Geothermal Cost Recovery Scheme Triggers Controversy

The Association of Indonesian Geothermal Producing Regions (ADPPI) opposed the Presidential Regulation (Perpres) Bill on the Purchase of New and Renewable Energy (EBT)-based Electricity. They argued that the compensation for exploration and geothermal resource infrastructure development costs after the commercial operation date (COD), similar to the cost recovery scheme in oil and gas working areas development, does not have a legal basis. The policy may overlap with Law No. 21/2014 on Geothermal and Government Regulation (PP) No. 7/2017 on Geothermal for Indirect Use.

ADPPI Chairman Hasanuddin said the Geothermal Law and Government Regulation mandated a geothermal power purchase scheme using an economical price scheme, and cost recovery are unknown to geothermal exploitation for power plants (PLTP). Besides, the Presidential Decree Bill on the Purchase of EBT Electricity has a sizeable impact on the state budget expenditure, thus becoming a burden for state expenditure in the future.

The regulation on the geothermal utilization has been stipulated in a specific Geothermal Law. Its implementation is contained in the Geothermal Presidential Regulation, which is a reference for any parties, either government, developers, and the community. "If the regulation is issued, it means that President Joko Widodo will approve the state budget expenditure without based on law, and it potentially causes legal problems in the future," Hasanuddin said in a written statement, Wednesday (8/5). Therefore, ADPPI suggested the Ministry of Energy and Mineral Resources (ESDM) roll back to economic scheme formulation in determining electricity tariffs from geothermal energy according to the Geothermal Law.