ADB invites bids for geothermal projects in Indonesia

Out-Law News | 18 Jan 2021 | 2:04 am | 1 min. read

The Asian Development Bank (ADB) has requested proposals from shortlisted bidders for consulting services for a geothermal power generation project in Indonesia.

The project includes two geothermal power plants: 55MW Dieng 2 geothermal power plant in central Java and 55MW Patuha 2 geothermal power plant in West Java. These will be developed by Indonesia state-owned company PT Geo Dipa Energi (GDE). For this project, ADB approved a $300 million loan in May 2020 and managed a $35m loan from the Clean Technology Fund.

The two power plants will sell electricity to national electricity company Perusahaan Listrik Negara (PLN) under current power purchase agreements.

The project is recognised as one of Indonesia’s 89 national strategic projects that announced by the government in 2020.

The Indonesian government has granted development rights for geothermal working zones with an estimated total potential of 4.4 gigawatts (GW), of which state-owned enterprises (SOEs) hold development rights for areas with an estimated potential of 2GW. GDE is a joint venture between Pertamina and PLN and responsible for managing and developing the geothermal working zones in Dieng and Patuha, which are among the areas granted to SOEs to develop the 2GW working zones.

Infrastructure expert John Yeap at Pinsent Masons, the firm behind Out-Law, said: “Indonesia, sitting on the Ring of Fire, is blessed with significant geothermal resource, estimated at close to 30GW or around 40% of the entire global geothermal resource.  With a national renewable energy target of 23% by 2025, geothermal should play a key role in Indonesia’s RE target. However, antiquated laws and regulatory challenges have historically hindered the exploitation of this valuable resource. The challenge has been understood for some time, and the 2014 Geothermal Law made some progress towards establishing a viable framework for geothermal exploitation.  However, challenges remain including with regards the tariff.”

“This development by GDE is in essence a government project given the involvement of PLN and Pertamina but is nevertheless a positive step forward for the geothermal sector in Indonesia. However, it remains to be seen if the concerns over development and financing challenges, such as the tariff, can be addressed to enable greater investment in this sector,” he said.

It is reported shortlisted bidders must submit their proposals by 25 February.