Power bidding rules stifle geothermal growth

Southeast Asia’s geothermal industry faces an uphill battle in attracting fresh investments as electricity procurement rules favor cheaper short-term power bids over reliable, round-the-clock generation, leaving much of the region’s energy potential untapped.

Industry leaders at the ASEAN Energy Business Forum (AEBF) in Manila warned that existing market structures fail to recognize geothermal’s long-term value despite the region holding an estimated 34 gigawatts (GW) of potential, or nearly half of the world’s total resource base.

Jerome C. Cainglet, president and chief operating officer of First Gen’s geothermal arm, Energy Development Corp. (EDC), said procurement models must account for geothermal’s dependable supply rather than focusing primarily on short-term electricity costs.

“We must rethink how we plan grid systems and evaluate power pricing,” Cainglet said.

“Transmission should be built where renewable resources exist. Procurement models must value geothermal’s fixed-cost, 24/7 reliability rather than focusing solely on short-term variable generation costs,” he added.

Industry players argued that current pricing structures overlook the volatility of imported coal and natural gas prices, as well as the additional grid costs of supporting intermittent solar and wind generation.

They called for stricter enforcement of the Renewable Portfolio Standards and the removal of the P0.24-per-kilowatt-hour cap on Renewable Energy Certificates to improve geothermal project revenues and attract investments.

National Geothermal Association of the Philippines President Dr. Jaime Austria said Indonesia holds approximately 28.9 GW, or 85 percent of the region’s geothermal potential, but has developed only 9.4 percent.

The Philippines has tapped 47 percent of its estimated 4.3 GW potential, although expansion in both countries remains constrained by high exploration costs and lengthy permitting procedures.

A single exploratory well costs between $6 million and $10 million, with developers potentially spending up to $30 million across multiple wells before establishing commercial viability.

The risk of drilling an unsuccessful well is estimated at 15 percent.

To ease these risks, industry leaders cited the Philippines’ $170-million Geothermal Resource De-risking Facility and Indonesia’s Dana Eksplorasi Panas Bumi as models for government-backed financing support.

They also urged governments to invest in transmission lines and access roads in geothermal-rich areas, including through the Philippines’ Competitive Renewable Energy Zones framework, to reduce developers’ infrastructure costs.

Permitting remains another obstacle, with geothermal projects in the Philippines taking an average of seven to 10 years to develop despite the Energy Virtual One-Stop Shop.

Meanwhile, PT Daya Mas Bumi Sentosa director Joeffrey Caranto proposed regional training partnerships to address shortages of drilling and reservoir engineering specialists, including retraining petroleum and gas engineers for geothermal development.