World Geothermal Energy Summit 2012 discusses how CTF
can be a vital funding source for geothermal energy
development.
Figure 1: The Clean Technology Fund (CTF), one of two Climate Investment Funds, promotes scaled-up financing for demonstration, deployment and transfer of low-carbon technologies with significant potential for long-term greenhouse gas emissions savings. The CT
JAKARTA (24 April 2012). The World Bank is providing $300 million in loans as a part of the Geothermal Clean Energy Investment Project. It includes funds sources from IBRD – the middle income window of the World Bank ($175 million) and the Clean Technology Fund ($125 million) that provides low interest loans for projects that benefit climate change. Let us explore some of the traditional funding sources and loans for funding geothermal energy projects through CTF, with a closer look into Indonesia.
1. What are the baseline and objectives of Indonesian CTF Investment Plan?
Energy, industry, and land use change cause Indonesia’s significant global GHG contribution. Energy use is the second largest source of emissions, and growing fastest. Plan framed by Presidential decree on National Energy Management which sets RE targets, and Indonesia’s pledges to reduce emissions by 26% by 2020. Indonesia proposes to double installed geothermal capacity which will reduce emissions by 5.1 million tons per year, and scale up EE and RE to deliver. Future phases may explore low carbon transport and other RE options.
2. What are the priorities of the Clean Technology Investment Plans in terms of geothermal energy.
Geothermal Power large-scale investments are led by the public sector among the following projects:
- upto 260 MW by Pertamina;
- up to 250 MW by PT PLN;
- 300 MW with private participation through risk mitigation, with prospects for some private sector investments
3. Who is financing CTF for geothermal energy development in Indonesia?
- $125 million (CTF) plus $500 million (MDB) from ADB
- $125 million(CTF) from IBRD
- $50 million from IFC/ADB geothermal advisory
4. How are the gaps (eg pricing, subsidies, regulations) to further investments in this sector being addressed?
The pricing systems within Indonesia do not allow for full cost recovery, but Indonesian government efforts to rationalize energy tariffs are underway. As energy markets are distorted by subsidies, the government has already begun to correct this situation by slowly eliminating subsidies for oil for power generation. Despite the establishment of MEMR to support implementation of the Geothermal Law, efforts to establish an independent regulator in Indonesia have stalled after rulings on privatization.
5. What are the other requirements to ensure success in this sector?
Reinforced collaboration between Ministries (Finance, Energy and Industry) to ensure that transparency and efficiency are achieved. The terms on which new generation is contracted requires independent oversight and transparency, and some mediation between various policy and legal directives is needed. This would support a timely, high quality and cost effective completion of proposed new investments.
By attending the World Geothermal Energy Summit 2012 (4-5 July 2012, Jakarta, we will have the opportunity to gain insights into the funds that are available and regulators that matter who will provide us meaningful information on:
- Concessional financing: Is this a more cost effective funding option?
- What are the key policy and institutional reforms required to enhance the investment climate in the sector?
- Shaping appropriate pricing mechanisms needed to encourage developers to mobilise investments knowing that they can cover their costs and secure returns commensurate with the risks they are facing
WGES 2012 international conference brings together all the stakeholders (key developers, financiers and investors) from across the geothermal spectrum to find solutions to financial, regulatory and technical challenges, and to increase the role of geothermal in the world’s energy mix in government setting.
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