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

The Sarulla Geothermal Power Plant case study demonstrates how public risk mitigation, including guarantees and feed-in tariffs, can attract private investment for geothermal energy in Indonesia. The project benefited from access to proven resources, which reduced exploration risk and allowed the developer to pay USD 70 million for completed exploration. While the project is expected to increase Indonesia's geothermal capacity by 20% and save 1.3 mt of CO2 annually by 2018, its levelized cost of electricity (USD 7.8-8.2 ¢/kWh) remains 40-60% higher than coal in Indonesia when excluding emission and health costs. The study suggests that public finance should prioritize exploration and field development, as commercial lenders are more willing to fund construction once resource risks are mitigated.

• Access to proven geothermal resources significantly reduced resource risks for the developer, Sarulla Operations Limited (SOL), leading them to pay USD 70 million to the state-owned utility PLN for completed exploration, including two production wells.
• Upon becoming fully operational in 2018, the Sarulla GPP is projected to increase Indonesia's geothermal capacity by 20% and renewable capacity by 5%, while saving 1.3 mt of CO2 annually.
• Public support through guarantees and a 30-year feed-in tariff (FiT) enabled the project to access competitive long-term debt and maintain equity returns of 14-16%; without this support, equity returns would likely drop by 4%.
• The project's levelized cost of electricity (LCOE) is estimated at USD 7.8-8.2 ¢/kWh, which is 40-60% more expensive than coal in Indonesia if emission and health impacts are ignored.
• Commercial lenders are generally willing to fund construction once bankability concerns are resolved, but public finance remains essential for exploration and field development, as commercial financing typically requires at least 70% of expected capacity to be drilled first.

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} }