Indonesia Geothermal Energy Market Outlook to 2029

The report titled “Indonesia Geothermal Energy Market Outlook to 2029 - By Market Structure, By Installed Capacity, By Energy Output, By Key Regions, By End-User Segments, and By Key Players” provides a comprehensive analysis of the geothermal energy market in Indonesia. The report covers an overview and genesis of the industry, the overall market size in terms of installed capacity and revenue, market segmentation; trends and developments, regulatory landscape, project-level profiling, issues and challenges, and competitive landscape including major players, opportunities, and barriers. The report concludes with future market projections based on installed capacity, energy output, end-user segments, and success case studies highlighting major opportunities and cautions in the market.

Indonesia Geothermal Energy Market Overview and Size

The Indonesia geothermal energy market reached an installed capacity of 2,500 MW in 2023, driven by the abundant availability of geothermal resources, growing demand for renewable energy, and supportive government policies promoting clean energy solutions. The market is characterized by major players such as Pertamina Geothermal Energy, Star Energy, Medco Energi, and Ormat Technologies. These companies are recognized for their robust project portfolios, advanced technology implementation, and significant contributions to Indonesia's renewable energy transition.

In 2023, Pertamina Geothermal Energy commissioned new capacity in the Lahendong and Ulubelu geothermal fields to enhance energy output and address the increasing demand for sustainable energy. This expansion supports Indonesia's target of achieving 23% renewable energy in the national energy mix by 2025. Key regions such as Java and Sumatra dominate the geothermal market due to their high-quality geothermal reserves and developed infrastructure, while areas like Sulawesi and Flores are emerging as potential growth zones.

Market Size for Indonesia Geothermal Energy Market on the Basis of Installed Capacity in MW, 2018–2024

What Factors are Leading to the Growth of Indonesia Geothermal Energy Market:

• Resource Availability: Indonesia possesses an estimated geothermal potential of 24 GW, with only 10% of this potential being utilized as of 2023. The vast availability of untapped resources positions the country as a global leader in geothermal energy development. High-temperature geothermal fields, located across Java, Sumatra, and Sulawesi, present significant opportunities for new project development.

• Government Initiatives: Supportive government policies and incentives, such as the feed-in tariff and renewable energy roadmap, have played a crucial role in market expansion. The Indonesian government targets 23% renewable energy in the energy mix by 2025, with geothermal energy contributing a significant share. The establishment of public-private partnerships (PPPs) has also facilitated funding for large-scale geothermal projects.

• Rising Energy Demand: With an annual energy demand growth rate of 6%, Indonesia faces increasing pressure to diversify its energy portfolio. Geothermal energy offers a reliable and sustainable solution, particularly in remote and off-grid areas where traditional energy sources are less viable.

Which Industry Challenges Have Impacted the Growth of Indonesia Geothermal Energy Market

• High Initial Investment Costs: The development of geothermal energy projects requires significant upfront capital investment for exploration, drilling, and infrastructure. On average, exploration and drilling account for approximately 40% of total project costs. This financial burden has deterred private sector participation, limiting the pace of market expansion.

• Regulatory and Permitting Delays: Complex regulatory frameworks and lengthy permitting processes remain a major challenge for project developers. In 2023, it was reported that the average time to secure permits for geothermal projects in Indonesia was over three years, causing delays and increasing project costs. Streamlining these processes is critical to attracting more investment into the sector.

• Technical and Resource Risks: Uncertainties related to geothermal resource availability and potential drilling failures pose significant risks. Industry reports indicate that up to 20% of exploration wells drilled in Indonesia yield suboptimal results, leading to increased costs and delays. This risk factor discourages investors, particularly in high-potential but underdeveloped regions.

What are the Regulations and Initiatives that Have Governed the Market

• Feed-in Tariff Mechanism: The Indonesian government introduced a feed-in tariff scheme in 2023 to incentivize geothermal energy development. This mechanism ensures competitive pricing for geothermal electricity, encouraging private sector investment. The tariff rates are adjusted based on project location and resource capacity, providing tailored support for different regions.

• Renewable Energy Targets: Indonesia’s renewable energy roadmap mandates a 23% share of renewables in the national energy mix by 2025, with geothermal energy expected to contribute a significant portion. This target has driven government efforts to facilitate project development and streamline regulations.

• Geothermal Fund Facility: To address the high upfront costs of geothermal projects, the government established the Geothermal Fund Facility (GFF), which provides risk mitigation support and financing for exploration activities. As of 2023, the GFF has supported over 15 projects, reducing exploration risks and attracting private investors.

Indonesia Geothermal Energy Market Segmentation

• By Market Structure: The geothermal energy market in Indonesia is dominated by private developers, who have been pivotal in advancing new projects and introducing innovative technologies. These developers often partner with government entities to secure funding and permits. State-owned enterprises, such as Pertamina Geothermal Energy, also hold a significant share due to their access to government resources, established expertise in energy development, and focus on large-scale projects. Their ability to develop extensive geothermal fields, such as Wayang Windu and Sarulla, underscores their importance in the market.

• By Key Regions: Java leads the geothermal market due to its high population density, energy demand, and well-established infrastructure. The island accounts for over 60% of Indonesia's total geothermal capacity. Sumatra follows as a key region due to its significant geothermal reserves and increasing industrial activity. Emerging regions such as Sulawesi and Flores are gaining traction with ongoing exploratory projects and government initiatives targeting untapped geothermal potential.

• By End-User Segments: Industrial users constitute the largest segment due to their high energy requirements and preference for cost-effective, sustainable energy sources. Geothermal energy is increasingly adopted by industries such as manufacturing, mining, and processing due to its reliability and low carbon emissions. Residential and commercial sectors also contribute significantly, driven by urbanization and a growing focus on clean energy solutions.

Competitive Landscape in Indonesia Geothermal Energy Market

The Indonesia geothermal energy market is relatively concentrated, with a few major players driving development across the country. These companies, including Pertamina Geothermal Energy, Star Energy, Medco Energi, and Ormat Technologies, dominate the sector due to their expertise, resources, and ability to manage large-scale projects. Emerging players and partnerships are adding diversity, bringing innovation and competition to the market.

Some of the recent competitor trends and key information about competitors include:

• Pertamina Geothermal Energy (PGE): PGE remains a dominant player, operating 14 geothermal working areas across Indonesia. In 2023, the company added 120 MW of capacity in the Ulubelu and Lahendong fields, contributing to its total installed capacity of over 1,877 MW. PGE’s focus on sustainability and community engagement has reinforced its market leadership.

• Star Energy: As the largest private geothermal operator in Indonesia, Star Energy manages significant projects such as Wayang Windu and Darajat. In 2023, the company reported a 10% increase in power generation efficiency through the adoption of enhanced geothermal system (EGS) technologies.

• Medco Energi: Medco Energi is expanding its geothermal portfolio with the recent commissioning of the Sarulla Geothermal Power Plant Phase III, bringing its total capacity to 330 MW. The company focuses on leveraging local expertise and building long-term partnerships with global technology providers.

• Ormat Technologies: Ormat is a global leader in geothermal technology and has partnered with local developers to provide modular power plants and advanced drilling technologies. In 2023, Ormat announced a joint venture with Supreme Energy to explore untapped geothermal fields in Sulawesi, aiming to add 200 MW by 2027.

• Supreme Energy: A relatively new entrant, Supreme Energy specializes in developing projects in high-potential but underdeveloped regions like Sumatra and Flores. The company commissioned its first 80 MW project in Muara Laboh in 2023, emphasizing sustainable development and environmental protection.

What Lies Ahead for Indonesia Geothermal Energy Market?

The Indonesia geothermal energy market is projected to grow significantly by 2029, with a robust CAGR during the forecast period. This growth will be driven by increasing energy demand, government incentives, and the global shift towards renewable energy sources.

• Expansion of Installed Capacity: Indonesia aims to increase its geothermal installed capacity from 2,500 MW in 2023 to 4,500 MW by 2029, supported by large-scale projects in Java, Sumatra, and Sulawesi. The government’s renewable energy targets and international partnerships will play a key role in achieving this expansion.

• Adoption of Advanced Technologies: The deployment of Enhanced Geothermal Systems (EGS), modular power plants, and advanced drilling techniques is expected to reduce project risks and costs. These technologies will enable efficient utilization of geothermal resources in untapped areas, particularly in remote regions like Flores and Sulawesi.

• Public-Private Partnerships (PPPs): The government’s focus on fostering PPPs will attract both domestic and foreign investments, accelerating project development timelines. These partnerships are anticipated to bring in technological expertise and funding, addressing critical challenges such as high upfront costs and resource risks.

• Regional Development Focus: Regions like Flores, Sulawesi, and Maluku, currently underdeveloped in terms of geothermal capacity, are expected to emerge as new growth hubs. Strategic investments in transmission infrastructure and localized energy solutions will unlock the geothermal potential in these regions.

Future Outlook and Projections for Indonesia Geothermal Energy Market on the Basis of Revenues in USD Billion, 2024-2029

Indonesia Geothermal Energy Market Segmentation

• By Market Structure:

• State-Owned Enterprises

• Private Developers

• Public-Private Partnerships

• Independent Power Producers (IPPs)

• By Installed Capacity Range:

• <50 MW

• 50–100 MW

• 100–300 MW

• 300 MW

• By Energy Output:

• Industrial Sector

• Residential Sector

• Commercial Sector

• Off-Grid Solutions

• By Regions:

• Java

• Sumatra

• Sulawesi

• Flores

• Maluku

• By Technology Type:

• Flash Steam Power Plants

• Dry Steam Power Plants

• Binary Cycle Power Plants

• Enhanced Geothermal Systems (EGS)

• By End-User Segments:

• Industrial Users

• Commercial Establishments

• Rural and Off-Grid Consumers

• Government and Utilities

Players Mentioned in the Report:

• PT Pertamina Geothermal Energy

• Star Energy Geothermal

• PT Geo Dipa Energi

• Sarulla Operations Ltd.

• Supreme Energy

• PT PLN (Persero)

• Medco Power Indonesia

• Ormat Technologies Inc.

• KS Orka Renewables Pte Ltd

• PT Sokoria Geothermal Indonesia

Key Target Audience:

• Geothermal Energy Developers

• Renewable Energy Investors

• Equipment Manufacturers and Suppliers

• Regulatory Bodies (e.g., Ministry of Energy and Mineral Resources)

• Research and Development Institutions

Time Period:

• Historical Period: 2018-2023

• Base Year: 2024

• Forecast Period: 2024-2029