Abstract

Although Indonesia is richly endowed with abundant energy sources, only oil, natural gas, coal and hydro have been exploited to fuel the development of the Indonesian economy. Geothermal exploitation shows it has lagged behind the exploitation of other energy sources. At present, geothermal steam generation plant accounts only 0.9 percent of the total installed capacity of electricity generation in Indonesia.

PERTAMINA and the Volcanological Survey of Indonesia identified 217 prospects with a total potential of 16 thousand MW. High electricity demand growth along with a large of geothermal reserves should have stimulated geothermal exploitation.

However, least generation cost influenced much by the inconsistent of subsidized fuel costs and the present structure of electricity tariff do not encourage investment decision for geothermal exploitation. This paper discusses prospects and constraints of geothermal development in Indonesia from economic perspectives. In addition, a macro benefit - cost analysis is also observed between power generation using geothermal steam versus other alternatives such as coal and oil based-sources.