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

The Sarulla Geothermal Power Plant (GPP) in Indonesia serves as a model for mobilizing private finance in the geothermal sector. By utilizing a combination of public guarantees, a long-term feed-in tariff, and concessional loans, the project attracted significant private debt and equity despite the high risks associated with field development. The study highlights that access to proven resources significantly reduced developer risk, while the government's Business Viability Guarantee Letter (BVGL) addressed bankability concerns regarding the state-owned offtaker, PLN. While the project's levelized cost of electricity (LCOE) is competitive with other geothermal projects, it remains more expensive than coal in Indonesia. The report concludes that to meet Indonesia's 7.6GW target by 2025, the government may need to take a larger role in early-stage exploration to further reduce risks for private investors.

• Access to proven geothermal resources was a primary driver for private investment; Sarulla Operations Limited (SOL) paid USD 70 million to the state-owned utility PLN for completed exploration data and two production wells, which significantly reduced resource risk.
• The project's levelized cost of electricity (LCOE) is estimated at USD 7.8-8.2 ¢/kWh. While competitive with other geothermal benchmarks, it is 40-60% more expensive than coal in Indonesia when emissions and health impacts are ignored.
• Public support, including a 30-year feed-in tariff (FiT) and a 20-year Business Viability Guarantee Letter (BVGL), was essential for securing long-term debt at competitive rates and maintaining equity returns between 14-16%.
• The Sarulla GPP is expected to provide significant environmental and economic benefits, including an annual saving of 1.3 mt of CO2 and the creation of 1,800 jobs during construction and operation.
• Lenders provided debt financing for all three units under a single contract during the field development phase—an unusual move—due to extensive due diligence, a detailed completion test system, and the use of contingent equity from sponsors.
• To reach the national target of 7.6GW by 2025, the Indonesian government may need to increase its role in exploration, as high early-stage risks remain a barrier. Government-led exploration could potentially reduce tariffs by USD 1-3 ¢/kWh.
• The Business Viability Guarantee Letter (BVGL) effectively mitigated bankability concerns regarding the creditworthiness of the state-owned offtaker, PLN, allowing commercial lenders to fund the construction phase.

APA

Rakhmadi, R., & Sutiyono, G. (2015). Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/06/Using-Private-Finance-to-Accelerate-Geothermal-Deployment-Sarulla-Geothermal-Power-Plant-in-Indonesia.pdf

Chicago

Rakhmadi, Randy, and Guntur Sutiyono. Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia. Climate Policy Initiative, 2015. https://www.climatepolicyinitiative.org/wp-content/uploads/2015/06/Using-Private-Finance-to-Accelerate-Geothermal-Deployment-Sarulla-Geothermal-Power-Plant-in-Indonesia.pdf.

Wikipedia

{{cite report |last1=Rakhmadi |first1=Randy |last2=Sutiyono |first2=Guntur |title=Using Private Finance to Accelerate Geothermal Deployment: Sarulla Geothermal Power Plant, Indonesia |publisher=Climate Policy Initiative |date=June 2015 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2015/06/Using-Private-Finance-to-Accelerate-Geothermal-Deployment-Sarulla-Geothermal-Power-Plant-in-Indonesia.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rakhmadi2015using, author = {Rakhmadi, Randy and Sutiyono, Guntur}, 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/wp-content/uploads/2015/06/Using-Private-Finance-to-Accelerate-Geothermal-Deployment-Sarulla-Geothermal-Power-Plant-in-Indonesia.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }