Geothermal Energy and Indonesia

When President Olafur Ragnar Grimsson of Iceland came to open the 2010 World Geothermal Congress on April 226 in Bali with Indonesian President Susilo Bambang Yudhoyono it was as if the fiery spirit of geothermal energy was angry with the human race.

The Icelandic volcano Eyjafjallajokull had thrown up huge clouds of ash, bringing Western European air traffic to a halt for days. But Grimsson came from his small island state near the Arctic circle with its population of 318,000 to inspire President Yudhoyono with his population of 230 million that Indonesia, with 40 percent of world geothermal energy resources, could succeed in developing clean sustainable geothermal energy.

The World Geothermal Congress 2010 hopefully marks a turning point for an industry which just reached global electrical production capacity of 10 GWe – or 10,000 megawatts (MW) - although Indonesia alone probably needs an extra 5 GWe every year to keep up with demand.

The geothermal industry is growing up, with an estimated resource capacity of 28,000 MW in Indonesia. Indonesia plans to develop 4,000 MW of geothermal energy as part of its second 10,000 MW accelerated electricity development program between 2010 and 2015 and to develop 9,500 MW of geothermal energy by 2025. Yet the country has only developed 1,200 MW so far and is taking a gamble that it can rapidly mobilize the financial and human capacity needed. The country needs an estimated US$12 billion to build 4,000 MW urgently. One foreign expert estimated it needs 50 to 60 full-time trained specialist professionals to build each GWe of capacity. But Indonesia only has 20 percent of this capacity right now.

The 2,500 Geothermal Congress participants in Bali looked like a cross-section of a green technology movement in transition. The crowd ranged from bearded latter-day hippie geo-technology freaks, to green idealists to bright young professionals and earnest bureaucrats from countries seeking to learn how to regulate a new energy business. Not to mention a growing number of harder-nosed blue-suited business leaders learning how to make money out of an industry with high front-end costs and big exploration risks.

Yet the geothermal congress still looked and sounded like a missionary movement seeking to finance the unfinanceable, bank on the unbankable, insure the uninsurable, and perhaps negotiate the non-negotiable with governments and institutions, whilst anxious that wind, solar and other renewables may overtake it before its search for the Holy Grail of exponential growth could be successful.

And looming over the entire green movement is the relentless onward march of a revived carbon-free nuclear power industry, providing the only technology that can plug the gap on the high-volume energy demands of the masses in Asia who are not yet into energy efficiency, while gobbling up maybe 80 percent of global energy research and development budgets, with its capacity to generate gynormous Gigs of power, but at what true cost in resources and long term waste management?

Energy statistics may mean that nuclear energy will win by a long lead, but geothermal can take its place as a medium-sized player on the global stage and maybe give the world 100 GWe in the next 90 years, having taken the last 100 to generate 10.

Meanwhile Indonesia is both dream and nightmare, and the main battleground on which the battle for global geothermal credibility must be fought and won. Its track record for progressing from laws to regulations to enforcement is poor. Its insufficiently adapted regulatory frameworks and hybrid deconcentrated decentralization are a challenge for decision-making.

The enthusiasm and commitment of President Yudhoyono, his top ministers and officials will hopefully counterbalance opposition, inertia and corruption. Problems of lack of infrastructure and capacity must be resolved. A cultural compromise is needed in support of the Independent Power Producer model, satisfying both the nationalist and globalizing camps at home as well as foreign investors.

In addition geothermal energy must serve the poor as well as the rich, the rural as well as the urban and small communities and interests as well as big ones, with micro and medium-sized power as well as larger-scale. Such thinking is almost unheard of in Indonesia but means it would be possible to help villages with their own geothermal power.

But some of the bright young professionals in Bali, and social visionaries, knew what to do and the expertise from Iceland, Germany, other EU countries and the USA needs to reach rural Indonesia, East Africa and other places where social balance is essential and large-scale development will not be possible given resources or appropriate to needs.

Resolve these issues and the geothermal lobby will help transform Indonesia into a truly modern and great economy, the seventh or eighth largest in the world. So President Grimsson was not selling hot air. If his little country could do so much with geothermal energy with so little, then Indonesia must learn from Iceland that size is not everything. And that it’s not what you do, but the way that you do it.

Terry Lacey is a development economist who writes from Jakarta.