Encouraging Geothermal Investment in Indonesia: Evaluating Government Strategies to Address Exploration Risks and Comparative Insights from Successful Countries

Abstract

Exploration is the most expensive and high-risk phase in the geothermal development chain. This condition has resulted in low private sector participation, particularly during the early stages of development. This study aims to evaluate the Indonesian government's policy strategies to address geothermal exploration risks and conduct a comparative analysis with successful approaches implemented in Kenya, the Philippines, and Turkey. Using a qualitative-descriptive method, the study draws on policy literature and actual exploration data to examine regulatory frameworks, fiscal incentives, and public risk-sharing mechanisms. The findings reveal that while Indonesia has initiated exploration through government agencies such as Center for Mineral, Coal, and Geothermal Resources “PSDMBP” and offers fiscal incentives and risk guarantees (via Geothermal Risk Mitigation Facility “GRMF” and PT Penjaminan Infrastruktur Indonesia “PII”), the implementation still faces major challenges, including limited budget, weak inter-agency coordination, bureaucratic inefficiencies, and restricted access to geoscientific data. In contrast, exploration models in Kenya (public exploration via Geothermal Development Company “GDC”), the Philippines (Build-Operate-Transfer “BOT” scheme with feed-in tariffs), and Turkey (cost-sharing with the private sector) show more integrated and investor-friendly approaches. This study concludes with strategic recommendations, including the establishment of a state-owned exploration company, improved data transparency, regulatory reforms, and the implementation of output-based fiscal incentives to enhance geothermal investment attractiveness in Indonesia.