New geothermal auction scheme in Indonesia to be based on financial strength
The new scheme for auctions of geothermal working areas in Indonesia, will require financially sound bids and strong financial commitment by bidders.
Auctions for geothermal working areas (WKP)in Indonesia is now using a new scheme which is regulated by the Minister of Energy and Mineral Resources Regulation No. 37 of 2018 concerning the Offer of Geothermal Work Areas, Giving Geothermal Permits, and Geothermal Exploitation Assignments. We previously reported on it.
With that rule, the determination of the WKP auction winner is no longer based on the lowest electricity price offer, but it is also determined by the developer bona fide in terms of finance.
ESDM Ministry’s Director General of EBTKE, Rida Mulyana, stressed that exploration commitments are important so that the government knows the bona fides of developers in developing geothermal projects.
“In essence, the exploration commitment is to check if they (developers) have money or not,” Rida said.
The new scheme contained in the Minister of Energy and Mineral Resources Regulation No. 37 of 2018 is a requirement for developers to attach exploration commitments in the bidding process. The amount is at least US $10 million (Rp. 135 billion-Rp. 13,500 / US $ 1) to develop the capacity of a Geothermal Power Plant (PLTP) greater than or equal to 10 MW. Meanwhile the value of the 10 MW exploration commitment and below is half, or US $5 million (around Rp. 68 billion less)
That rule is a new point. In the previous auction scheme, the determination of WKP auction winners was only seen from the cheapest electricity offer.
During the socialization in front of a number of media in the Jakarta EBTKE building last July, Rida explained, the ESDM Ministerial Regulation 37/2018 also aims to provide certainty regarding the criteria of the Geothermal Work Area that can be assigned and the procedures for assignments to BLU / BUMN so that this is expected to maintain the climate investment in geothermal development in Indonesia.
He added, ESDM 37/2018 is the mandate of Article 67 and 68 of PP 7/2017 which is the Government’s effort to provide clear guidelines and legal basis to stakeholders related to the procedures and mechanism of WKP bidding by way of auctioning, giving IPB, and assigning business geothermal energy to BLU / BUMN and WKP criteria that can be assigned.
“In addition, this regulation also regulates the assignment of geothermal exploitation to BLU / BUMN which is one of the geothermal implementation breakthrough policies based on PP 7/2017,” he said as released by the esdm.go.id page
Meanwhile, the Director of Panasbumi, Ida Nuryatin Finahari, said that the electricity price scheme was not valid because in practice, developers had to renegotiate with PT Perusahaan Listrik Negara (PLN). “So the experience so far determines the price ahead is not right too,” he said.