Update on renewable energy investments in Indonesia. It is an interesting article in the Jakarta Post on geothermal investments. Indonesia has only less than a thousand MW of geothermal power although it is estimated that almost one third of the world's geothermal resources. Research of the Ministry of Natural Resources noted that 252 sites were along the heat of a volcanic belt extending from Sumatera, Java, Nusa Tenggara, Sulawesi and Maluku. These heat resources of the entire potential of 27 GWe, which is Indonesia's largest geothermal potential in the world!
A Jakarta Post OP ED said that (i) fiscal uncertainties, and (ii) legal uncertainties are under the front of the barriers to investment. Geothermal plants is really a high risk, high return investments, the huge system exploration and exploitation are. It is never intended as a short-term investment. Investors fear that their contracts were not fulfilled.
I give a little to the legal obstacles. Generally, contract compliance remains high. Business partners will think twice before deciding the rescue operation from a contract, because the litigation costs are too high. The problem stems not from the observance of the Treaty, but mainly for regional autonomy. How much share of the regions will be the hot topic. There was one case in which Chevron calls Garut state government and the central government the payment money for their concession area. They even threatened to annul Article 41 of the Geothermal Energy Act before the Constitutional Court. Article 41 regulates the provision, which is a transitional provision provides that all contracts entered into before the effective date of the Geothermal Law is still valid. Under this transition rule, the regions will not receive any money. Of course, their attempts to invalidate the article are futile.
It must also be noted that the 2003 Geothermal Law has too many regions, particularly in relation to licensing. This is a good opportunity for investors, because they can now directly with the regions. In ancient times, people have to deal with state-owned enterprises such as PLN and Pertamina. However, it is necessary to ensure that both the central and regional government tolerates or approves the projects. It would not be good if after a few years to invest the license issued by the regional government will be repealed by the central or a license issued by the Central Government is lifted by the central. In any case, even if the regions are granted more power, it is still important, calls for a condonation of the nature of the central government.
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