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The government wants geothermal energy promoters to take
advantage of global carbon trading market as an alternative source of
funding to help lower their investment and production costs, a minister
says.
Energy and Mineral Resources Ministry Purnomo Yusgiantoro said Tuesday
that geothermal energy promoters could benefit hugely from the global
carbon credit program to compensate for their huge investment costs,
thereby allowing them to offer competitive tariffs to state power firm
PT PLN as their buyer.
"Let say that to build a 100-megawatt geothermal power plant, the
investors will need some US$100 million. If the project was eligible
for carbon credits, for example, credits worth $70 million, that means
that the investment would only cost $30 million," Purnomo said.
The carbon-credit mechanism was created under the Kyoto Protocol to
help developed nations meet the target of reducing their carbon dioxide
emissions by 5 percent from the 1990 level by 2012.
Under the scheme, businesses developing clean projects in developing
nations can seek compensation in the form of carbon credits, certified
by the United Nations (UN), and then sell these to the developed
nations.
Purnomo's remarks came after a recent study by a special ministry
committee showed that the feasible price for geothermal-generated
electricity is around 7 to 8 U.S. cents per kwh, well above PLN's
standard purchase price of around 5 U.S. cents per kwh.
The committee, which was established to come up with a formula for
determining an economically feasible ceiling price for electricity,
said the main reason for such a high price was the huge investments
geothermal projects require.
However, according to Purnomo, the carbon-credit trading mechanism now
provides a quid pro quo for investors in the geothermal sector.
"With lower investment costs, we can expect the price of the
electricity to be much lower than the 8 U.S. cents per kwh suggested by
the committee," he said.
Purnomo pointed to three geothermal projects -- Drajat and Kamojang in
West Java and Lahendong in North Sulawesi -- which he said had secured
carbon credit certificates worth $156 million.
Indonesia has great potential to participate in the carbon-credit
market through geothermal projects as it is host to 40 percent of the
world's reserves.
Currently, the country only has seven geothermal plants in operation,
which have a combined capacity of a mere 852 megawatts.
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