Financing exploratory wells may not be enough to unlock Southeast Asia’s geothermal resources, an energy specialist from Association of Southeast Asian Nations (Asean) Centre for Energy warned, arguing that coal-dependent countries in the region must also confront coal-heavy power systems that weaken the investment case for geothermal development.
Exploration drilling has long been a major barrier to geothermal development as developers must commit substantial capital before confirming whether an underground resource can commercially support a power plant, with no guarantee of recovering their investment. The World Bank identified this early-stage uncertainty as a central obstacle to attracting private financing.
In Indonesia, those exploration risks are compounded by competition from existing coal-fired generation. Coal supplied 61.8 per cent of Indonesia’s electricity in 2023, just below the Philippines’ 61.9 per cent, according to energy think tank Ember. Both countries relied on coal for nearly two-thirds of their electricity, compared with less than half across Asean.
That reliance complicates geothermal development where existing plants already serve the market, said Yudiandra Yuwono, Lead Modeller at the Asean Centre for Energy (ACE), during the Asean Energy Business Forum in Manila.
Two-thirds of Indonesia’s geothermal resources lie in its major islands Sumatra and Java, he said, yet new industrial electricity demand is emerging elsewhere. That geographical mismatch adds to the challenge of attracting the substantial upfront investment geothermal projects require, he suggested.
“
Unless something touches coal, we’re gambling on how much electricity demand will increase in that area [to grow enough additional geothermal capacity].
Yudiandra Yuwono, Lead Modeller, Asean Centre for Energy (ACE)
Developers must consider how new geothermal capacity would fit into systems already supplied largely by coal, rather than simply banking on rising electricity consumption, Yuwono said.
“Unless something touches coal, we’re gambling on how much demand will increase in that area,” he said. “Unless you are having discussions on existing generations, then it is a question of why you would put money into adding capacity there.”
The challenge extends to captive coal plants that supply industrial facilities directly. Many are located away from geothermal resources, Yuwono said, complicating efforts to replace their output with geothermal power.
Financing mechanisms such as Indonesia’s Just Energy Transition Partnership (JETP) must account for the risks and costs of connecting clean electricity to those industrial users, he argued. Without that support, public and private investment would struggle to displace captive fossil generation.
Alongside those wider financing needs, government support remains essential to reducing geothermal exploration risks, said Joeffrey Caranto, Director of Indonesia-based joint venture geothermal development company PT Daya Mas Bumi Sentosa at the same panel.
State backing enabled the growth of geothermal industries in both the Philippines and Indonesia, he noted. The Philippine government absorbed substantial exploration costs during the 1970s and 1980s, while Indonesia developed its resources through public-private partnerships.
Deregulation has shifted exploration risks to private developers in the Philippines, Caranto said. Indonesia, meanwhile, continues to share those risks through government-led drilling before sites are tendered to developers. The Philippine approach instead provides financing for developer-led exploration.
The Philippine government has established a US$170 million geothermal derisking facility to support early-stage exploration. Backed by a sovereign loan from the Asian Development Bank, the Philippine Geothermal Resource De-Risking Facility is being implemented through the Department of Energy and state-owned LandBank.
Such support can help unlock resources, but replacing coal-fired generation remains a challenge. Indonesia’s pursuit of net zero emissions provides an incentive to expand geothermal development and attract private investors, Caranto said, with geothermal offering a potential replacement for some ageing plants.
“It provides a certain level of comfort that there are resources that can actually be developed and can replace some of these aging assets,” he said.
A panel titled Unlocking Asean’s Geothermal Potential: A 24/7 Foundation for a Secure Future was held at the Asean Energy Business Forum in Manila on 5 October. Speakers included, from left, Jerome Cainglet, President and Chief Operating officer of Energy Development Corporation (EDC), First Gen Group; Joeffrey Caranto, director of PT Daya Mas Bumi Sentosa; Yudiandra Yuwono, Lead Modeller at the Asean Centre for Energy (ACE); Rexor Amancio, Regional Lead, Asia-Pacific, Global Renewables Alliance. Image: EDC
Clean energy competition
Efforts to make geothermal competitive should address advantages enjoyed by fossil fuel generation rather than focus on competition between renewable technologies, said ACE’s Yuwono.
“We’re discussing mechanisms to make it easier for geothermal and renewable energy to enter the system. But we also need to stop making things easy for the opposite side – fossil thermal generation,” he said.
Removing those advantages would ease the task of attracting renewable investment, Yuwono argued, noting that discussions too often pit technologies such as solar and geothermal against each other.
In Indonesian industrial regions such as Sulawesi, companies can build coal plants beside their operations, while renewable resources cannot necessarily be developed wherever electricity demand emerges, he said.
Financing institutions should also reassess their perception of fossil fuel transport as relatively low-risk, given disruptions to global supply chains, he added.
Jerome Cainglet, President and Chief Operating officer of Energy Development Corporation (EDC), First Gen Group said that comparisons between geothermal and other renewables should consider more than generation costs per kilowatt-hour.
Although solar and wind generation costs are falling, he said, consumers also bear the expense of maintaining supply when those sources are unavailable.
“We need to value the total cost to consumers. Those hidden costs aren’t there with geothermal because geothermal is available round the clock. You don’t have to pay someone else for capacity when the sun isn’t out or the wind isn’t blowing,” he said.
Rexor Amancio, Regional Lead, Asia-Pacific of Global Renewables Alliance, called for stronger regional cooperation on geothermal, drawing a parallel with established collaboration in petroleum.
Private developers should be more closely involved in regional discussions because they bring experience delivering projects on the ground, he said.
Amancio urged deeper engagement between industry and multilateral bodies such as the Asean Centre for Energy, while calling on companies such as First Gen to take a more proactive role in championing geothermal development across the region and beyond through stronger regional partnerships.
You are enjoying free access to this article, thanks to the support of our strategic partner, First Gen and the Net Zero Carbon Alliance (NZCA).
