Despite having 40 percent of the world's total geothermal potential, Indonesia only utilizes about four to five percent of its vast geothermal reserves. The main problem for geothermal energy development in Indonesia is the legal framework. Currently, geothermal activities are lawfully defined as 'mining activities' (Law No. 27 2003), which implies that it is prohibited to be conducted in protected forest and conservation areas (Law No. 41 1999), even though geothermal mining activities have a small impact on the environment (compared to other mining activities). However, about 60 percent of Indonesia's geothermal energy is located in soils beneath protected forest and conservation areas and thus is prohibited to be extracted. The government of Indonesia has only recently realized the potential of geothermal energy in the country and is therefore yet to create a conducive climate, in particular a sound legal framework. If this new bill is approved by a plenary meeting in April 2014 then it is expected to give a boost to the country's geothermal energy exploration and exploitation.

Another important point in the proposed bill is the obligation for geothermal concession holders to "sell a 10 percent interest to regionally owned enterprises or state-owned enterprises after it enters the exploitation stage." This provision intends to secure local participation (and benefit).

The Indonesian government has ambitious intentions to reduce the country's dependency on expensive and exhaustive fossil fuels by making renewable energy an important asset in the country's energy mix:

   Energy Mix
 Energy Mix
Oil         50%         23%
Coal         24%         30%
Gas         20%         20%
Renewable Energy          6%         26%

Source: Ministry of Energy and Mineral Resources

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