30 Sep 2014
NEW GEOTHERMAL LAW

On 26 August 2014, a new bill concerning Geothermal Energy was passed by the House of Representatives. The new act is a revised version of Law No. 27 of 2003 concerning Geothermal, with major changes that are meant to ease the development of the country’s geothermal energy industry.

Key changes in the new Geothermal Act (New Act):

• The New Act clearly distinguishes between geothermal energy which are “directly used” and which are “indirectly used”. While the previous act includes the exploitation of geothermal for purposes such as tourism, agribusiness and industrial purposes, the new version refers to the use of geothermal to generate electricity.
• The New Act provides that pricing will be set by the government based on economic costs. It also provides that an IUP holder may renegotiate its geothermal power purchase agreement if it had signed the agreement before the legislation came into force.
• The New Act makes the central government the sole licensing authority for the use of geothermal energy for power generation.
• The New Act does not view geothermal exploitation as a form of “mining” activity, which is a major change from the earlier act – it allows geothermal activities to be conducted in designated forest areas. The new legislation also allows concessions on state lands, registered lands (lands with a title certificate), tribal lands, water areas and most importantly, forest conservation areas.
• The new act provides that the determination of the size of a concession must take into account the geographical extent of the geothermal system. It also provides the government with a leeway by letting it regulate this aspect by way of a government regulation.
• As for contribution to the local people, benefits are being offered from the developers of geothermal power plants, as they are also required by the new act to allocate production bonuses or part of their revenue to local communities.(by: Herry Kurniawan/Zefanya S. Sahusilawane)