This law updates previous geothermal laws and regulations, and separates geothermal activities from other natural resources exploitation such as mining. This may mean that geothermal exploitation will no longer be subject to the restrictions that apply to mining activities. It also specifies that tenders for geothermal exploration will now be issued by central government.
The new law also requires that local communities either receive a share in revenue or a production bonus from the geothermal power plant.
The basic structure of the law (building on Law No. 27/ 2003 and associated regulations) seeks to provide a stronger legal basis for upstream geothermal energy development, including private investments in the sector and to expand regional autonomy to support sustainable energy alternatives to fossil fuels. There is a fiscal incentive for new renewable energy development.
In 2005, the Directorate of Geothermal Enterprise Supervision and Groundwater Management was created, to strengthen the sector's management efficiency.
The regulations set out all the requirements and obligations for businesses seeking to establish themselves in this sector, including the coordination with the different levels of government, and the requirements to adhere to environmental quality and conservation legislation.
This law formally recognises that decreasing environmental quality is a serious problem for Indonesia, and that climate change presents further systemic threats. It seeks to ensure that development is underpinned with the principle of sustainably and environmentally sound development principles.
In practice this means that environmental protection and management should be integrated into all efforts to preserve the functioning of the environment, which includes the development of environmental monitoring programmes and development project impact evaluations.It concerns ecosystem integrity (such as forest ecosystems, which is why the legislation is relevant to REDD+) but also the release of toxic materials into the environment.
Sets out the need to develop GHG inventory for climate change policy development.
This comprehensive energy legislation stresses the importance of sustainable development, environmental preservation and energy resilience in national energy management. In terms of supply-side policies, it requires that more attention should be given to new and renewable energy development and that incentives should be developed for energy providers to do so. It includes a target to increase the share of renewables from 4.3% in 2005 to 15% by 2025.
The Law promotes national energy efficiency. There are a series of measures proposed to achieve this. First is the creation of an inventory of energy resources. Then, energy stocks resources should be increased. Furthermore, the energy supply should be diversified, with a simultaneous promotion of energy conservation. The Law also addresses the distribution network, with the goal of improving the quality of storage and transmission.
The Law also requires that energy is provided for under-developed, remote and rural areas by exploiting local energy potential, and renewable energy in particular. Throughout these developments, there should be a prioritisation of environmentally friendly technologies.