Indonesia’s chief economic minister has announced that the country will begin construction next month of its long-delayed US$1.6-billion Sarulla project, the world’s biggest geothermal power plant.
Southeast Asia’s largest economy, home to the world’s largest geothermal resources, is racing to meet power demand growth of more than seven per cent a year, with plans to add 60 gigawatts (GW) of capacity to its existing grid by 2022.
Reuters Newsagency reports the sector has struggled to attract investment because of complex regulations and difficulties securing project finance.
A government plan to derive 12 per cent of the country’s energy mix from geothermal power by 2025 seems unrealistic.
“The Sarulla groundbreaking will be very soon,” Coordinating Economic Minister Chairul Tanjung told Reuters, adding that the project had reached financial closing and the government expected construction to begin next month.
He declined to give further details.
Reuters reports the project was originally initiated in 1990 but ground to a halt during the Asian financial crisis in 1997.
Its first phase is expected to begin operation in 2016, with the next two phases to follow within 18 months of the first phase.
The 330MW Sarulla project is envisioned to provide clean power to an Indonesian grid dominated by fossil-fuel energy.
Reuters reports Sarulla is expected to reduce 1.3 million tonnes of carbon dioxide emissions a year when completed in 2018.
The financing of the project has been heralded as a breakthrough for Indonesia’s largely undeveloped 29GW of geothermal potential.
The banks involved in the financing are the Japan Bank for International Cooperation (JBIC) and the Asian Development Bank (ADB) along with Bank of Tokyo-Mitsubishi, ING Bank, Societe Generale, Sumitomo Mitsui Banking Corporation, Mizuho Bank and National Australia Bank.
The Itochu Corporation and Kyushu Electric Power Company each have 25 per cent of the project while PT Medco Power Indonesia, a unit of Medco Energi Internasional, has a 37.5 per cent interest and Ormat International, a unit of Ormat Technologies has 12.5 per cent.
Reuters reports that financing of the Sarulla plant makes it Indonesia’s first geothermal project to gain financing since Star Energy’s 227MW Wayang Windu plant commenced in 1997.
