Indonesia’s Geothermal Energy: A 2025 Investment Guide

Indonesia is a global leader in harnessing geothermal energy. The country is known to hold 40% of the world’s geothermal reserves and ranks second globally in installed capacity. This renewable resource aligns with the nation’s sustainability goals and energy transition efforts. 

By 2025, Indonesia’s geothermal sector has thrived, driven by government incentives and growing global investment, becoming a key part of its renewable energy strategy. Let’s review Indonesia’s geothermal energy market, investment opportunities, challenges, and future outlook.

Market Overview of Indonesia’s Geothermal Energy Sector

According to Energy and Mineral Resources Minister Bahlil Lahadalia, Indonesia’s geothermal sector has attracted USD 8.7 billion in investments in the last ten years. The construction of geothermal power plants (PLTPs) has grown eightfold, making Indonesia the world’s second-largest geothermal producer, with 2.6 GW of installed capacity.

Furthermore, Indonesia holds an impressive 24 GW of geothermal potential, making up 40% of global reserves. The development of these resources has created nearly 900,000 jobs and contributed IDR 16 trillion (about USD 1 billion) to the economy each year.

In addition, geothermal energy in Indonesia is crucial for reducing 17.4 million tons of carbon emissions annually and advancing the country’s goal of achieving 23% renewable energy in its energy mix by 2025.

Installed Capacity of Geothermal Energy in Indonesia

According to Statista, as of 2023, Indonesia’s geothermal energy capacity reached approximately 2.6 thousand megawatts, a steady increase from the previous year. With nearly 40% of the world’s geothermal potential, Indonesia remains a critical player in the global renewable energy landscape.

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12 Geothermal Projects Open for Investment in Indonesia

The Indonesian government announced at the 2024 UN Climate Change Conference (COP29) in Baku, Azerbaijan, that it promotes geothermal energy development by offering 12 major investment projects.

These projects require a total investment of around USD 2.14 billion (IDR 34 trillion) and include a mix of large-scale and small-scale ventures across the archipelago.

• Lahendong Phase 7 and 8 (2 x 20 MW) – North Sulawesi, by PT Pertamina Geothermal Energy.
• Sarulla Phase 2 (50 MW) – North Sumatra, by Medco/Ormat/Kyushu/Itochu.
• Ijen Phase 2 (30 MW) – East Java, by Medco/Ormat.
• Salak Phase 7 (55 MW) – West Java, by Star Energy Geothermal Salak.
• Ulumbu (30 MW) – East Nusa Tenggara, by PT PLN.
• Candradimuka (40 MW) – Central Java, by PT Geo Dipa Energy.
• Bukit Daun (30 MW) – Bengkulu, by PT Pertamina Geothermal Energy.
• Klabat Wineru (40 MW) – North Sulawesi, by PT Ormat Geothermal Indonesia.
• Hu’u Daha (60 MW) – West Nusa Tenggara, by Vale/Antam.
• Lahendong Bottoming Co-Generation (15 MW) – North Sulawesi, by PT Pertamina Geothermal Energy.
• Lumut Balai Bottoming Unit 1 and 2 Co-Generation (20 MW) – South Sumatra, by PT Pertamina Geothermal Energy.
• Ulubelu Small-Scale Co-Generation (30 MW) – Lampung, by PT Pertamina Geothermal Energy.

Challenges Facing Indonesia’s Geothermal Sector

Despite its immense geothermal potential, Indonesia’s energy sector needs help maximizing this resource. High costs, market competition, and regulatory barriers continue to slow progress, even as the government works to address these issues. Tackling these challenges is critical for ensuring the sector’s growth and contribution to the renewable energy goals.

High Costs and Uncertainty

Indonesia’s 23.7 GW geothermal potential spans 300 sites, yet exploration is costly and risky. Once expensive drilling is completed, developers often need more certainty about energy output. Remote areas with the most resources need more infrastructure, increasing development costs and logistical challenges.

Competition with Cheaper Energy Sources

Due to subsidies and low costs, coal dominates 60% of Indonesia’s electricity production. Meanwhile, wind and solar are becoming more affordable, while geothermal energy struggles with high production costs. Without innovation, the government may prioritize other renewable sources.

Limited Market Competition

State-owned enterprises, notably PT Pertamina Geothermal Energy, control 82% of geothermal production, stifling innovation. Reforms like the Omnibus Law aim to attract foreign investment and introduce competition, but the sector remains tightly regulated.

Infrastructure Gaps

Geothermal-rich regions lack electricity networks, hindering energy distribution. Poor connectivity, especially in remote areas like Riau, limits the potential of even the most promising projects.

Policy Barriers

Despite incentives, weak mandates to replace coal with renewables slow geothermal growth. While reforms are encouraging, stronger policies are needed to level the playing field for geothermal energy.

The Future of Indonesia’s Geothermal Energy

Indonesia aims to reach 7 GW of geothermal capacity by 2030, five years behind its original 2025 goal. According to Fabby Tumiwa, executive director of the Institute for Essential Service Reform (IESR), with annual additions of 200-300 MW, it needs more than 500-600 MW annually.

Despite delays, Indonesia’s geothermal sector has immense potential. Progress can be accelerated by addressing policy gaps, enhancing incentives, and adopting innovative technologies. Achieving the 7 GW target will require stronger collaboration between the government, private investors, and environmental stakeholders.

Tap into Indonesia’s Geothermal Energy Sector with InCorp

Indonesia’s energy sector’s future relies on sustainable solutions, particularly geothermal energy. Although progress has been slower than anticipated, the commitment to expanding its renewable energy portfolio remains strong.

Achieving the 7 GW target by 2030 will necessitate collaboration across various sectors, innovation, and strategic investments. For businesses looking to participate in this green revolution, InCorp can offer you with:

• Company Registration Services will help you establish your foothold in Indonesia.
• Business Advisory Services to craft strategies for impactful market entry.

Fill out the form below to drive Indonesia toward a greener and more sustainable future.