Understanding Indonesia’s Geothermal Ceiling Tariff: What Investors Need to Know

A ceiling tariff, referred to in the regulation as the Highest Benchmark Price, is the maximum benchmark for electricity purchased by PT PLN (Persero) from qualifying renewable energy projects.

For geothermal projects, the applicable ceiling depends on:

• The installed generation capacity

• The project’s geographic location

• The operating period following the Commercial Operation Date, or COD

The agreed electricity price is incorporated into the Power Purchase Agreement, or PPA. Therefore, the published ceiling represents the upper boundary of the pricing framework—not necessarily the final tariff received by every project.

The tariff applies from the project’s COD and is divided into two periods:

• Years 1–10

• Years 11–30

The location factor applies only during the first ten years. The regulation presents these tariff stages without an escalation mechanism. The government may periodically evaluate the ceiling-price framework, while the commercial terms of an individual project remain governed by its executed PPA.

In the table, F represents the location factor.

The tariff structure provides a higher benchmark for smaller projects, reflecting their more limited economies of scale. During the first ten years, the location factor also provides a higher benchmark for projects developed outside Indonesia’s main electricity and infrastructure centres.

Certain small islands and designated island groups have different factors. For example, the factor increases to 1.25 for small islands in Nusa Tenggara and to 1.30 for small islands in Maluku and North Maluku.

The higher factor can help recognise some of the additional costs and execution challenges associated with remote locations, including logistics, limited infrastructure, and smaller electricity systems.

However, it does not automatically compensate for every site-specific challenge. The actual cost impact of access roads, transmission facilities, drilling logistics, mobilisation, local infrastructure, and supply-chain limitations must still be evaluated separately.