Postcard from Jakarta: Powering Indonesia's rise with volcanic energy and smiles

Geothermal energy and tourism are the cornerstones of the nation's reform strategy

A local market in central Jakarta. Mohamad Ali Harisi / The National

A billboard in Jakarta shows a couple holding hands near a sign that says “opening soon”, promoting a new hotel in a prime tourist spot that is a stone's throw from the headquarters of Indonesia's main geothermal energy company.

The two locations have something in common: They represent the cornerstones of the country's push to become one of the world's five biggest economies.

Long known as a top tourist destination, Indonesia has also been making significant strides towards exploiting its location on the Pacific Ring of Fire, a region teeming with volcanic activity, to meet its growing power needs and to export this expertise to other countries.

The archipelago nation of about 280 million people is sitting on a treasure that can not only generate revenue but also hasten the transition to clean energy in the face of climate change threats, says Julfi Hadi, president director of Pertamina Geothermal Energy.

“In Indonesia, we have the biggest geothermal resources because we're a volcanic country,” he told The National in Jakarta.

“We have a clean, continuous renewable energy. It’s estimated to be about 24,000 megawatts. Right now, it's just developed to about 2,400 megawatts, so there's huge opportunity and a huge energy underneath.”

Indonesia is home to more than 130 active volcanoes – the most for any country in the world, many of which are also tourist attractions.

The process of harnessing geothermal energy involves drilling wells into the Earth's crust to access steam and hot water reservoirs heated by volcanic activity.

This steam is then used to drive turbines that generate electricity. The process is sustainable as the water can be reinjected into the ground to be reheated by the Earth's natural geothermal activity.

Mr Hadi says PGE's focus on harnessing Indonesia's geothermal energy is driven by a real sense of urgency about climate change.

“We need to understand that the climate now is urgent and real. It's not business. It's not a story,” he says.

“That's why PGE is on the move, in a real move, to help slow down climate change. Right now, the situation is much faster than anticipated. You can feel it in the turbulence in the plane, you can feel it in the weather, you can feel it business-wise, economically, and it's going in the wrong direction.”

The company's initial public offering in 2022 was a significant milestone in its growth. The IPO not only raised capital to expand its projects domestically and internationally but also attracted strategic investors.

UAE-based renewable energy company Masdar acquired a 15 per cent stake.

Mr Hadi says international expertise and investment are crucial for Indonesia to realise its geothermal potential.

“I don't see how Indonesia can move forward in the energy transition without this baseload. That's why we hit the IPO [initial public offering] last year,” he says.

“That's where the UAE came in through Masdar, and it was the missing link in the puzzle to start planning to be the biggest geothermal producer in the world.

“We’re working with Masdar in Kenya and Turkey, people are looking for us in Colombia. So, we're going worldwide. Our vision is to be the biggest geothermal producer in the world. Why? Because we have 40 years of experience.”

Unceasing smiles

Developing the geothermal sector is just one aspect of Indonesia's efforts to enhance its growth and role in the global economy. The goal is to rank among the five biggest economies within the next five years.

Under President Joko Widodo’s administration, the country has focused on developing infrastructure, simplifying regulations and attracting foreign investment, with the result that Indonesia has become one of the fastest-growing economies in South-East Asia.

Erick Thohir, Minister of State-owned Enterprises, told The National that tourism was a cornerstone of this strategy in a country renowned for its stunning natural landscapes, rich cultural heritage and warm hospitality

Although Indonesia attracts millions of visitors each year, tourism accounts for only 6 per cent of its gross domestic product.

“Our tourism is still low when compared to some of our neighbours. If we push this, then our economy can hit 5.5 per cent to 6 per cent growth”, Mr Thohir says, from the current level of 5 per cent.

Many areas, such as tourist magnet Bali, have experienced a property boom in recent years, with international hospitality companies rushing to open hotels and serviced apartments in luxury compounds.

“Indonesia wants to work for everybody. The most consistent goal for Indonesia until now is to ensure better prosperity for our people. This is why we focus more on the economy than becoming entangled in global conflicts,” Mr Thohir says.

“We want to be part of the global ecosystem, creating win-win partnerships with all.”