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Optimising Geothermal Energy for Indonesia’s 2050 NZE Goal: Is the Existing Regulatory Framework Sufficient?
Setyawati Fitrianggraeni, Eva F Fauziah, Melvin Julian, Jericho Xavier Ralf[1]
Indonesia, home to 40% of the world’s geothermal reserves, stands on the cusp of a renewable energy revolution, pivotal in meeting its 2050 NZE (Net Zero Emissions)[2] target.[3] Indonesia plans to embrace clean energy on the way to reaching net zero emissions by 2060 by increasing the use of renewables in the country’s energy mix from 12% now to 23% by 2025.[4] According to the Indonesia NZE roadmap, Java has hydropower and geothermal resources. However, the nation’s path to net zero emissions from power generation requires low-emissions electricity that exceeds estimated renewable capacity.[5] Its abundant geothermal reservoirs, predominantly located across Sumatra, Java, and Sulawesi, represent an estimated 29,000 MW of untapped potential.[6]
Current development has only achieved less than 10% of this capacity, as cited in reports by IRENA and IESR.[7] Challenges such as outdated technology, capital intensity, and limited expertise have hindered progress.[8] Government incentives and international collaboration, such as the Geothermal Energy Upstream Development Project by the World Bank, signify positive momentum but underline a need for more pronounced strategic alignment with the 2050 NZE vision.[9]
Considering all these potentials, many would wonder whether our regulatory framework is ready. This article scrutinizes Indonesia’s current geothermal landscape and probes whether the existing regulatory framework aligns with the ambitious 2050 NZE agenda.
The existing regulatory framework for geothermal energy is Law No. 21 of 2014 as amended by Government Regulation in Lieu of Law No. 2 of 2022 (Geothermal Law). It emphasizes geothermal development but is often seen as cumbersome and fragmented.[10] In regard to this, several challenges arise as follows:
- First, before the issuance of the Geothermal Law, geothermal mining activities fell under the same regime as oil and gas. Therefore, the production and utilization of geothermal energy were conducted through Joint Operation (JO) contracts with Pertamina. A change occurred since the enactment of Law Number 27 of 2003 regarding Geothermal. Following the enactment, geothermal mining activities started to be conducted through geothermal permits rather than JO contracts.[11]
- Second, complex licensing procedures, land access disputes, and inconsistencies in environmental regulations have been pinpointed by industry experts and institutions like the World Bank as a primary roadblock.[12]
- Lastly, the law also requires any issue with the land owners to be resolved first before any exploration and exploitation, and even prior to the issuance of a geothermal business license.[13] This may take some time as the land relinquishment process and negotiation could turn out to be more complex and expensive than expected.
The latest regulation relating to Geothermal is the Ministry of Energy and Mineral Resources Number 33 of 2021 on safety measures and technicality of utilizing geothermal energy. The law updates regulation on work safety in exploration and exploitation that was previously regulated in Ministry Regulation Number 02.P/20/M.PE/1990 on Work Safety in Geothermal Exploration and Exploitation and Ministry Regulation Number 06 P/0746/M.Pe/1991 on Occupational Safety Examination of Installations, Equipment and Techniques Used in Oil and Gas Mining and Geothermal Resources Operations.[14] The effective implementation would still lie on the operators of geothermal exploration and exploitation. This regulation provides guidance for operators in assuring the safety of their personnel in providing geothermal energy for further use.[15] One important mechanism is to appoint a K3LL (Keselamatan Kesehatan Kerja Lindung Lingkungan or Occupational Safety and Health of Protected Environment) committee which is tasked with giving suggestions and consideration regarding any issues in the implementation of work safety and geothermal engineering, pollution control, and/or environmental damages.[16]
Conclusion and Recommendations
Indonesia’s geothermal energy landscape offers a compelling narrative of unexplored promise and complex challenges. While current regulatory structures have propelled the nation towards recognizing geothermal energy’s potential, a discerning evaluation reveals gaps and inconsistencies that hinder alignment with the 2050 NZE target. To surmount these hurdles, a comprehensive reform embracing international best practices, stakeholder collaboration, and adaptive policymaking is needed. Further, Indonesia can also draw from the regulatory successes of nations such as Iceland and New Zealand, where geothermal accounts for a significant share of their energy mix.[17] Key takeaways include streamlined permitting processes, robust public-private partnerships, and community-centric approaches.[18] Adaptation of these practices, when aligned with Indonesia’s unique geographical and socio-economic context, may provide a blueprint for regulatory refinement and innovation. It is within this delicate balancing act of regulation, investment, and innovation that Indonesia’s geothermal future lies, a future intertwined with the nation’s global leadership in a sustainable energy era.
[1] Setyawati Fitrianggraeni holds the position of Managing Partner at Anggraeni and Partners in Indonesia. She also serves as an Assistant Professor at the Faculty of Law, University of Indonesia, and is currently pursuing a PhD at the World Maritime University in Malmo, Sweden. Additionally, Eva Fatimah Fauziah is a Senior Associate in the International Arbitration and Litigation Group and also Head of the Legal Lab at Anggraeni and Partners, Melvin Julian is a Middle Associate, and Jericho Xavier Ralf is a trainee associate at Anggraeni and Partners. The writers express their gratitude to Dr. Hary Elias for generously dedicating his time to provide valuable feedback on their article.
[2] NZE is a condition where the amount of carbon emissions released into the atmosphere does not exceed the amount of emissions the earth can absorb. Achieving this requires transitioning from the current energy system to a renewable energy system one of which is geothermal energy to achieve a balance between human activities and natural balance.
[3] Muhammad E. H. Chowdhury, “A Review and Feasibility Study of Geothermal Energy in Indonesia”, Research Gate, 6.
[4] Jhonny Wood, “Indonesia’s net zero future: sustainable energy transition.” https://spectra.mhi.com/indonesias-net-zero-future-sustainable-energy-transition#:~:text=Indonesia’s%20policymakers%20have%20set%20ambitious,now%20to%2023%25%20by%202025%20. Accessed on 24 August 2023.
[5] International Agency Report, “An Energy Sector Roadmap to Net Zero Emissions in Indonesia”.
[6] Ibid.
[7] International Renewable Energy Agency, “INDONESIA ENERGY TRANSITION OUTLOOK”, 33.
[8] Ibid.
[9] Peter Johansen, “PROJECT INFORMATION DOCUMENT (PID) (CONCEPT STAGE) – Indonesia: Geothermal Energy Upstream Development Project,”. http://documents.worldbank.org/curated/en/225201468044360245/Project-Information-Document-Concept-Stage-Indonesia-Geothermal-Energy-Upstream-Development-Project-P155047.
[10] Surya Suryanto, “Geothermal Deregulation and Energy Policy in Indonesia,” Proceedings World Geothermal Congress 2005, 3.
[11] Sepasthika, Adya. Sasongko, Maher. Muryanti, Serafina. The Laws Reviews. “in review: energy regulation in Indonesia”. https://www.lexology.com/library/detail.aspx?g=a656c5be-5797-4fbc-95a4-59b3dd1d44c7. Accessed on 24 August 2023
[12] PT Sarana Multi Infrastruktur, PT Geo Dipa Energi, “GEOTHERMAL ENERGY UPSTREAM DEVELOPMENT PROJECT, ENVIRONMENTAL AND SOCIAL MANAGEMENT FRAMEWORK, INCORPORATING: RESETTLEMENT POLICY FRAMEWORK, INDIGENOUS PEOPLES’ PLANNING FRAMEWORK,”. 67.
[13] Article 42 and Article 43 of the Government Regulation in Lieu Of Law Number 2 of 2022 on Job Creation
[14] Indonesia Legal Brief, “Aspek Keamanan Kegiatan Pemanfaatan Panas Bumi Tidak Langsung Diperbarui
[15] Article 2 of Ministry of Energy and Mineral Resources Regulation Number 33 of 2021.
[16] Article 13 of Ministry of Energy and Mineral Resources Regulation Number 33 of 2021.
[17] Bart Van Campen, “Geothermal Sustainability Regulation in Iceland and New Zealand,” Research Gate.
[18] Ibid.
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Anggraeni and Partners, an Indonesian law practice with a worldwide vision, provides comprehensive legal solutions using forward-thinking strategies. We help clients manage legal risk and resolve disputes on admiralty and maritime law, complicated energy and commercial issues, arbitration and litigation, tortious claims handling, and cyber tech law.
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Eva F. Fauziah
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