and stakeholder engagement, Indonesia’s net-zero emissions target for 2060 could be achieved on time.
Reference
https://lintas.artristik.co.id/investasi-ebtke/sektor-panas-bumi/potensi