State Electricity Company ('PLN') Obliged to Purchase Geothermal Power

Minister of Energy and Mineral Resources Regulation No. 2 of 2011 on the Obligation of PLN to Purchase Electricity from Geothermal Power Plants and the Standard Purchase Price for Geothermal Power by PLN (‘Regulation’) has been issued to set out how PLN purchases geothermal power. The Regulation is intended to accelerate the development of geothermal power, in particular the second-phase geothermal development of 10,000 MW. 

The Regulation sets the maximum purchase price for geothermal power at 9.7 cents USD/kWh, which applies to high tension purchases (Articles 2 (1) and (2)), this has not changed from the previous Minister of Energy and Mineral Resources Regulation No. 32 of 2009.

PLN will purchase geothermal power at the price that results from a tender process. This purchase price is final and non-negotiable. For tenders held prior the issuance of the Regulation the price stipulated in the sale and purchase agreement remains valid and binding. However, if the previously stipulated price is higher than the ceiling price (i.e. 9.7 cents USD/kWh), the parties will have to renegotiate and will have to obtain approval from the Minister (Article 3).

For geothermal power generated by those who obtained licenses prior the issuance of Law No. 27 of 2003 on Geothermal (22 October 2003), the purchase price will use the ceiling price as the benchmark price and must also be renegotiated. The renegotiated price will similarly have to be approved by the Minister (Article 5).

In relation to the power purchasing obligation, the Minister will issue an obligation letter, serving as the approval for geothermal power purchasing by way of direct appointment, for tender winners, and by way of approval of the agreed price (Article 4). 

The Regulation repeals and replaces Minister of Energy and Mineral Resources Regulation No. 32 of 2009 on Standard Purchase Price by PLN from Geothermal Power Plants.

The Regulation has been in force since 16 February 2011.