Seulawah Agam Geothermal Power Plant Development:
The Economic Rationale and Competitiveness
With Coal Based Power Plant
M.Sc Program of Renewable Energy Management
Albert-Ludwigs University of Freiburg
This paper presents a comparative overview of the economic rationality and
competitiveness related to the development Seulawah Agam geothermal power
plant with a coal based power plant in same installed capacity. The cost and
economic benefits that will be evaluated are capital cost, operational and
maintenance cost (OM), environmental damage externality cost and global
environment benefits from CO2 emission trading.
The results imply that Seulawah Agam geothermal power plant is less
competitive to a coal based power plant without including environmental damage
externality cost. It will be more competitive when benefit from CO2 emission
trading also included.
Keywords : Geothermal energy . Coal based power plant . Enviromental cost. CO2
emission. Economic competitiveness
Indonesia has biggest geothermal potential in the world with 27.000 MWe or nearly
equivalent to 40 % world potential that spread in 151 locations (DESDM, 2006).
According to a study from Engineering and Consulting Firm Association Japan 2008,
from that number only 857 MW has been utilized.
One of the potential is Seulawah Agam geothermal field. It is located in District Aceh
Besar Province of Aceh. Based on Sinclair Knight Merz (SKM) Workshop Report on
Seulawah Agam Development 2008, the Seulawah Agam volcano has potential to
generate electricity up to 100 MW.
Figure 1 : Seulawah Agam mountain location
Source : Final Report of Seulawah Agam Geothermal Workshop
The current state of project is on tendering process. In 2009, in order to accelerate the
development of the project German Government has allocated a 7 million Euro grant
that will be used for exploration risk mitigating. Beside that, for exploitation and
utilization Phase I, 40 MW of Geothermal Power Plant, the German Government and
the German Development Bank (KfW) will provide the concessional loan 54 million and
24 million Euro respectively.
Until December 2009, before Indonesian Government issued Regulation of Ministry of
Energy and Mineral Resources concerning the electricity tariff from geothermal power
plant, high investment cost and inappropriate feed in tariff has slowed down the
development of geothermal resources in Indonesia (Wijaya, 2006). Another factor is
the overabundance of other primary energy resources availability especially coal that
led to the lower operational cost of coal-based power plant. Based on those facts, a
geothermal power plant is considered uncompetitive to a coal-based power plant.
The objective of this paper is to view economic rationale and economic
competitiveness of Seulawah Agam geothermal power plant development respect to a
coal-based power plant with similar installed capacity. The aspects that will be
evaluated are capital cost, operational and maintenance (OM) cost, environmental
damage cost and the global environment benefit from carbon credit trading.
The reason to choose Seulawah Agam Geothermal Power Plant as a case is by
considering that the energy requirement in this area traditionally met by fossil fuel
mainly oil, gas and coal (kfw-entwicklungsbank, 2009). Seulawah Agam geothermal
power plant project will use the new generation engines with the low emission,
therefore this project will help Indonesia to develop more environmental friendly energy
generation in order to mitigate the climate change (bappenas, 2009). Furthermore, the
development of Seulawah Agam serves as a pilot case for the development of
geothermal energy for power production, particularly in the Province of Aceh, applying
ordiance 27/2003, the Government Implementing Regulation 59/2007 and ordinance
11/2006 through a Public Private Partnership (PPP) approach.
2. LITERATURE REVIEW
Energy sector contributes three quarter of CO2 emission volume (Hammons, 2005).
The combustion of fossil fuel is responsible for most of anthropogenic green house gas
emission. Therefore, the utilization of renewable energy resources will be in favor than
fossil energy resources (Nugroho, 2005).
Geothermal energy is the best choice due to emission reduction in energy production,
but geothermal energy needs to be competitive with the price of fossil fuel sources
(Fauzi, et al, 2000).
The high availability of coal resources over the world put environmental concerns to be
resolved. A coal power plant particularly will produce pollutants like SOx, NOx,
particulates and heavy metals (Ziock, et al, xxxx).
In term greenhouse gases emission not only CO2 emission from coal power plant is
considered, but also NOx emission. Electricity sector is responsible for 20% of NOx
emission in United States (Burtraw, 2003). NOx is considered as indirect greenhouse
gases (GHGs), which influence climate by altering levels of direct species and it’s very
complex to represent NOx emission into CO2 equivalent (Delucchi, 2007).
From coal burning the span of range emission is very large, which span 4 – 113 g
SO2/kg coal for china and 8 – 16 g SO2/ kg coal for India and value for NOx are more
consistent for both countries span 5 -12 g/ kg coal (Shindell, 2009)
In 2007, Global Environment Facility (GEF) has assessed economical competitiveness
of 51 geothermal field in Indonesia with total potential 13,824 MW to coal power plants.
The results show 662 MW of geothermal energy economically justified if
environmental benefits are excluded (business as usual), 2,442 MW of geothermal
power is economically justified if local environmental benefits (reduced TSP, SO2, and
NOx emission) were considered, and 9,669 MW were justified if both local and global
environmental benefits are incorporated.
3. ASSESSMENT METHOD
The data will be used are from Geothermal Development Project Proposal in Indonesia
(GEF, 2008). All costs are assumed to be economic costs, i.e. exclusive of taxes and
duties. The coal price is based on international prices.
The methodology consists of following steps:
1. The estimation of capital, operational and maintenance cost of coal based power
2. The estimation of capital, operational and maintenance cost of Seulawah Agam
geothermal power plant.
3. The estimation of local environmental damage cost of coal based power plant.
4. The estimation of global environment impact of geothermal power plant justified by
avoidance CO2 emission.
For Coal Based Power Plant:
Table 1 : Basic assumption parameters for coal based power plant
- Capital cost ($/kW) * 1000
- O & M cost ( $/ kW – year) 45
- Plant efficiency (net, %) 36
- Economic life (year) 25
- Capacity factor (%) 75
- Coal price ($/ton) 30
- Coal quality
LHV (kcal/kg) 4,800
Sulfur content (%) 0.23
Ash/ TSP content (%) 3.3
Carbon content (%) 60
- Emission removal efficiency
TSP/ Particulate (%) 95
SO2 (%) 0
- Economic life (year) 25
*FDD is not installed
Source : Global Environment Facility (GEF)
Based on this data we can calculate the capital, operational and maintenance
cost (including fuel cost). The following additional data is needed in order to
the local environmental damage externality cost. There are several methods
can be used to estimate the local environmental externality cost from a coal
based power generation (GEF, 2008):
• The first method is by estimated the cost of damage directly caused
by air pollution, including for example, health cost due to pollution and
agriculture losses because of acid rain, etc.
• Another alternative is by estimated the cost needed for investing and
maintaining the facility to avoid the pollution.
Each of these methods needs extensive data, which is not available in
Indonesia. Therefore, the costs associated with pollution in developing
countries are often estimated using the benefit transfer method. This method
adjusting the cost in one country to be applicable in another country is
commonly by comparing the ratio of GDP or PPP per capita between those
countries (GEF, 2008).
Table 2: Externality cost estimation in Indonesia
Country PPP per capita Pollutants Reference Price Externality Cost
In 2006 ($) ($/ ton) ($/ ton)
Indonesia 3,950 TSP 1,807 (China) 555.6
US 44,260 SO2 1,000 (US) 89.2
China 7,730 NOx 1,800 (US) 160.6
Source : Source : Global Environment Facility (GEF)
In table 1, nitrogen content in coals is not given. Therefore, data from
Cooperative Research Centre for Coal in Sustainable Development (CCSD)
will be used. The coal contents 1.5 - 2.0 % of nitrogen and the percentage
1.5% of nitrogen will be used in this paper and also assumed that every
kilogram of coal will produce 4 gram SO2 and 5 gram NOx (Shindell, 2009).
For CO2 greenhouse gases (GHGs) emission, data from National Power
Company (PLN) will be used. Every 1 kWh generation of electricity resulted
from coal will produce 0.787 kgCO2 and for indirect NOx gas emission very
difficult to be evaluated, therefore will be neglected.
For Seulawah Agam geothermal power plant:
• The development of installed capacity is 40 MW ( based on proposed
• The investment cost of Seulawah Agam power plant is 80 euro (based
on KfW estimation)
• The operational and maintenance cost for geothermal power plan with
capacity above 30 MW is 52 US $/ kW (based on GEF data)
• The emission from geothermal power plant is much less than coal
based power generation
• Geothermal power plant normally located far from transmission grid
compared with coal based power plant. Therefore the additional cost
to build 275 kV transmission line is needed. With assumption it will
need 50 km transmission grid and it costs USD 200.000/ km.
The results are divided into three parts, part one describes the competitiveness by only
including the Operation and maintenance (OM) cost and capital cost. The second part
includes local environmental benefits and the last part includes the estimation of global
4.1 Operational & Maintenance (OM) and Capital Cost Competitiveness
The coal power plant will consume 1.176.900 ton coal with coal price 30 USD/ ton,
therefore the operational cost for 25 year will be 37.5 million USD. For
maintenance cost is USD 45 million for 25 years. The capital cost for a coal power
plant is 40 million.
On other hand, Seulawah Agam geothermal power plant needs 80 million Euro
investment cost or USD108 million (1 euro = 1.3 USD, Bloomberg Currency,
21.02.2010) and its operational and maintenance cost is for 25 years is USD 52
Figure 2 : Capital, operational and maintenance cost competitiveness
Capital and O& M Cost Competitiveness
100 Coal Power Plant
80 Geothermal Power Plant
Capital O&M Grid Cost Overall
For 275 kV transmission grid, Seulawah Agam geothermal power plant will require
USD 10 million.
The graph illustrates by excluding local environmental benefits, the development of
Seulawah Agam geothermal power plant is not competitive with a coal based
power plant in same capacity. Seulawah Agam geothermal power plant needs total
USD 170 million for investment and operational and maintenance cost compared to
only USD 125.5 million coal based power plant.
4.2 Valuation of Environmental Damage Cost
Based on calculation, the total of coal needed to fuel the coal power plant for 25
years is 1.176.900 ton. Without Flue Gas Desulphurization (FGD) installed, the
burning of that amount coal will produce 4.707 ton of SO2, 194,000 ton of TSP
matter (with removal efficiency 95%) and 5.884 ton of NOx.
By multiplying these numbers with the externality cost in table.2, a 40 MW coal
power plant will cost USD 109 million for environmental externality cost. If this
variable included the competitiveness of Seulawah Agam power plant will increase.
Figure 2 : Cost rationale of Seulawah Agam power plant development by including
environment externality cost
The Cost Rationale by Including Environment Externality Cost
Coal Pow er Plant
Geothermal Pow er Plant
Capital O&M Env. Cost Grid Cost Overall
4.3 Global Environment Benefit
By excluding indirect NOx GHGs emission, Seulawah Agam geothermal power
plant will avoid 5.3 million ton of CO2 emission. The average price of Certificate
Reduction Emission (CER) in 2006 is USD 10.9/ ton of CO2. Therefore, Seulawah
Agam geothermal power plant will earn benefits as much as USD 57 million for 25
years CO2 emission avoidance.
BAPPENAS. (October, 2009). Pembangkit Listrik Geothermal Seulawah Agam.
Retrieved on March 12th, 2010 from
Burtraw, D. Evan, D.A. (2003). The Evolution of NOx Control Policy for Coal-Fired
Power Plant in the United States. Retrieved on March 13th, 2010 from
Cooperative Research Center for Coal in Sustainable Development (CCSD).
(2008). Fuel Nitrogen and NOx Formation, Retrieved on March 12th, 2010
Delucchi, M. (2007). Project 4 : Indirect Global Warming Potential of NOx Emission.
Retrieved on March, 13th, 2010 from
Departemen Energi dan Sumber Daya Mineral (DESDM). (Juni, 2006). Rencana
Umum Ketenagalistrikan Nasional 2006 – 2026. Jakarta, Indonesia.
Engineering and Consulting Firm Association Japan. (March, 2008). Study Report:
Pre-Feasibility Study for Geothermal Power Development Projects in
Scattered Island of East Indonesia. Retrieved on March 12th, 2010 from
Fauzi, A, et al. (June, 2000). Geothermal Development in Indonesia : An Overview
of Industry Status and Future Growth. Retrieved on March 12th, 2010 from
Global Environment Facility (GEF). (2008). Annex 4 : Result of Project
Analysis Indonesia Geothermal Power Generation Project.
Retrieved on March 12th, 2010 from
Hammons, T.J (December, 2005). Impact of Electric Power Generation on Green
House Gas Emissions in Europe : Russia, Greece, Italy, and Views of EU
Power Plant Supply Industry – A Critical Analysis. Retrieved on March
12th, 2010 from http://www.aseanenvironment.info/Abstract/41013574.pdf
KfW Enwicklungsbank. (June, 2009). Programe - Geothermal Energy to Generate
Electricity. Retrieved on March 12th, 2010 from http://www.kfw-
Nugroho, H. (April, 2005). Financing Renewable Energy Utilization in Indonesia :
Notes. Retrieved on March 12th, 2010 from
Shindell, D.T. Faluvegi, G. (2009). The Net Climate Impact of Coal-Fired Power
Plant Emission. Retrieved on March, 13th, 2010 from http://www.atmos-
Sinclair Knight Merz. (February, 2009). Final Report : Seulawah Agam Geothermal
Workshop. Auckland, New Zealand.
Wijaya, A.R. (November, 2006). Pengaruh Kebijakan Pemerintah dalam
Optimalisasi Pemanfaatan Energi Panas Bumi. Retrieved on March 12th
Ziock, H.J. Harrison, D.P. (xxxx). Zero Emission Coal Power, a New Concept.
Retrieved on March 13th, 2010 from