Prioritizing Collaboration, PT Pertamina Geothermal Energy Tbk (PGE) Introduces a New Paradigm for Indonesia's Geothermal Energy Development at ISF 2024

Jakarta, September 9, 2024 – PT Pertamina Geothermal Energy Tbk (PGE) (IDX: PGEO), as a world-class green energy company, continues to promote geothermal energy development to support Indonesia's energy transition and the Net Zero Emission (NZE) 2060 agenda. At the Indonesia International Sustainability Forum (ISF) 2024 on Thursday (5/9), PGE introduced a new paradigm emphasizing collaboration among various stakeholders to accelerate geothermal development as the national energy transition’s backbone.

Collaboration among stakeholders was one of the key messages echoed at ISF 2024. Coordinating Minister for Maritime Affairs, Luhut B. Pandjaitan, in a plenary session, emphasized that accelerating energy transition requires a collective effort involving various parties, from the government and industry to investors. According to him, the future of Indonesia's energy transition depends on the collaborative commitment of all stakeholders.

In line with this vision, Nicke Widyawati, President Director of PT Pertamina (Persero), added that geothermal energy is the best solution for Indonesia on its journey toward clean energy. The ability of geothermal energy to serve as a baseload energy source is a compelling reason why Indonesia must optimize this potential through strong collaboration among all stakeholders.

To maximize geothermal potential, President Director of PGE, Julfi Hadi, conveyed that a new paradigm in geothermal energy development is needed to make investments in this renewable energy sector more attractive under the current tariff structure. “Until now, there has been no new approach in geothermal development, even though we need to accelerate geothermal development over the next 6-8 years to achieve the national geothermal capacity target of seven GW by 2033. We need breakthroughs to reduce geothermal development costs and shift the paradigm through a new business model,” said Julfi Hadi.

Changing the paradigm in geothermal energy development is essential. With current geothermal electricity tariffs, a more optimal approach is needed to increase developers' (independent power producers/IPP) profitability. The new paradigm proposed by PGE focuses on three main strategies to achieve this.

First, the strategy involves renewing the business model through phased development in geothermal working areas to enhance success opportunities and cost optimization, considering that large-scale direct development often leads to cost overruns.

Second, the strategy aims to reduce development costs per unit (USD per MW) through new technology utilization and increase operational volume through collaboration between geothermal developers to build markets and consolidate demand.

Third, the strategy emphasizes diversification through related businesses and local manufacturing development. Geothermal developers need to expand into non-electricity (off-grid) businesses such as green hydrogen and green ammonia and promote the development of local technology and manufacturing for key geothermal power plant components domestically.

Additionally, it is important to consider other incentives, such as access to concessional loans and international carbon credit sales. It also requires government support to provide additional incentives, particularly for increasing local content and infrastructure development.

“Geothermal developers need to move away from old paradigms and business models that still rely on the business-as-usual approach and limit collaboration, resulting in marginal internal rates of return. We need to grow and collaborate to enable geothermal energy to play a crucial role in the national energy transition,” said Julfi Hadi.

With its resources, PGE is optimistic that it can become the driving force and leader in accelerating national geothermal development. PGE currently manages 15 geothermal working areas (WKP) with an installed capacity of 672 MW, which will be increased to 1 GW in the next two to three years, with a total geothermal reserve potential of 3 GW ready for development from 10 WKPs managed independently.

“PGE is already walking the talk in realizing this new paradigm. We have taken many steps, such as collaborating on resource exploration, promoting the development of new technologies in Indonesia, and advancing local manufacturing. PGE has also initiated a green hydrogen pilot project in Ulubelu,” concluded Julfi Hadi.

Pertamina, as a leading company in the energy transition, is committed to supporting the Net Zero Emission 2060 target by continuously promoting programs that directly impact the Sustainable Development Goals (SDGs) achievement. All these efforts align with Environmental, Social & Governance (ESG) implementation across all Pertamina's business lines and operations.**