Gov’t Prepares Geothermal Gov. Reg. Revision, Tax Incentives Key

JAKARTA, DDTCNews - The government is preparing a revision of Government Regulation (Gov. Reg.) 7/2017 on Geothermal Energy for Indirect Utilisation. One of the key aspects under consideration is the provision of tax incentives to improve the economic viability and investment attractiveness of geothermal energy.

Minister of Energy and Mineral Resources (Energi dan Sumber Daya Mineral/ESDM in Indonesian) Bahlil Lahadalia stated that the government is preparing a number of breakthroughs to accelerate geothermal development, including through tax incentives and the revision of Gov. Reg. 7/2017.

"The government is preparing tax incentives and a revision of Gov. Reg. 7/2017, directed, amongst others, at the indirect utilisation of geothermal energy and improving the rate of return for investors," he said, as quoted on Thursday (20/8/2026).

According to Bahlil, economic viability remains one of the key challenges in geothermal development. At present, the economic value of geothermal energy has reached approximately USD0.095 per kilowatt hour (kWh). However, this level is deemed inadequate by industry players.

For this reason, the government views the provision of incentives as one instrument to improve the economic viability of projects whilst simultaneously increasing the rate of return on investment for geothermal developers.

Gov. Reg. 7/2017 currently serves as one of the legal foundations for geothermal operations for indirect utilisation. The regulation governs, amongst other matters, the authority for operations, geothermal working areas and geothermal business activities for indirect utilisation.

Under Article 16 of Gov. Reg. 7/2017, the government has allowed the provision of fiscal facilities. That Article states that in the conduct of preliminary survey and exploration (penyelenggaraan survei pendahuluan dan eksplorasi/PSPE in Indonesian) activities, a business entity may obtain fiscal facilities pursuant to statutory provisions.

Further, in the elucidation of Gov. Reg. 7/2017, such fiscal facilities include, among others, import duty facilities for imported goods and income tax facilities.

Based on data from the Ministry of Energy and Mineral Resources, the total national geothermal potential reaches 23,202.77 megawatts (MW). However, installed capacity has only reached 2,776.39 MW, or approximately 11.6% of total potential.

Geothermal energy is considered to play a strategic role in strengthening national energy sovereignty. Its development is also expected to reduce dependence on imported energy amid geopolitical uncertainty and the dynamics of global energy prices.

Bahlil stated that accelerating geothermal development cannot rely solely on the government. Collaboration between regulators and industry players is crucial to ensure that geothermal potential can be promptly developed into productive projects.

"There is no other way to accelerate the implementation of geothermal energy, whether for electricity generation or other uses, than through collaboration between industry players and regulators," he said.

In addition to preparing incentives and reforming regulations, the government has also called on developers that have already obtained concessions to proceed immediately with their projects. Bahlil cautioned against holding concessions without any project progress, as this also hampers the acceleration of geothermal development.

On the other hand, the government is also preparing a revision of Presidential Regulation 112/2022 on the Acceleration of the Development of Renewable Energy for Electricity Supply. The revision is aimed at further accelerating the development of new and renewable energy. (dik)