SUGIHARTO HARSOPRAYITNO, M.Sc.DIRECTOR

Husin’09

Indonesia Energy Sector BackgroundGeothermal as a Energy Security/Climate Change SolutionGeothermal Development Plans and PolicyDevelopment Barriers faced in IndonesiaSeveral Key Reforms/Efforts

Pricing PolicyCarbon FinanceTransactions

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Natural Gas, 28.57%

Coal, 15.34%Oil

51.66%

Geothermal, 1.32%

Hydro Power, 3.11%

Coal , 33%

Oil, 20% BIOFUELS, 5%

Geothermal, 5%

Biomass, Nuclear, HydroSolar Energy, Wind Power, 5%Coal Liquefaction

2%

NRE,17%

National (primary) Energy Mix of 2006(1 million BOE)

OPTIMIZING ENERGY

MANAGEMENT

National (Primary) Energy Mix of 2025(BaU Scenario) (5 million BOE)

National (Primary) Energy Mix of 2025 (Presidential Decree No. 5/2006) (3 million BOE)

Gas, 20.6%

Coal 34.6%

Oil, 41.7%

Geothermal, 1.1%

Mini/micro Hydro Power Plant, 0.1%Power Plant, 1.9%

Target in 20251. Less than 1 for energy elasticity2. Optimized primary energy mix

Gas, 30%

Source : Presidential Decree No.5/2006

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in GWh

No. Energy Sources 2006 2007 2008 2009 2010

1 Oil 28,009 9,104 5,978 4,350 4,950

2 Gas 27,063 47,293 55,827 63,577 65,912

3 Coal 54,659 60,091 65,836 72,173 81,341

4 Geothermal 6,539 10,030 10,426 11,666 13,154

5 Hydro 12,153 12,224 12,379 12,504 12,526

128,423 138,742 150,446 164,270 177,883Total

Source : The Electrical Power Supply Business Plan (RUPTL), PT PLN, 2006

-20

20

60

100

140

180

2006 2007 2008 2009 2010

Gen

erat

ion

Cap

acity

(t

hous

ands

GW

h)

Oil Gas Coal Geothermal Hydro

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2006 2007 2008 2009 2010ENERGY DEMANDIndonesia 113,760 122,939 133,610 146,172 158,603 Java-Bali GWh 89,895 96,488 104,173 113,190 121,650 Outside Java-Bali 23,865 26,451 29,437 32,982 36,953 ENERGY DEMAND RATEIndonesia 7.5 8.1 8.7 9.4 8.5 Java-Bali % 6.8 7.3 8.0 8.7 7.5 Outside Java-Bali 10.2 10.8 11.3 12.0 12.0 GDP RATEIndonesia 5.9 6.4 7.0 7.6 7.1 Java-Bali % 5.6 6.1 6.7 7.3 6.2 Outside Java-Bali 6.4 6.9 7.5 8.1 8.1 ELECTRIFICATION RATEIndonesia 60.1 61.6 63.3 65.4 67.2 Java-Bali % 64.3 65.7 67.5 69.5 71.2 Outside Java-Bali 53.0 54.5 56.3 58.4 60.4

YearSubjects Unit

Source : The Electrical Power Supply Business Plan (RUPTL), PT PLN, 2006

Husin’09

Advantages of Geothermal EnergyEnergy Security by Utilizing National Resources

Enhance energy security by exploiting dependable indigenous (non-tradable) resource

Environmental Benefits of Utilizing a Clean Energy Source

Reduction in local pollutants (TSP, NOx, SO2) andGreenhouse Gases (GHGs)

Hedge Against Volatile Prices for Fossil FuelsGeothermal “fuel” price does not fluctuate unlike fossil fuels, providing a natural hedge in managing Indonesia’s energy mix portfolio

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Source : Geological Agency, MEMR (2007)

in MW

Speculative Hipotetive Probable Possible Proven

Sumatera 5,275 2,194 5,555 15 380 12Java 2,235 1,446 3,175 885 1,815 1,000Bali-Nusa Tenggara 360 359 943 - 14 -Kalimantan 45 - - - - -Sulawesi 925 12 865 150 65 40Maluku 400 37 297 - - -Papua 50 - - - - -

Total(256 Location)

Installed Capacity

2,2879,290 4,048 10,835

27,510

1,052

Location NameResources Reserves

1,050

13,338 14,172

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Source : Geological Agency, MEMR (2007)8

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Remarks:PGE : (Pertamina Geothermal Energy)CGS : (Chevron Geothermal Salak)CGI : (Chevron Geothermal Indonesia)SE : (Star Energy)GDE : (Geo Dipa Energy)

in MW

ResourcesHipotetive Probable Possible Proven

1 Sibayak North Sumatera PGE 34 35 - 30 12

2 Gn. Salak West Java PGE-CGS - 110 110 375 375

3 Wayang Windu West Java PGE-SE - - - 400 110

4 Kamojang West Java PGE - - 300 260 200

5 Darajat West Java PGE-CGI - 160 150 300 255

6 Dieng Central Java GDE 200 185 115 280 60

7 Lahendong North Sulawesi PGE - - 150 78 40

234 490 825 1,723 1,052

Installed Capacity

Total

No Location Province Developer ReservesPotential

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2008 2009 2010 2011 2012 2013 2014total installed

capacitytotal installed

capacitytotal installed

capacitytotal installed

capacitytotal installed

capacitytotal installed

capacitytotal installed

capacity1052 1169 1239 1397 2370 3165 5785

addit ional installed capacity

addit ional installed capacity

addit ional installed capacity

addit ional installed capacity

addit ional installed capacity

addit ional installed capacity

117 70 158 973 795 2620

0

1000

2000

3000

4000

5000

6000

7000

2008 2009 2010 2011 2012 2013 2014

Cap

acity

(MW

)

Additional Installed

Existing Capacity

Total Installed Capacity

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I. Law No. 27/2003 on GeothermalII. Government Regulation No. 59/2007 on Geothermal

EnterpriseIII. Ministerial Regulations

Ministry Regulation No. 02/2009The Guidelines for Geothermal Preliminary Survey Assignment

Ministry Regulation No. 11/2008Mechanism for Determining of Geothermal Working Area

Ministry Regulation No. 5/2009Guideline for Purchasing Electricity by PLN, Cooperative and Third Party (includes provision on geothermal)

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Barriers to Geothermal Development

Policy & Regulatory

Need for more attractive incentive framework to make the cost of developing geothermal competitive (pricing & incentives)

InstitutionalLimited experience with institutional processes & procedures for competitive tendering, especially at sub-national level

Limited availability of public information regarding geological & feasibility informationTechnology

/Capacity Limited domestic capacity/participation in geothermal development which lead to higher costs

Investment Risk

High up-front cost of developing geothermal and uncertainty in upstream field exploration leads to higher risks

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The Pricing Challenge: How to deal with incremental cost to scale up geothermal development?

Someone

has to Pay! Incremental Costs

PSO from PLN

Incentives for Generators to lower cost to

level of competing

technologies

Passing the Costs to Consumers

All Consumers

Willing to Pay

Consumers

(Green Electricity)

Trading of ERs through Carbon

Finance

Direct or Indirect Government

Funding

Husin’09

Programmatic Application of Carbon Finance for Geothermal (CF Framework with World Bank CPF)Support scaling up of geothermal development in Indonesia through:

Streamlining and simplifying the procedures for (i) accessing the Clean Development Mechanism (CDM)(ii) undertaking due diligence (i.e. assessment) of geothermal

projects(iii) obtaining government approvals and clearances

Enhancing the certainty of cash benefits to geothermal developers by

(i) enabling the sales of emission reductions beyond the current Kyoto Protocol commitment period ending in 2012 (or other applicable international agreement under the UNFCCC)

(ii) allowing flexible long term contracts to better manage the volatility of emission reduction pricing

Husin’09

in MW

NO FIELD REGENCY PROVINCEDEVELOPMENT

TARGETS1 Seulawah Agam Aceh Besar Nangroe Aceh Darusallam 1602 Jailolo West Halmahera North Maluku 753 Telaga Ngebel Ponorogo and Madiun East Java 1204 Ungaran Mt. Semarang and Kendal Central Java 1005 Tampomas Mt. Sumedang and Subang West Java 506 Cisolok Cisukarame Sukabumi West Java 457 Tangkuban Perahu Mt. Subang, Bandung and Purwakarta West Java 1008 Jaboi Sabang Nangroe Aceh Darusallam 509 Sokoria Ende East Nusa Tenggara 30

10 Talang Mt. Solok West Sumatera 3611 Blawan Ijen Bondowoso, Banyuwangi and Situbondo East Java 27012 Hu'u Daha Dompu West Nusa Tenggara 6513 Sipaholon Ria-Ria North Tapanuli North Sumatera 7514 Bukit Kili Solok West Sumatera 8315 Sorik Marapi Roburan Mandailing Natal North Sumatera 20016 Marana Donggala Central Sulawesi 3617 Songa Wayaua South Halmahera North Maluku 14018 Atadei Lembata East Nusa Tenggara 4019 Suwawa Bone Bolango and Gorontalo Gorontalo 11020 Kaldera Danau Banten Serang and Pandeglang Banten 11521 Rajabasa Mt. South Lampung Lampung 91

1991Total

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Thank You