Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia

This case study examines the Sarulla Geothermal Power Plant (GPP) in Indonesia, highlighting how public risk mitigation tools, including guarantees and feed-in tariffs, enabled significant private sector investment in a project designed to be the world's largest single contract geothermal plant with a 330MW capacity by 2018.

• Access to proven geothermal resources significantly reduced resource risks for the developer, Sarulla Operations Limited (SOL). Because previous exploration by Unocal North Sumatra Geothermal (UNSG) provided high-quality data, SOL was willing to pay USD 70 million to the state-owned utility PLN for the completed exploration, which included two production wells for the first unit.
• The Sarulla GPP is projected to have a substantial impact on Indonesia's energy landscape by 2018, increasing geothermal capacity by 20% and renewable capacity by 5%. It is expected to meet 10% of the projected geothermal capacity additions for the 2013-2020 period and save 1.3 mt of CO2 annually.
• Public support through guarantees and a 30-year Feed-in-Tariff (FiT) were essential for the project's financial viability. These tools allowed access to competitive long-term debt and maintained expected equity returns between 14-16%; without this support, equity returns would have dropped by 4%. The FiT structure allows for project payback within nine years of all three units becoming operational.
• While the Sarulla GPP's levelized cost of electricity (LCOE) is estimated at USD 7.8-8.2 ¢/kWh—competitive with global geothermal benchmarks—it remains more expensive than coal in Indonesia. Even with public support, the cost of baseload power from the plant is 40-60% higher than coal, assuming emission and health impacts are ignored.
• The project demonstrates that commercial lenders are willing to fund construction once bankability concerns are resolved, but they typically require at least 70% of expected capacity to be drilled first. Consequently, public finance is most critical during the exploration and field development stages where commercial debt is scarce. For Sarulla, concessional loans from the Canadian Climate Fund and the Clean Technology Fund were essential for reaching financial close.

APA

Climate Policy Initiative (2015). Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia. https://www.climatepolicyinitiative.org/publication/using-private-finance-to-accelerate-geothermal-deployment-sarulla-geothermal-power-plant-indonesia/

Chicago

Climate Policy Initiative. Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia. 2015. https://www.climatepolicyinitiative.org/publication/using-private-finance-to-accelerate-geothermal-deployment-sarulla-geothermal-power-plant-indonesia/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia |date=16 June 2015 |url=https://www.climatepolicyinitiative.org/publication/using-private-finance-to-accelerate-geothermal-deployment-sarulla-geothermal-power-plant-indonesia/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2015using, author = {{Climate Policy Initiative}}, title = {{Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia}}, institution = {Climate Policy Initiative}, year = {2015}, month = jun, url = {https://www.climatepolicyinitiative.org/publication/using-private-finance-to-accelerate-geothermal-deployment-sarulla-geothermal-power-plant-indonesia/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }