Jakarta (Indonesia Window) - As much as 40 percent of the world's geothermal potential is found in Indonesia, but so far only 4-5 percent has been exploited for people's electricity needs, and therefore geothermal risk mitigation projects will support the national energy exploration.

Director General of New, Renewable Energy and Energy Conservation at the Ministry of Energy and Mineral Resources FX Sutijastoto said the development of geothermal power is a risky investment, especially in the exploration phase and there are no financial institutions that provide funding at this initial stage.

The funding constraint has now been overcome with a grant of US$127.5 million from the Green Climate Fund and Clean Technology Fund, an organization supporting environment-friendly development projects, the Government News Network (JPP) reported as quoted by Indonesia Window here on Sunday.

Through the Geothermal Resource Risk Mitigation (GREM) project, the loan will help developers, both public and private sectors, reduce the risk of geothermal resource exploration including covering some costs if exploration fails.

"We welcome the GREM facility, which specifically funds exploration activities and provides instruments to share risks. This project will help address the enormous challenges of exploration funding that will contribute to the successful development of geothermal power in Indonesia," Sutijastoto said.

The cost of exploration drilling for energy is relatively small compared to the total cost of developing geothermal power.

However, this is the riskiest phase because it is often difficult for developers to obtain initial capital which may not recover costs if drilling shows that geothermal resources are economically unfeasible.

"To achieve the renewable energy mix target of 23 percent by 2025 requires contributions from geothermal development of around seven percent or the equivalent of 7,000 megawatts (MW). This is a large-scale and ambitious development with a total investment value of US$ 35 billion," Sutijastoto said.

Of the total national installed power capacity, 88 percent comes from fossil fuels and 12 percent comes from renewable energy.

So far Indonesia has 1.9 gigawatts of installed geothermal power and plans to develop 4.6 gigawatts.

Reporting by Indonesia Window