FINANCIAL FEASIBILITY ANALYSIS OF A GEOTHERMAL PROJECT IN WEST JAVA AND CENTRAL JAVA IN RELATION TO THE YEAR 2022 TARIFF, LEVY, AND PRODUCTION BONUS REGULATIONS

• Main Author: Al Husni, Habibi
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/75235
• Institution: Institut Teknologi Bandung

Beneath the soils of Indonesia’s blissful rainforests lies the powerful heat of countless geothermal reservoirs. Indonesia is located within the Circum-Pacific Belt or the so-called Ring of Fire. Indonesia is currently the world’s second-largest producer of geothermal energy with a total installed capacity of over 2.9 thousand megawatts (ESDM, 2021). However, based on a model by MEMR (2023), to add a 22-gigawatt capacity up to the year 2060, an additional investment of USD 71,270 million will be required, both for the generation and transmission of energy. To achieve the investment amount in time, geothermal developers and GOI are ought to ensure investors or financiers that geothermal development projects in Indonesia generate adequate returns. More recently in September 2022, the GOI introduced Presidential Decree No. 112/2022 with a new tariff system. The government has introduced new purchase and ceiling prices that are based on power plant capacities and locations. Another change in regulation with direct relation to the feasibility of geothermal projects is the Presidential Decree No. 22/2022 which introduced new levy and production bonuses, different from the Ministry of Finance No. 19/2017 regulation implemented to existing geothermal working areas. This final project aims to simulate and compare the costs, cost components, and feasibility of an ongoing geothermal project in two separate locations, West Java and Central Java, when subject to the new tariff, levy, and production bonuses. This final project aims to provide feedback regarding new geothermal regulations for future geothermal development projects. Based on the financial feasibility results, the development project in Central Java and West Java is profitable where the NPV is higher than zero and the IRR is higher than the project cost of capital. For both project locations, the introduction of new tariff, levy, and production bonus regulation is found to provide an NPV and IRR higher than the previous. Results of sensitivity analyses indicate that the key component that contributes the most towards the feasibility of the project is the OPEX, followed by the project cost of capital (WACC).