New geothermal law and its implications for geothermal development in Indonesia

Abstract

Purpose

This paper aims to investigate the new geothermal law and its implications for geothermal development in Indonesia.

Design/methodology/approach

This paper investigates new geothermal law and its implications for geothermal development in Indonesia by using comparable law article to discuss this development. All the data are obtained from literature studies based on the history and background, ownership and access, investment and risks, electricity market and re-policies, environmental regulations and community participation around the geothermal resources.

Findings

Geothermal industries in Indonesia need assurance and clear legal basis to be developed. Geothermal investors, whether foreign or local, need policy assurance and good business structures that can create a secure investment environment. Furthermore, a good relationship with international cooperation agency needs to be improved to establish knowledge transfer regarding technologies and information about exploration, production and geothermal development. This is essential to further develop the geothermal utilization and prepare Indonesia to be the country with the biggest reduction in CO₂ emission in 2025. New geothermal regulation (Law No.21 Year 2014) has facilitated the geothermal activities. After the issuance of this regulation, the activities can be done at conserved, production and conservation forest. Moreover, the public service agency (BLU) or state-owned enterprise (BUMN) assignment scheme can boost the geothermal industries development.

Originality/value

Indonesia has huge geothermal resources because of its geological condition that is located at volcanoes path, also known as “Ring of Fire”. According to 2017 ESDM data, Indonesia’s geothermal potentials are almost 30 GW and are distributed to 331 potential points. However, only 5 per cent of those potentials (1,643.5 MW) have been utilized to date. The huge potentials can be utilized optimally to support the Government’s plan in achieving the energy security. Therefore, policies that regulate geothermal utilization is strategically essential for Indonesia’s future.

Citation

Hermanto, A. and Narindro, L. (2019), "New geothermal law and its implications for geothermal development in Indonesia", International Journal of Law and Management, Vol. 61 No. 1, pp. 2-16. https://doi.org/10.1108/IJLMA-10-2017-0248