Frost & Sullivan: Indonesian Geothermal Market Heats Up in 2011

Feb. 7, 2011 - PRLog -- Singapore – Amongst all the renewable energy (RE) technologies, geothermal power and small hydropower attracted private sector investments in Indonesia during 2010 and is likely to hold investors’ attention during 2011.

According to Frost & Sullivan’s Asia Pacific Program Manager for the Energy & Power Systems Practice, Suchitra Sriram, Indonesia seems to have realized the urgent need to adopt RE technologies to meet its electricity demand of about 7.0% p.a.

She adds, “The Indonesian government is therefore offering tax incentives for RE project developers. They have also signed a major Memorandum of Understanding with General Electric Company for the joint development of RE projects in Indonesia. As a result, the RE market growth is expected to be slightly better during 2011.”

Still, Indonesia lags behind its Southeast Asian counterparts in the widespread acceptance and deployment of various RE technologies except geothermal power. Though the country has abundant RE resources and the government has incorporated renewable energy targets into the National Energy Management Blueprint 2005-2025, sluggish implementation has restricted market penetration of fastest growing technologies such as wind, solar PV power and bioenergy in the country during 2010.

Indonesia is highly dependent on thermal power plants. Low-cost fuels are vastly available and have a huge generation capacity can bridge its growing electricity demand-supply gap. The Indonesian government aims to reach a capacity of 9500MW in the geothermal market by 2025.

In terms of industry specifics, geothermal power generation continues to attract investments in Indonesia, but the market growth rate is expected to be moderate between 8.0 and 10.0% due to the slow pace of development.

Suchitra adds, “According to the second 10,000 MW crash program introduced by the government of Indonesia, geothermal power generation has been accorded high priority. But its success remains to be seen as some of the projects have not been able to get environmental clearances and faces opposition from environmental groups as reservoirs have been identified in forest areas.”

In Southeast Asia, Indonesia’s market attractiveness for RE technologies is expected to be low especially for wind and solar PV power in 2011 as there are no regulatory framework and policies such as ‘feed-in-tariff’ to attract private sector participation in the industry.

“Moreover, the impact of declining prices of these technologies has not been felt in Indonesia because of weak demand. This is largely attributed to the highly subsidized electricity that is supplied to end users in urban areas. Hence, wind and solar PV power continue to generate interest only for rural and remote area electrification in areas that are not connected by the utility grid,” says Suchitra.

Growth of the small hydropower market is likely to remain stable at 8.0% during 2011 as they are largely installed to provide electricity in rural and remote areas, and in islands where grid extension is economically and technically unviable.

“Despite immense potential to develop biomass power, several industry challenges such as lack of credit, logistics issues in transporting fuel, limited incentives, and low awareness are expected to restrict market penetration of this technology. The market growth rate for biomass is projected at less than 10.0% during 2011,” Suchitra concludes.


About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation and implementation of powerful growth strategies.   Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.


MEDIA CONTACT:

Donna Jeremiah
Corporate Communications – Asia Pacific
P: +603 6204 5832
F: +603 6201 7402
E: djeremiah@frost.com

Carrie Low
Corporate Communications – Asia Pacific
P: +603 6204 5910
E: carrie.low@frost.com

# # #

Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company's research and consulting services empower clients to generate, evaluate, and implement effective growth strategies.