An Overview of Indonesia’s Geothermal Energy Sector - ASEAN Briefing
Published January 18, 2026
An Overview of Indonesia’s Geothermal Energy Sector
Indonesia is recognized as a leading nation in the geothermal energy sector, boasting the largest geothermal energy reserves in the world. The country has a total geothermal potential estimated at around 29,000 megawatts (MW), with approximately 23,000 MW identified as technically feasible. However, as of now, only about 2,500 MW of this potential has been harnessed for electricity generation, indicating a significant opportunity for growth in this renewable energy source.
The Indonesian government has set ambitious targets to increase the share of renewable energy in the national energy mix. By 2025, the government aims for renewables to contribute at least 23% of the total energy supply, with geothermal energy playing a crucial role in achieving this goal. The government has implemented various policies and incentives to attract investment in the geothermal sector, making it an appealing option for both domestic and foreign investors.
Geothermal Energy Development in Indonesia
Geothermal energy development in Indonesia is primarily managed by the Ministry of Energy and Mineral Resources (ESDM). The ESDM has established a regulatory framework that encourages exploration and development activities while ensuring environmental sustainability. The government has also introduced a feed-in tariff system, which guarantees a fixed price for electricity generated from geothermal sources, thereby providing a stable revenue stream for investors.
In addition to the feed-in tariff, the government has improved the licensing process for geothermal projects, significantly reducing the time required to obtain permits. This streamlined process is designed to facilitate investment and development in the sector, making it more attractive for companies looking to enter the market.
Key Players in the Geothermal Sector
The geothermal energy landscape in Indonesia is characterized by the involvement of various stakeholders, including state-owned enterprises, private companies, and international investors. Pertamina Geothermal Energy, a subsidiary of the state-owned oil and gas company Pertamina, is one of the largest players in the sector. The company operates several geothermal power plants across the country and is actively involved in the exploration and development of new geothermal projects.
In addition to Pertamina, several international companies have established a presence in Indonesia's geothermal sector. Notable players include Chevron, which has been involved in the development of geothermal resources in the country for over three decades, and the Japanese company J-Power, which has invested in various geothermal projects in Indonesia. These companies contribute not only capital but also expertise in geothermal technology and project management.
Challenges Facing the Geothermal Sector
Despite its vast potential, the geothermal energy sector in Indonesia faces several challenges that could hinder its growth. One of the primary challenges is the high upfront capital costs associated with geothermal exploration and development. The process of identifying and drilling geothermal wells is expensive and carries significant financial risks, which can deter potential investors.
Another challenge is the regulatory landscape, which, although improved, can still be complex and cumbersome. Investors often encounter bureaucratic hurdles that can delay project timelines and increase costs. Additionally, there are concerns regarding land rights and local community engagement, as geothermal projects often require land use changes that may affect local populations.
Recent Developments and Future Outlook
In recent years, the Indonesian government has taken steps to address some of the challenges facing the geothermal sector. In 2020, the government introduced a new regulation aimed at simplifying the licensing process for geothermal projects, making it easier for investors to navigate the regulatory environment. This move is expected to accelerate the development of geothermal resources and attract more investment into the sector.
Furthermore, the government has also initiated several geothermal projects, including the development of new power plants and the expansion of existing facilities. The Wayang Windu Geothermal Power Station, located in West Java, is one such project that has recently undergone expansion to increase its capacity. This project exemplifies the government’s commitment to harnessing geothermal energy to meet its renewable energy targets.
Looking ahead, Indonesia's geothermal energy sector is poised for growth. With the global shift towards renewable energy and the increasing demand for clean energy sources, the potential for geothermal energy in Indonesia remains significant. The government’s commitment to enhancing the regulatory framework and attracting investment will be crucial in realizing this potential.
Conclusion
In conclusion, Indonesia's geothermal energy sector stands at a critical juncture. With the largest geothermal reserves in the world and a growing commitment from the government to promote renewable energy, the country has the opportunity to become a leader in geothermal energy production. By addressing the challenges that currently exist and leveraging its natural resources, Indonesia can significantly increase its geothermal energy output, contributing to a more sustainable energy future.
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