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Indonesia is said to have the world's largest geothermal energy reserves but their potential remains mostly untapped. That could soon change with German know-how.
With 240 million people, Indonesia is the biggest and fastest growing market in Southeast Asia. And as the country's economy grows, so, too, does its demand for electricity.
President Susilo Bambang Yudhoyono is a self-acclaimed fan of "green energy." In a meeting with German Chancellor Angela Merkel during her recent visit to Indonesia, Yudhoyono talked about one of his major goals: to give greater focus to alternative energy resources such as wind, solar and, in particular, geothermal heat.
Volcanic areas, like Indonesia, are a rich source of geothermal energy. The island nation is situated on the so-called "Ring of Fire" volcanic belt, which encircles the Pacific Ocean, accounting for 40 percent of the world's geothermal reserves - more than any other country.
Indonesia lies in Pacific's volcanic 'Ring of Fire'
The government has pinpointed 250 locations where geothermal energy can be produced, including Seulawah on Sumatra, Ijen on Java and Tomohon on Sulawesi. Today, just 15 geothermal plants are in operation, with the last one going live in 1997.
Not all geothermal fields, however, are suited for commercial energy use because they don't have the right temperature, pressure or permeability.
"With geophysical, geochemical and geological tests, you try to get a picture of what it looks like inside the Earth," says Thorsten Schneider from Germany's KfW Entwicklungsbank in Jakarta.
After the test, drilling begins, representing a huge financial risk, according to Schneider. "A typical drilling costs between 3 and 5 million US dollars," he says. "And if you find nothing, the money is gone."
Building a geothermal power plant is an expensive undertaking. Its costs are estimated to be two to three times more than that of a coal power facility, according to Schneider.
In addition to costs, Indonesia's excessive bureaucracy, tough regulations and strict government price controls add to the challenges. So the country, concedes Schneider, "has a bit of a problem at the moment."
Most of the geothermal power plants in operation in Indonesia today are run by the state-owned natural gas and oil company PT Pertamina.
But in a move to tap into the country's vast geothermal reserves, the Indonesian government has opened the doors to foreign investment and know-how.
German money and know-how
Today, Germany is one of the biggest supporters, together with Japan, Australia and the US. The German government has earmarked 300 million euros in aid.
Although Germany is not a "volcanic country," it has extensive geothermal expertise, admits Professor Ernst Huenges from the German Research Center for Geosciences in Potsdam.
"Currently in Indonesia, only geothermal steam is used," he says. "In Germany, by comparison, we're also able to utilize the energy from hot water" to significantly increase power production "by as much as 60 gigawatts."
Potential business opportunities also exist for German companies, points out KfW's Schneider. "Building power plants, with all the electronics and other technical equipment involved, is certainly of interest to German businesses," he says.
Merkel and Yudhoyono have agreed to collaborate in increasing Indonesia's share of renewable energies to 25 percent by 2015.
Schneider calls the target "utopian." Merkel, on the other hand, prefers more diplomatic language, referring to the agreement as a "demanding target," which Germany can help Indonesia achieve.
Few will disagree, however, that there is plenty of work to be done - and some risk involved - if Indonesia wants to tap its vast reservoirs of geothermal energy deep down.
Author: Monika Griebeler / jrb
Editor: Sarah Berning