In the pursuit of clean, sustainable, and reliable energy, geothermal power has emerged as one of the most promising options. It provides baseload electricity, produces minimal emissions, and can help nations reduce reliance on fossil fuels. However, the expansion of geothermal energy—especially in developing economies—requires more than just natural geothermal potential. It needs strategic and supportive government policies to create an enabling environment for investment, innovation, and deployment.

This article explores how government policy plays a pivotal role in driving geothermal energy development, the types of policies that work best, and case studies—including Kenya’s success—to illustrate the impact of public sector involvement.

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1. Why Government Policy Is Critical for Geothermal Energy

Geothermal development differs from other renewables like solar and wind in that it involves:

• High upfront costs (especially in exploration and drilling),

• Long development timelines (5–7 years on average),

• Technical and geological risks,

• A need for specialized expertise and infrastructure.

These factors make private investment risky without policy support. Effective government policies help by:

• De-risking investments,

• Facilitating access to land and data,

• Offering financial and technical incentives,

• Setting regulatory frameworks for safe and sustainable operations.

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2. Key Government Policies That Support Geothermal Development

Here are the most important types of policy interventions that can stimulate geothermal growth:

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a) Feed-in Tariffs (FiTs) and Power Purchase Agreements (PPAs)

Feed-in Tariffs guarantee a fixed, above-market price for electricity produced from renewable sources, including geothermal. This assures developers of long-term returns on investment.

Power Purchase Agreements provide contractual certainty for developers by locking in a buyer (usually a national utility) at agreed rates and terms.

These tools are crucial in attracting Independent Power Producers (IPPs) to the geothermal sector.

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b) Risk Mitigation and Exploration Support

Geothermal projects carry exploration risk—developers can spend millions before confirming a viable resource. To mitigate this:

• Governments can provide exploration insurance or partial risk guarantees.

• Public agencies can carry out initial exploration and then open the field to private developers.

• International donors and multilateral banks can be partners in risk mitigation facilities.

Example: The African Union’s Geothermal Risk Mitigation Facility (GRMF) offers grants for surface studies and drilling across East Africa.

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c) Tax Incentives and Investment Allowances

Fiscal incentives encourage private capital by improving project economics. These include:

• Accelerated depreciation of geothermal equipment,

• Tax holidays or exemptions,

• Import duty waivers for drilling rigs, turbines, and other equipment.

Kenya offers zero-rated VAT on renewable energy equipment, which has helped reduce geothermal project costs.

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d) Regulatory and Institutional Frameworks

A transparent, efficient, and investor-friendly regulatory environment is essential. Effective frameworks should:

• Clearly define land rights and subsurface ownership.

• Establish licensing processes for exploration and production,

• Ensure environmental and safety standards,

• Create a single-window system to streamline approvals.

A strong geothermal regulatory agency or department ensures coordination and compliance.

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e) Public-Private Partnerships (PPPs)

Governments can partner with private firms to:

• Share capital costs,

• Split exploration and development phases,

• Leverage technical expertise while retaining public oversight.

PPPs allow governments to retain control over strategic geothermal resources while enabling private sector efficiency.

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3. Kenya: A Model for Policy-Driven Geothermal Growth

Kenya is a global leader in geothermal energy, generating over 950 MW, which accounts for nearly 50% of its electricity mix. This achievement stems largely from deliberate policy actions, including:

• Establishing the Geothermal Development Company (GDC) to handle high-risk exploration and resource confirmation.

• Offering guaranteed tariffs and attractive PPAs through the Energy and Petroleum Regulatory Authority (EPRA).

• Creating a clear legal framework under the Energy Act, 2019, which defines roles and licensing.

• Encouraging private sector participation via tenders and joint ventures at Olkaria, Menengai, and Baringo-Silali fields.

• Hosting an investor-friendly climate, supported by consistent government backing and development partner engagement.

Kenya’s experience shows how policy, planning, and execution can unlock the full potential of geothermal power—even in a developing economy.

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4. Lessons from Other Countries

Other nations provide useful case studies in geothermal policy development:

• Iceland: Offers government-funded geological surveys and local heating subsidies to encourage geothermal use in homes and businesses.

• Indonesia: Introduced risk-sharing mechanisms and pricing reforms to attract private geothermal developers in remote islands.

• United States: The Department of Energy supports R&D and offers tax credits, especially for Enhanced Geothermal Systems (EGS).

• Philippines: Liberalized its energy market in the 1990s, leading to the growth of geothermal IPPs like Energy Development Corporation (EDC).

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5. International Support and Multilateral Engagement

Governments often partner with international bodies to accelerate geothermal projects. Key actors include:

• World Bank and IFC: Provide concessional loans and policy advisory services.

• GEF (Global Environment Facility): Offers technical assistance for policy design and resource mapping.

• AFD, JICA, and KfW: Bilateral agencies that co-finance geothermal exploration and drilling.

• IRENA and IGA: Promote global policy dialogue, training, and knowledge sharing.

Kenya, Ethiopia, and Djibouti have all benefited from this type of support in developing their geothermal sectors.

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6. Policy Challenges to Address

Despite progress, policy gaps still hinder geothermal expansion in some countries:

• Bureaucratic delays in approvals and licensing,

• Inconsistent or unclear regulations,

• Lack of local expertise in geothermal engineering and project finance,

• Political risk or shifting government priorities.

Strong policy design must be adaptive, consultative, and stable, ensuring long-term investor confidence.

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7. Future Directions for Geothermal Policy

To scale geothermal globally, future policy should focus on:

• Scaling Enhanced Geothermal Systems (EGS) through grants and R&D funding,

• Incentivizing direct use applications in agriculture and manufacturing,

• Promoting community engagement to ensure local benefits and acceptance,

• Creating regional geothermal corridors and cross-border power-sharing frameworks (e.g., East African Power Pool).

Ultimately, policy must be visionary and pragmatic, combining energy, economic, and environmental goals.

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Conclusion: The Power of Policy in Driving Renewable Growth

Government policy is the cornerstone of successful geothermal development. By offering a blend of financial incentives, regulatory clarity, and risk reduction, governments can unlock vast geothermal resources, attract private investment, and deliver affordable, clean energy to their populations.

Kenya’s geothermal success, alongside lessons from Iceland, Indonesia, and others, demonstrates that with the right policies in place, even high-cost, high-risk technologies like geothermal can thrive.

As the world seeks to meet climate goals and expand energy access, well-designed geothermal policy will not just be helpful, but essential.