Indonesia has laid the groundwork for a $270 fund to finance geothermal exploration, as part of the country’s efforts to boost renewable sources of energy.
The government has allocated Rp 3 trillion ($224 million) in the 2017 state budget for the so-called Government Drilling Fund, which will be used to finance geothermal exploration around Indonesia.
The Washington-based World Bank will also chip in with a $55.25 million loan to shore up the fund.
Sarana Multi Infrastruktur, the government’s infrastructure investment arm, will be responsible for managing the fund under supervision of the ministries of finance and energy.
Indonesia has about 29 gigawatts of geothermal capacity – the largest in the world – but high exploration costs and the risks involved often prove prohibitive for investors in the sector.
Rida Mulyana, director general of renewable energy and energy conservation at the Ministry of Energy and Mineral Resources, said the fund will help reduce exploration risks borne by geothermal producers.
Under the scheme, the government will conduct a survey of potential geothermal resources and drill exploration wells, activities that are usually capital intensive.
“So now, the risk in the exploration stage will be borne by the state,” Rida said over the weekend.
“The IPP [independent power producers] just need to take over the already proven resources… they just need to pay the cost of exploration, to be used again by the government for other explorations,” he added.
Yunus Saefulhak, director for geothermal at the Energy Ministry, said his ministry and the Ministry of Finance are working on an agreement that will establish a geothermal exploration committee. The committee will consist of officials from of the Energy Ministry, Geological Agency and the Finance Ministry.
“The committee will be responsible for ensuring that the fund is used in an accountable and measurable way,” Yunus said.
Indonesia is set to overtake the Philippines as the world’ second-largest geothermal power producer by 2018 after the United States. The government plans for geothermal energy to contribute 23 percent of Indonesia’s primary energy mix by 2025, from 7 percent today.