From Geothermal Prospect to Commercial Operation

The first stage determines whether a geothermal opportunity is worth further investigation.

Initial screening may consider geological indications, existing studies, nearby wells, geothermal manifestations, estimated resource potential, access to a Geothermal Working Area or Wilayah Kerja Panas Bumi (WKP), electricity demand, grid proximity, land and forestry conditions, and the potential development scale.

For investors, this stage is not intended to prove that the project is commercially viable. Its purpose is to identify critical constraints early and determine whether the opportunity deserves additional time and capital.

The investment question is:

Is there a credible pathway from this geothermal opportunity to an operating power project?

A prospect with attractive subsurface indications may still be difficult to develop if there is no clear licensing position, grid capacity, market requirement, land access, or realistic route to electricity sales.

Once an opportunity passes initial screening, the project must develop a clearer understanding of the geothermal system.

Geological, geochemical, and geophysical studies are used to refine the conceptual model, identify possible heat sources, estimate reservoir depth and temperature, assess structural controls, and select potential exploration targets.

At this stage, investors should distinguish between indications of geothermal potential and evidence of a commercially productive reservoir.

Surface studies can strengthen the technical case, but they cannot fully confirm reservoir permeability, fluid deliverability, or sustainable production capacity. Those characteristics ultimately require subsurface evidence.

The investment question becomes:

Is the resource model sufficiently credible to justify exploration drilling?

A strong resource-assessment programme should therefore produce more than an estimated megawatt figure. It should define the remaining uncertainties, explain why the proposed well locations were selected, and establish what the drilling programme is expected to prove.

Exploration drilling is one of the most important value-creation—and risk-reduction—stages in geothermal development.

Wells provide direct evidence of reservoir temperature, pressure, permeability, fluid chemistry, and potential deliverability. This information is essential for determining whether the geothermal system can support commercial electricity generation.

However, drilling also requires substantial capital before the project generates revenue. A completed well is therefore not automatically a successful investment outcome. The more important question is whether the well confirms a resource that can contribute to the planned development.

Investors should examine:

• Whether the well encountered the intended reservoir

• Measured temperature and pressure

• Permeability and feed-zone characteristics

• Production or injection-test results

• Fluid chemistry and potential operating constraints

• Implications for future well design and drilling cost

• Whether the results support the proposed generation capacity

Successful exploration drilling can materially increase project confidence and value. Unsuccessful or inconclusive results may require additional wells, a revised conceptual model, a smaller development concept, or a decision not to proceed.

Once sufficient resource evidence is available, the project must translate the subsurface findings into an executable development plan.

This stage brings together the reservoir, wells, steamfield, power plant, grid connection, infrastructure, schedule, cost estimate, and commercial assumptions.

Key decisions include:

• Sustainable generation capacity

• Number of production and injection wells

• Development drilling sequence

• Steamfield configuration

• Power-plant technology and unit sizing

• Grid-interconnection concept

• Capital and operating expenditure

• Construction and commissioning schedule

• Future make-up well requirements

• Expected electricity generation and financial performance

This is where geothermal potential begins to become a defined business case.

The investor question is:

Can the confirmed resource support a technically executable and commercially viable project?

A development concept should not be based only on the maximum estimated resource capacity. It must also consider drilling productivity, reservoir sustainability, plant efficiency, infrastructure constraints, execution capability, and the electricity demand that the project is expected to serve.

A technically feasible geothermal project still requires a bankable route to revenue.

For standard utility-scale, grid-connected projects in Indonesia, the Power Purchase Agreement or PPA—known locally as the Perjanjian Jual Beli Tenaga Listrik—establishes the commercial relationship between the developer and PLN.

Investors and lenders will assess the contracted capacity, tariff, payment mechanism, commercial operation date, grid responsibilities, performance requirements, risk allocation, default provisions, and available government support or guarantees.

The financing case must also demonstrate that projected electricity revenue can support operating costs, debt service, future well requirements, and an acceptable return on investment.

The investment question becomes:

Are the project’s technical evidence, commercial structure, legal position, and risk allocation strong enough to support major capital commitment?

A confirmed geothermal resource without an executable offtake and financing structure may still be unable to proceed into full development.

Once the project reaches investment approval and financing readiness, capital exposure increases significantly.

Development drilling, steamfield construction, power-plant engineering and construction, transmission facilities, roads, water systems, and other infrastructure must advance as one coordinated programme.

During this stage, investors should monitor:

• Well delivery and actual productivity

• Drilling cost and schedule performance

• Changes in required well count

• Reservoir response during development

• EPC and contractor performance

• Long-lead equipment

• Grid-interconnection readiness

• Progress against the required commercial operation date

Resource risk is reduced by exploration, but it does not disappear entirely. Differences between expected and actual well productivity can affect the number of wells, total project cost, available steam, plant capacity, and schedule.

After the wells, steamfield, power plant, and grid connection are completed, the project enters testing and commissioning.

The plant must demonstrate that it can operate safely, reliably, and in accordance with its contractual requirements. Successful completion leads to the Commercial Operation Date, or COD.

COD represents a major change in the project’s financial position:

Before COD, the project primarily consumes capital. After COD, it begins generating contracted electricity revenue.

Even after operations begin, long-term performance depends on reservoir management, plant availability, reinjection performance, operating cost, and the timely drilling of make-up wells where required.

Commercial operation is therefore not the end of geothermal risk management. It is the point at which development risk transitions into operating and reservoir-management risk.