Geothermal Energy Investment in Indonesia: A 2026 Investor Guide

Geothermal energy investment in Indonesia offers several routes for foreign businesses, from developing power plants to supplying drilling equipment or using geothermal heat. The first decision is what your company would own, operate, or sell.

On 19 August 2026, the Ministry of Energy and Mineral Resources (ESDM) reported 23,202.77 MW of estimated geothermal potential and 2,776.39 MW of installed electricity capacity.^[1]

Those national figures cannot tell you whether an individual site is commercially viable or available for investment.

Indonesia’s Geothermal Market: Potential, Installed Capacity, and Planned Growth

Indonesia’s headline figures describe estimated resources, existing power plants, and planned development. Investors need to keep those measures separate when judging the market.

ESDM reported its resource and installed-capacity figures during the Indonesia International Geothermal Convention and Exhibition in August 2026.^[1]

In May 2025, ESDM announced PLN’s electricity supply business plan, or RUPTL. It includes 5.2 GW of planned geothermal additions over 2025-2034.^[2]

Geothermal generation does not depend on sunlight or wind. Output varies with reservoir conditions, well performance, and maintenance.

For operating assets, request production records before estimating electricity sales.

Our overview of renewable energy investment in Indonesia compares the broader sector. This guide examines the geothermal-specific decisions that sit behind those national numbers.

Five Commercial Routes Into Indonesia’s Geothermal Sector

A foreign investor can develop a resource, acquire a stake, sell technical services, use heat, or finance a project. These are commercial roles for comparison, not five official permit categories.

Developing or Acquiring a Power Project

A greenfield developer carries early exploration and drilling exposure. An equity buyer can enter after some work has taken place, but must still examine the developer’s permits, outstanding liabilities, and financing commitments.

Ask the seller for the named rights holder and the contract chain. A geological presentation, however promising, cannot establish ownership of the geothermal development rights.

Supplying Drilling, Engineering, and Plant Operations

Equipment suppliers and contractors may sell surveys, drilling services, wells, turbines, control systems, or maintenance. Their route to revenue depends on contracts with project companies rather than direct ownership of a geothermal resource.

A drilling company should identify whether it will import equipment, employ field personnel, or deliver engineering advice. Each activity may require a different business classification, qualification, or permit.

Using Geothermal Heat Without Generating Electricity

Indonesia’s geothermal law recognizes direct use for tourism, agribusiness, and industry. ESDM cited coffee drying in Kamojang and palm-sugar processing in Lahendong in its August 2026 release.^[1][3]

A food processor might use heat where its plant already has steady demand. A tourism operator might use a hot spring. Both need lawful resource access and activity-specific permits.

Compare electricity output in MWe and direct thermal use in MWt separately. The Geological Agency explains how to calculate geothermal potential and direct utilization.^[10]

Its technical guidance does not grant a right to operate a site.

Where Documented Geothermal Activity Can Inform Your Research

These Indonesian locations provide useful research starting points. They are illustrative examples, not a ranked list of provinces or confirmed offers to invest.

Kamojang and Lahendong show reported applications of geothermal heat. ESDM did not identify them as transferable permits or open commercial partnerships in that announcement.

On 19 August 2026, ESDM announced plans to offer five Wilayah Kerja Panas Bumi (WKP), or geothermal work areas, during 2026.^[1]

It also planned seven Penugasan Survei Pendahuluan dan Eksplorasi (PSPE), or preliminary survey and exploration assignment areas.

Check the latest official documents and deadlines for each area. A planned offering can change before the tender opens or closes.

Geothermal Licensing: Match Each Activity to the Correct Rights

A PT PMA creates a possible Indonesian operating entity for eligible foreign investment. It does not establish geothermal resource rights, confirm a power buyer, or replace sector permits.

Register the Company Under Its Actual Business Activities

Government Regulation No. 28 of 2025 governs risk-based business licensing through Online Single Submission (OSS). It revoked Government Regulation No. 5 of 2021, with transitional treatment requiring a review of existing projects and permits.^[6]

BPS Regulation No. 7 of 2025 established Klasifikasi Baku Lapangan Usaha Indonesia (KBLI) 2025, the Indonesian business activity classification. Match each revenue activity to the classification applicable in OSS.^[7]

Existing companies should reconcile legacy activity codes and licensing data where necessary. A KBLI selection alone cannot confirm foreign ownership eligibility; verify any activity-specific ownership or qualification conditions before drafting the deed.

Our KBLI guide for foreign-owned companies explains how to describe each activity before incorporation.

Check the IPB and Work Area for Electricity Projects

Law No. 21 of 2014 on Geothermal, as amended, provides the sector framework.^[3]

For electricity generation, review Government Regulation No. 7 of 2017 as amended by Government Regulation No. 25 of 2021, along with the applicable implementing rules.^[4][5]

Identify the WKP, its rights holder, and the status of its Izin Panas Bumi (IPB), or geothermal permit. For a share acquisition, have Indonesian counsel review any change-of-control conditions against the actual project documents.

Assess IPL for Direct Heat and Other Site Approvals

Direct geothermal utilization has its own authorization route. Under Law No. 21 of 2014 as amended, assess the Izin Pemanfaatan Langsung (IPL), or direct utilization permit, together with site and environmental requirements.^[3]

Check the location and proposed activity to identify the competent authority and any forestry or overlap approvals. An IPB for electricity does not substitute for the direct-use authorization that your operation may require.

Landowner consent alone cannot prove that your company may extract or use geothermal heat. The applicable rules and permit records need project-specific legal review.

Confirm Land, Environment, and Electricity Sales

For power projects, obtain the relevant land and environmental documents alongside the permit record. Check forestry requirements where the facilities or resource area intersect regulated forest land.

Examine the proposed power purchase agreement (PPA), grid connection, and generation licensing requirements. Neither an IPB nor a project entry in the RUPTL establishes a signed PPA.

Once you have defined the company’s work, InvestinAsia’s PT PMA registration service can help align its deed and OSS activities with that scope.

Licensing and corporate legal delivery in Indonesia is supported by vOffice and IZIN.co.id. Have sector specialists review the geothermal rights.

Three Due Diligence Gates Before You Commit Project Capital

Before asking lenders or shareholders to fund development, test the resource, legal rights, and route to revenue. These three gates are our editorial screening framework, not a government certification.

Resource Gate: Check the Reservoir Evidence

Ask for geological assessments, reservoir models, and well-test results where available. Record the assumptions behind the expected capacity and who would pay if the next well underperforms.

A 2018 World Bank brief identified exploration and drilling uncertainty as barriers to private geothermal financing in Indonesia. Use current bids and technical work for a 2026 budget rather than recycling historical cost illustrations.^[11]

Rights Gate: Identify the Permit Holder

Obtain the work area documents, license holder’s name, permit conditions, and pending approvals. For acquisitions, compare the permit record with shareholder agreements and existing financing covenants.

Use our Indonesia investment due diligence checklist for the corporate side. Add independent reservoir and geothermal-rights reviews for a power project.

Revenue Gate: Verify the Buyer and Delivery Conditions

For electricity, check the contractual buyer, tariff mechanism, interconnection obligations, commissioning conditions, and payment terms. Ask to see the signed PPA where one exists.

For direct heat, quantify the customer’s thermal demand, required temperature, and distance from the source. The business may need different contracts if it serves a food processor rather than an electricity buyer.

Financing and Cost: Build the Budget Around Project Stages

Well depth, drilling results, access roads, reservoir conditions, and transmission distance affect a geothermal project’s cost. You need a site budget before any cost-per-MW comparison will be useful.

Separate preliminary surveys, exploration wells, confirmation drilling, surface facilities, the generating plant, grid connection, financing expenses, and operating contingencies.

Asian Development Bank (ADB) announced a US$92.6 million financing package in January 2025 for a new approximately 83 MW plant at Muara Laboh in West Sumatra.^[9]

It comprised US$38.8 million from ADB, a US$38.8 million syndicated ADB B loan, and US$15 million in concessional financing from the Australian Climate Finance Partnership.^[9]

ADB described a financing package. It did not present US$92.6 million as the project’s total capital expenditure. Dividing that loan package by 83 MW would give you a misleading construction-cost estimate.

PT PMA Capital, Investment Plan, and Project Funding

Indonesia’s corporate thresholds answer a different question from the exploration budget.

Under Minister of Investment and Downstreaming/BKPM Regulation No. 5 of 2025, the general minimum placed and paid-up capital is IDR 2.5 billion per PT PMA, unless another rule applies.^[8]

Under Article 26, the general minimum investment plan exceeds IDR 10 billion per five-digit KBLI and project location, excluding land and buildings, with specified exceptions for particular activities and locations.^[8]

These are separate requirements. Neither amount represents the funding needed for drilling, a power plant, or financial close. A contractor and a geothermal power developer should prepare different financial models.

Article 27 restricts movement of paid-up capital during the first 12 months, with exceptions for asset purchases, building construction, and business operations.^[8]

Have counsel check how that rule applies to your intended use of company funds.

Our PT PMA capital guide covers company capitalization in more detail. Here, keep the incorporation budget separate from project expenditure.

A Practical Screening Sequence for Foreign Investors

Your first task is to write down the commercial role, proposed entity, and named counterparty. An equipment supplier needs a different plan from a company developing a geothermal field.

1. Define the income: identify what your company will own or sell, who pays it, and which contracts it must sign.
2. Name the location and counterparty: verify the WKP, project company, prospective customer, or direct-heat site.
3. Test the resource, rights, and revenue: record missing evidence and assign someone to obtain it.
4. Check foreign ownership and KBLI: confirm eligibility for each activity under the applicable classification and sector rules, including legacy OSS data if you already have an Indonesian company.
5. Map the permits: separate company registration from IPB, IPL, environmental, land, forestry, and electricity requirements where applicable.
6. Set funding conditions: agree what technical, legal, and contractual evidence shareholders need before the next expenditure.

Keep the result in a short investment memo. Include the evidence reviewed, questions still open, the person responsible for each answer, and the next decision date.

Set Up the Indonesian Business Around a Verified Opportunity

Indonesia’s geothermal resource base and power expansion plan justify further market research. A viable transaction still depends on a named project or customer, suitable rights, and a workable contract.

Investors preparing to operate in Indonesia can review our business licensing support for general company requirements. The appropriate geothermal authority and specialist advisers should assess sector permits for the chosen site.