A geothermal capacity upgrade becomes a tradeable carbon asset while the exchange looks for supply

PT PLN Indonesia Power signed a second amendment to its emission reduction purchase agreement with South Pole AG, covering the capacity upgrade of the Gunung Salak geothermal power plant. The signing took place on 2 September 2026 at the IndoEBTKE ConEx convention at JIEXPO Kemayoran in Jakarta.

PLN Indonesia Power was represented by Julita Indah, Director of Business Development and Commerce. South Pole AG was represented by Fadri Mokolintad, a specialist in business development for sustainable technologies in Southeast Asia. Gunung Salak, in Bogor, operates three units of 60 megawatts for a total of 180 megawatts.

The mechanism is straightforward in principle. Raising output at an existing geothermal plant displaces generation that would otherwise have produced emissions. That avoided quantity, once verified, becomes a carbon asset that can be sold.

What makes it notable is that the underlying work is a capacity upgrade rather than a new plant. The field was already producing, the connection already existed, and the additional output comes from getting more out of what is installed. Indonesian geothermal has seen several agreements of this shape recently, including the bottoming units at Ulubelu and Lahendong that draw power from brine already being pumped. Carbon revenue attaches to that category of project particularly well, because the emissions baseline is well established and the incremental output is straightforward to measure against it.

Where this sits in a market still looking for supply

The agreement reads differently when set against the state of Indonesia's carbon exchange.

As of mid 2026 the exchange held about 3.1 million tonnes of carbon dioxide equivalent in registered units, drawn predominantly from technology based projects rather than nature based ones. Registered projects numbered 47, covering roughly 4.6 million tonnes of annual emissions. Ary Sudijanto, Deputy for Climate Change Control and Carbon Economic Value Management, has described trading volume as remaining low despite adequate infrastructure and regulation being in place.

Against that, a further geothermal project entering the pipeline is not a marginal addition. The registered project list is already weighted toward the energy sector, including Lahendong units 5 and 6 operated by Pertamina Geothermal Energy and the Gunung Wugul mini hydro plant operated by PLN Indonesia Power itself. Gunung Salak continues an established pattern rather than breaking new ground, which is precisely what a thin market needs.

An exchange with 47 projects on it does not have a demand problem it can solve by waiting. Every additional verified project is a larger share of a market that is still being assembled.

Bernadus Sudarmanta, President Director of PLN Indonesia Power, framed the work as renewable energy development involving more than the supply of cleaner energy, with emission reductions managed as sustainable added value. Yuliot Tanjung, Deputy Minister of Energy and Mineral Resources, connected the acceleration of energy transition to energy security amid global geopolitical conditions.

The price gap between efficiency and renewables

The figure most worth dwelling on is not the volume. It is what different kinds of reduction are worth.

Energy efficiency projects trade at approximately Rp58,000 per tonne of carbon dioxide equivalent. Renewable energy projects trade at approximately Rp144,000. A tonne avoided by generating cleanly is therefore worth roughly two and a half times a tonne avoided by consuming less.

There is no physical basis for that difference. A tonne not emitted is a tonne not emitted regardless of which route produced the saving. The gap reflects how the market values project types, and it carries a consequence: it pulls capital toward generation projects and away from efficiency ones, even though efficiency is frequently the cheaper way to avoid a tonne in the first place.

Sudijanto has said that neither price reflects the costs actually required to accelerate decarbonisation. That is a candid assessment, and it identifies the real constraint. A project developer deciding whether to pursue verification will weigh the administrative cost of registration against what the resulting credits fetch. At Rp58,000 a tonne, a great many efficiency projects will not clear that threshold.

What the pipeline could hold

The government has identified where larger volumes might come from. Carbon capture and storage is put at around 4 million tonnes annually. B50 biodiesel implementation is estimated at 44 to 47 million tonnes a year. Solar expansion carries a reduction potential of 140 million tonnes.

Those figures dwarf the 3.1 million tonnes currently registered. The gap between potential and registered supply is not about whether the reductions happen. B50 is already being distributed nationally and the solar programme is under construction. It is about whether those reductions are measured, verified and registered in a form the exchange can trade.

The government is pursuing other routes to thicken the market as well, including carbon trading through voluntary markets and Article 6 mechanisms under the Paris Agreement intended to raise domestic demand and with it the price. Both work on the demand side, while project registration works on the supply side, and an exchange needs the two moving together for its prices to mean anything.

Sirkularium's read for government and public institutions

Three observations follow.

The first concerns correcting the efficiency discount. If efficiency credits are worth less than half what renewable credits fetch, the market is steering investment away from the cheapest abatement available. Public institutions can address this through procurement preferences, through methodologies that reduce the verification burden on efficiency projects, or by purchasing efficiency credits directly. Leaving the differential unexamined means the subsidy and emissions savings available from industrial efficiency stay unrealised while capital concentrates on generation.

The second concerns registration as the binding step. The potential volumes in biodiesel and solar already exist as physical activity. What is missing is the measurement and verification chain that converts an emissions reduction into a tradeable unit. That chain is administrative infrastructure, and building it is considerably cheaper than building the projects themselves. Agencies able to standardise monitoring and reporting for programmes already underway would expand exchange supply without any new abatement being required.

The third concerns state owned enterprises as anchor supply. PLN Indonesia Power and Pertamina Geothermal Energy are among the few entities with the scale, the verified projects and the technical capacity to register consistently. Their pipeline is effectively the market's floor. Treating carbon asset development as a standard part of every state owned generation project, rather than as an initiative pursued case by case, would give the exchange the depth it currently lacks.

What to watch next is whether the Gunung Salak units complete verification and issuance, whether the efficiency and renewable price gap narrows, and whether the B50 and solar programmes are brought into registered methodologies at anything approaching their stated potential.