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From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

Indonesia has the world's largest number of active volcanoes, and it's betting on geothermal wealth as a vast source of clean and reliable energy for the future.

But as NPR's Anthony Kuhn report from Jakarta, making that economically feasible is the real challenge.

(SOUNDBITE OF STEAM)

ANTHONY KUHN, BYLINE: Steam shoots from a crack in the Earth with a thunderous roar like a jet engine. The steam is visible from miles away as it billows into the sky over Kawah Kamojang, Indonesia's first geothermal field in West Java. Some of the steam is piped into a plant, where it turns turbines and generates electricity that is fed into the national power grid. It's run by the geothermal arm of the state-owned oil company PERTAMINA.

Plant manager Tavip Dwikorianto says that the plant is actually on an ancient volcano.

TAVIP DWIKORIANTO: (Through Translator) This area used to be a volcano that erupted and collapsed, forming a large crater. Heat comes up from the faults inside the crater. The heat is released through vents and hot springs around the crater.

(SOUNDBITE OF SPLASHING)

KUHN: Springs like this one where hot sulfurous water gushes from the ground near the Kamojang plant. Indonesia has around 130 active volcanoes strung out through the archipelago. At present, Indonesia is only using about half a gigawatt of its estimated potential of 28 gigawatts of geothermal energy. That potential is roughly equivalent to 12 billion barrels of oil.

Until 1996, Indonesia produced more oil than it could consume, so there was little incentive to invest in geothermal, and it's still cheaper to produce electricity by burning oil or coal.

Slamet Riadhy, CEO of PERTAMINA Geothermal, says his company will only invest in building up capacity if the price is right.

SLAMET RIADHY: (Through Translator) It takes very little money to operate a plant to produce geothermal power. But it requires huge investments up front. The price has to be high enough to help us recover that and give us a return on our investment of more than 10 percent.

KUHN: Riadhy says geothermal in Indonesia is now poised to take off. The government is preparing to introduce feed-in tariffs that will make the price of geothermal more competitive with fossil fuels. And PERTAMINA plans to double or triple its geothermal capacity in the next five years.

New Zealand geothermal consultant Mike Allen says that private energy companies are now lining up to invest in Indonesian geothermal, which is currently dominated by state-owned firms like PERTAMINA.

MIKE ALLEN: I think that the private sector input is valuable because it's going to give the opportunity for work to be done by commercially savvy groups, who perhaps can do things a little bit cheaper and faster than the state-owned enterprises would able to do. So I think it will bring some balance into the market.

KUHN: It's hard to make money in Indonesia's energy market because prices for oil, kerosene, and electricity are all heavily subsidized by the government, which sets prices based in part on political considerations, including social stability.

(SOUNDBITE OF PROTESTORS)

KUHN: On March 30th, police in downtown Jakarta fired tear gas on thousands of demonstrators who were protesting government plans to reduce fuel subsidies by a third. At the equivalent of about $1.90 a gallon, Indonesia's gas is the cheapest in Asia. Critics point out that the biggest beneficiaries of this subsidy are those who burn the most fuel - the rich. Geothermal could help this problem by generating electricity which could then be used to power urban mass transit for everyone.

Whatever energy mix Indonesia chooses, says Mike Allen, geothermal provides a good, steady supply, which unlike solar or wind, doesn't depend on the weather.

ALLEN: It just runs 24 hours a day, seven days a week. It provides you a good underlying input of energy which doesn't exist in Indonesia at the moment; that has to come from coal or oil.

KUHN: Renewables, Allen points out, can't meet all of the energy needs of Indonesia's rapidly developing economy. But he says they'll make an important contribution without emitting a lot of greenhouse gases, of which Indonesia is already the world's third largest emitter, after China and the U.S.

Anthony Kuhn, NPR News, Jakarta.

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