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Understanding the Stakeholders Behind a Geothermal Project
Indonesia has significant geothermal resources, but converting underground heat into a commercially operating power project requires more than resource potential. A developer must establish a route through which the electricity can enter the grid, reach customers, and generate long-term revenue.
For most utility-scale, grid-connected geothermal projects in Indonesia, this route is centred on PT PLN (Persero).
The geothermal developer develops the resource and power plant, while PLN acts as the principal electricity offtaker and grid operator. The relationship between the two parties is governed by a long-term Power Purchase Agreement, or PPA—referred to in Indonesian regulations as a Perjanjian Jual Beli Tenaga Listrik or PJBL.
Understanding this structure is essential for evaluating how a geothermal opportunity becomes an investable power project.
The Basic Electricity Sales Structure
In the standard grid-connected structure, a geothermal developer does not sell electricity directly to households, commercial buildings, or industrial customers.
Instead, the commercial flow generally works as follows:
The geothermal developer confirms and develops the resource.
The developer drills the required production and injection wells.
The developer constructs the steamfield facilities and power plant.
The developer delivers electricity to an agreed connection or delivery point.
PLN purchases the delivered electricity under the PPA.
PLN transmits and distributes the electricity to customers through the grid.
Electricity customers pay PLN based on the applicable retail electricity tariff.
PLN therefore sits between the power producer and the electricity customer. It is the developer’s PPA counterparty, electricity buyer, and connection to the wider power market.
This structure means that the revenue of a geothermal developer primarily comes from electricity payments made by PLN—not directly from end users.
In simplified terms:
Project Revenue = Net Electricity Delivered × Contracted PPA Tariff
The actual payment mechanism may also include contractual adjustments related to metering, plant availability, dispatch, performance, indexation, penalties, or other provisions agreed in the PPA.
PLN as the Principal Offtaker
Indonesia’s electricity market is not structured like a fully open wholesale market in which power producers freely sell electricity to multiple competing buyers.
For a conventional utility-scale geothermal IPP connected to the national grid, PLN is generally the principal offtaker. PLN also plays a broader role in power-system planning, generation procurement, grid connection, transmission, distribution, and retail electricity supply.
As a result, a technically attractive geothermal resource is not automatically a commercially viable power project. It must also align with electricity demand, system planning, grid availability, procurement requirements, and PLN’s development schedule.nA project can have a strong geothermal resource and still face development constraints if its power evacuation and offtake pathway are not sufficiently defined.
The PPA as the Commercial Backbone
The PPA is more than an agreement on electricity price. It is the principal contract that converts a geothermal development into a long-term revenue-generating project.
A geothermal PPA typically establishes the commercial and operational relationship between the developer and PLN, including:
Contracted generating capacity
Electricity price and payment mechanism
Contract period
Scheduled commercial operation date
Delivery and metering arrangements
Plant performance and availability requirements
Grid connection responsibilities
Testing and commissioning requirements
Treatment of force majeure events
Allocation of project and operational risks
Default, termination, and compensation provisions
Environmental attributes and other applicable rights
Indonesia issued Ministry of Energy and Mineral Resources Regulation No. 5 of 2025 to provide a clearer framework for renewable-energy PPAs between PLN and independent power producers. According to the Ministry, the regulation addresses areas including payment mechanisms, risk allocation, geothermal commercial operation dates, price changes, domestic-content requirements, environmental attributes, and refinancing.
For investors and lenders, the quality of the PPA is therefore as important as the headline electricity price. A tariff may appear attractive, but the project may still be difficult to finance if key risks are not clearly or appropriately allocated.
Ceiling Tariff, PPA Tariff, and Retail Tariff
Three different pricing concepts are often confused when discussing geothermal electricity in Indonesia.
The ceiling tariff is the maximum regulatory benchmark applicable to PLN’s purchase of renewable electricity under the relevant pricing framework. It is not an automatic or guaranteed selling price for every project.
The PPA tariff is the actual contractual price agreed between PLN and the geothermal developer. This is the price directly connected to the developer’s electricity revenue.
The retail electricity tariff is the price paid by electricity customers to PLN. It is separate from the PPA tariff and does not represent the amount received by the geothermal developer.
A project should therefore not be evaluated using the ceiling tariff alone. Commercial viability must be tested using the expected PPA tariff together with capital expenditure, drilling success, financing structure, construction schedule, operating performance, and the timing of electricity sales.
Where the Other Stakeholders Sit
Although the electricity-sale transaction is primarily between the developer and PLN, numerous other stakeholders influence whether the project can reach commercial operation.
The Ministry of Energy and Mineral Resources establishes the geothermal and electricity-sector policy framework. Its responsibilities include geothermal working areas, licensing, development requirements, and the regulatory framework for renewable-electricity procurement and sales.
The Ministry of Finance has a role in applicable fiscal facilities, financing programmes, government guarantees, and risk-allocation mechanisms. However, access to such facilities is subject to the relevant eligibility and approval requirements and should not be assumed automatically.
Environmental, forestry, land, and regional authorities influence environmental approvals, forest-area access, spatial alignment, land matters, and local implementation.
Local governments and communities are essential to land access, community acceptance, regional coordination, and long-term project continuity. Their position is not part of the electricity payment chain, but it can materially affect project schedule and execution.
Investors and lenders provide the capital required to develop the field and power plant. Their assessment generally covers resource risk, drilling requirements, construction cost, PPA bankability, grid readiness, regulatory compliance, completion risk, and expected financial returns.
Drilling contractors, EPC companies, technology providers, and other service companies convert the development plan into producing wells, steamfield infrastructure, and operating generation capacity.
Each stakeholder therefore occupies a different position, but the project only progresses when the technical, commercial, regulatory, financial, and local interfaces are aligned.
What Investors Should Examine
Before committing substantial capital, an investor should look beyond Indonesia’s geothermal potential and published ceiling tariff.
The central questions include:
Has the geothermal resource been sufficiently confirmed?
Is the project’s legal and licensing position clear?
Is there a defined and executable route to a PPA?
Does the power system require the proposed generation capacity?
Is the grid connection technically and commercially feasible?
Are the proposed PPA terms capable of supporting project financing?
Are drilling, construction, and completion schedules realistic?
Have environmental, land, forestry, and community interfaces been addressed?
Can the project reach commercial operation within the required timeframe?
The commercial value of a geothermal opportunity is created when resource confidence, grid access, PPA terms, project execution, and financing can work together—not when any one of these elements is considered in isolation.
From Resource Potential to Revenue
Indonesia’s geothermal electricity-sales structure may appear simple: the developer generates electricity, PLN purchases it, and PLN supplies it to customers.
In practice, reaching that point requires coordination across resource development, government approvals, grid planning, commercial negotiation, drilling, construction, financing, and stakeholder management.
A successful project must therefore be developed from both directions: from the geothermal resource toward a technically reliable power plant, and from the electricity market toward a bankable and executable offtake structure.
PT Armada Energi Solusi integrates opportunity screening, stakeholder and market access, regulatory navigation, commercial and offtake framing, drilling and field-development insight, and power-plant technology integration. This combined perspective helps translate geothermal potential into a development pathway grounded in technical reality and commercial requirements.
References
This article provides a general overview based on regulations and information available as of September 2026. The applicable structure and requirements should be confirmed for each individual project.
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