Financial and community hurdles slow geothermal energy development in Southeast Asia

[December 02, 2024]  By VICTORIA MILKO

JAKARTA, Indonesia (AP) — Providing round-the-clock energy, using minimal space and considered a clean source of power — geothermal energy seems like an ideal option for countries like Indonesia and the Philippines, where the potential is high, and governments are seeking to transition away from highly polluting fossil fuels.

Yet most of the potential of geothermal energy, created by harnessing heat produced by the earth from underground reservoirs of hot water to power turbines that generate electricity, remains untapped in these countries and across the world — as financial, regulatory and community roadblocks have stalled growth.

More readily available financing and domestic regulatory changes are starting to address these barriers, but experts say more should be done to unlock the vast clean energy source trapped just beneath the Earth’s surface.

Countries with high geothermal potential — such as the United States, Indonesia and the Philippines — are usually located close to tectonically active regions where hot water or steam is naturally carried to the Earth’s surface through volcanic activity, or can be accessed by shallow drilling.

“We’re essentially standing on our own sun, which we can get clean, reliable energy from,” said Marit Brommer, CEO of the International Geothermal Association based in Germany.

Experts also laud geothermal plants for their ability to operate continuously to meet the minimum level of power demanded around-the-clock, unaffected by weather, with long lifespans and minimal maintenance.

As countries shift towards renewable and cleaner energy, geothermal use is expected to grow: In Southeast Asia, geothermal power generation is expected to increase tenfold from 2020 to 2050, reaching 276 million megawatt-hours, according to the International Energy Agency.

With their steaming volcanoes and bubbling lakes, Indonesia and the Philippines — two archipelagic Southeast Asian countries located on the seismically active “Ring of Fire” — are the second and third-largest users of geothermal energy in the world, with some of the highest geothermal energy potential. The U.S. is number one.

Yet Indonesia uses less a tenth of its gargantuan reserves, making up 6% of its power supply. In the Philippines, about 8% of geothermal capacity has been developed, constituting 14.6% of the country's energy use, the country's largest source of renewable energy.

Both countries plan to expand use of geothermal energy as they transition away from fossil fuels: Indonesia aims to increase the share of geothermal power generation by at least 8% by 2030, making it the second-largest renewable energy source after hydropower. The Philippine government is targeting several projects to boost geothermal capacity by adding nearly 1.5 gigawatts, nearly doubling its current use.

But the exploratory stage of geothermal development — when companies do tests and drilling to confirm the size, temperature, pressure, and potential production rates of sites — is expensive and risky. That makes it hard to attract finance for development, said Shigeru Yamamura, an energy specialist at the Asia Development Bank.

Farmers walk by as steam rises from a geothermal power plant in Dieng, Central Java, Indonesia, Nov. 15, 2024. (AP Photo/Beawiharta)

“That’s the most difficult part of developers, because (financially) they cannot take 100% of the exploration risk themselves,” Yamamura told The Associated Press.

Climate finance for geothermal development is limited for most Southeast Asian nations, accounting for only 9% of finance available for the Association of Southeast Asian Nations — a political and economic bloc of ten states in the region, which includes Indonesia and the Philippines.

A 2024 ASEAN energy report said “blended finance” using both public and private sources, grants and green bonds could help bridge the gap.

The Philippine government has announced green energy auction schemes for geothermal energy and is preparing a “smart green grid plan” that prioritizes renewable energy — vital to enable private developers to get financing from banks. This signals progress in policy support for investment, Yamamura said.

Indonesian President Prabowo Subianto has focused on geothermal as part of the country's energy transition. The Ministry of Energy and Mineral Resources says it's working to shorten permitting times and considering ways to increase rates of return on investments in geothermal projects. The state electric utility, Perusahaan Listrik Negara, also said it's committed to ramping up geothermal energy development.

The World Bank is providing a $150 million loan to scale up Indonesian investments in geothermal energy by reducing the risks of early-stage exploration. The Green Climate Fund and the Clean Technology Fund are providing a $127.5 million.

Even when finance is secured, community pushback can slow development.

In Indonesia, residents of villages have protested projects, citing safety and environmental concerns: Several geothermal sites in Indonesia have had deadly gas leaks in the past five years.

Some Indonesian communities don't understand what geothermal energy is and how they could benefit from its development, said Timothy Ravis, a doctoral student in global development at Cornell University.

Protests at geothermal sites in the Philippines have led at least one company to pay royalties to Indigenous groups worried about land degradation caused by geothermal development.

Governments and businesses should work to gain the consent of communities near projects to help ensure they succeed, said Brommer.

“We need to show that this development benefits all people, not just a company,” she said. “It's not about being a good neighbor, it's about being the best neighbor and really working with communities to respect their concerns."

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