Governance Obstacles to Geothermal Energy Development in Indonesia

Abstract

Despite having 40 per cent of the world's potential for geothermal power production, Indonesia exploits less than five per cent of its own geothermal resources. We explore the reasons behind this lagging development of geothermal power and highlight four obstacles: (1) delays caused by the suboptimal decentralisation of permitting procedures to local governments that have few incentives to support geothermal exploitation; (2) rent-seeking behaviour originating in the point-source nature of geothermal resources; (3) the opacity of central government decision making; and (4) a historically deleterious national fuel subsidy policy that disincentivised geothermal investment. We situate our arguments against the existing literature and three shadow case studies from other Pacific countries that have substantial geothermal resources. We conclude by arguing for a more centralised geothermal governance structure.