Sumitomo snags $156.7m deal to build 110 MW

Sumitomo snags $156.7m deal to build 110 MW geothermal plant in Indonesia

17 February 2010 - Indonesia's state electricity firm PLN has signed a $156.7m contract with Japan's Sumitomo for a geothermal power plant in Sumatra.

Nasri Sebayang, PLN's director of planning and technology, said Sumitomo would build the geothermal plant, with a combined total of 110 MW of geothermal power, for PLN in South Sumatra. According to Reuters, PLN will buy steam, as feedstock for the power plant, from a unit of state oil firm Pertamina, which owns the geothermal area where the power plant will be built.



"We expect the power plant will be in operation in 2012 to supply electricity in the South Sumatra area," Sebayang told reporters. PT Pertamina Geothermal Energy (PGE), a unit of Pertamina, plans to build and operate another 110 MW geothermal power plant in the same area, to be completed in 2013.

Indonesia has established two crash programmes to increase power generation by 10 GW in a bid to resolve chronic power shortages and frequent blackouts. About 40 per cent of the first programme should be completed by the middle of this year. It will rely on coal-fired power plants, while a second programme, due to start this year, has 3900 MW of power slated to come from geothermal sources.

Indonesia's plans to tap geothermal energy have hit obstacles, including difficulties in attracting investment and uncertainty over the operation of such plants in areas with protected forest. PLN's President Director Dahlan Iskan said there were problems in encouraging private sector players to participate in the construction of geothermal power plants.

"Investors want to negotiate the price of electricity before steam exploration drilling, while PLN wants (to do it) afterwards," he said, adding that the government needed to step in to resolve the issue. Indonesia is hoping to tap alternative sources of energy to meet rising power demand and cut consumption of expensive crude oil as its own reserves dwindle.

The vast archipelago, with hundreds of active and extinct volcanoes, has the potential to produce an estimated 27 GW of electricity from geothermal sources. However, most of the potential remains largely untapped because the high cost of geothermal energy makes the price of electricity generated this way expensive.

From PEI Power Engineering Magazine week #7 18 February 2010