“INDONESIA has the world’s greatest geothermal energy potential,” World Wildlife Fund (WWF) conservation director Nazir Foead told me when I met him in Jakarta earlier this month. “Yet it uses only about 4 per cent of it”.

The comparison with neighbouring countries is both quick and damning. “The Philippines uses 70 per cent of its geothermal potential.”

Located along one of the world’s most tectonically active regions, the Indonesian archipelago presents numerous opportunities for the development of geothermal power. This is particularly so on the islands of Java and Sumatra.

Geothermal energy is both non- polluting and renewable – important advantages at a time of increasing global recognition of the need for sustainable development.

Historically, Indonesia neglected geothermal energy because it had abundant and readily available supplies of cheap oil. Now that Indonesia is a net importer and oil prices are high, however, this option is no longer attractive. Oil subsidies are also taking up a larger share of the government budget.

The nation’s first geothermal plant began operating in Kamojang in West Java in 1980, and there are now six such plants in operation across the country. But so far, most of the shift away from oil has been towards coal. Indeed, despite their reputation for being among the most polluting forms of electricity generation, coal-fired plants have become the backbone of Indonesia’s electricity supply.

This is not simply because coal is cheap in comparison to oil. It is also because coal-fired plants take a long time to start up and shut down. In effect, this forces state electricity utility Perusahaan Listrik Negara (PLN) to use such plants to provide the base load electricity supply. Diesel and gas plants, which can be turned on and off more rapidly, provide additional capacity during peak periods.

Coal-fired plants have an additional advantage in that they can also be built relatively quickly. This makes them a very attractive option for politicians as the country approaches the 2014 elections. Only about 70 per cent of the population has access to electricity, and officials have promised to ensure 100 per cent electrification by 2020.

Environmentalists such as Mr Nazir, however, take heart from an announcement President Susilo Bambang Yudhoyono made during the Group of 20 meeting in Pittsburgh in 2009.

Indonesia, said Dr Yudhoyono, would undertake to lower its greenhouse gas emissions by 26 per cent by 2020, or even more if it received international assistance. In contrast to many other countries, however, Indonesia’s approach to emission reduction has been to focus on reducing its forest- and peat-related emissions rather than on cleaner ways to produce energy.

In June, however, the Ministry of Energy made it clear that the national effort would also involve a shift towards renewable energy.

Traditionally, investors have shown little interest in geothermal energy, citing low investment returns and the need to compete with cheaper energy sources such as coal.

Last month, the government announced that it was prepared to pay between 10 and 17 cents per kilowatt hour for electricity produced by geothermal sources, up from a previous ceiling of 9.7 cents. The idea was to make the industry more profitable and thus encourage greater private sector interest.

In effect, Jakarta has now agreed to subsidise the production of geothermal power. But unlike the controversial oil subsidies, notes Mr Nazir, the result is “clean” rather than “dirty” power. And since geothermal energy cannot be exported, the fact that there may be a significant difference in price between the domestic and international markets is of little relevance.

But before geothermal power can really take off in Indonesia there needs to be a change in the regulatory environment. Last month, PLN revealed that 13 geothermal plant projects were facing delays, partly as a result of the arduous task of obtaining licences from local governments.

Some potential geothermal sites cannot be exploited because they are located in protected forests or conservation areas. Changes will need to be made in this area as well.

Drawing on the Philippine experience, organisations such as the WWF are now working with the authorities to produce a sustainability standard for geothermal power suited specifically to the Indonesian situation.

(C) Singapore Press Holdings Limited