U.S. COMPANIES FACE OBSTACLES IN ADB GEOTHERMAL TENDERS

UNCLAS JAKARTA 001025

SIPDIS

DOE FOR PI-32 CUTLER AND EERE/ED WALL
DEPT FOR EAP/MTS, EEB/ESC/IEC/ENR, AND EEB/IFD/ODF
COMMERCE FOR 4430/NADJMI AND 6930/HUEPER
TREASURY FOR T RAND AND G RAO
MANILA FOR FCS REIDBORD AND TREASURY CURRY
STATE PASS TO USTR EHLERS AND WEISEL
STATE PASS TO EPA MARK KASMAN

E.O. 12958: N/A
TAGS: ECON ETRD ENRG EAID ID
SUBJECT: U.S. COMPANIES FACE OBSTACLES IN ADB GEOTHERMAL TENDERS


1. This is an action request. Please refer to paragraph 7.


2. Asian Development Bank (ADB) geothermal tender specifications
prevent meaningful participation by U.S. companies. A U.S. company
active in the geothermal products market has brought to Post's
attention that a requirement that turbine product lines be at least
2 or 3 years old and in regular manufacture within the last 10 years
disqualifies most types of geothermal turbines made or
remanufactured in the United States.


3. David Mendive of Geothermal Development Associates, a geothermal
equipment supplier and remanufacturer based in Reno, NV, informed
Post that his company was unable to compete in most ADB geothermal
tenders, because compatible U.S. technology has not been
manufactured regularly within the last 10 years. Mendive confirmed
that his company can refit or remanufacture turbines to meet all
other technical specifications of most tenders. When asked about
the rule, the ADB's Director of Energy and Water Division confirmed
the rule serves ADB's goals, because "we are looking for new
equipment and not retrofitted equipment. We will not be able to
support retrofitted equipment."


4. According to Mendive, few U.S. companies regularly manufacture
geothermal turbines. Japanese manufacturers dominate the geothermal
turbine market, and this equipment is the only type that
consistently qualifies under ADB requirements, according to Mendive.
In a separate discussion, Indonesia's Director of Geothermal
Enterprise Supervision Sugiharto Harsoprayitno observed that
Japanese firms have dominated Indonesia's geothermal development in
recent years and expressed a desire to broaden the mix of geothermal
firms in Indonesia.


5. Geothermal experts at the Department of Energy have expressed
concerns that the ADB specifications will lock in current
technologies and exclude new developments. U.S. companies including
UTC and Ormat have developed power conversion technologies for
low-temperature applications that could potentially be excluded by
ADB's restrictions. The state of geothermal technology is changing
rapidly, and in a few years there will likely be new drilling
methods, pumps, tools, and conversion technologies. It is critical
that specifications such as ADB's do not disadvantage the
implementation of these technologies, or handicap U.S. companies
that develop them.


6. Indonesia is preparing an electricity crash program that will add
10,000 MW of electricity generating capacity, 4,700 MW of which will
be geothermal power. This program presents an opportunity to U.S.
geothermal developers, but the ADB 10-year rule would put U.S.
companies at a disadvantage for projects that receive ADB funding.


7. Post requests assistance in addressing obstacles in ADB
geothermal tender requirements so that U.S. firms can fully
participate in ADB-funded projects.

NORTH