Organic Law on Geothermal Resources (Ley Organica de Recursos Geotermicos)

Source: JOIN IEA/IRENA Policy and Measures Database
Last updated: 29 March 2017

The Organic Law on Geothermal Resources (Law No. 26848) and its regulations were promulgated to promote the development of geothermal resources. In April 2010, a Regulation to the Law 26848 was approved with the objective of introducing private investment in developing geothermal energy source. Also, the Ministerial Resolution No.191-2007-PCM supports the Law by establishing a Multisectoral Technical Commission on Geothermal.

The law and its regulations establish the regime for geothermal energy exploration and concessions:

  • Geothermal activities need to obtain concession for electricity generation under the Electricity Concession Law. 
  • Concessions are awarded for 30 years, automatically extendable for the same duration as existing electric concessions. 
  • They are subject to a geothermal tax no larger than 1% of annual sales. 
  • Soliciting a concession requires a guarantee of 1% of the total investment, which is increased to a 5% construction guarantee if the concession is awarded. The construction guarantee can be gradually released each time 25% of investment is executed.

In tax matters, this Law mainly establishes the following benefits:

  • Amortization of expenses incurred in the exploration stage over a period of five years, or on the basis of 'production units'.
  • Authorization to carry accounting in foreign currency. However, only companies in the exploration stage could benefit from this benefit.
  • Stability of the tax regime in force at the time the authorizations are granted or the concession contracts are signed.

After implementation of new Regulation of the Organic Law of Geothermal Resources in April 2010, the multiple requests for authorization of geothermal rights were presented to the Ministry of Energy and Mines (MINEM). Applications of 98 projects were notified in the official newspaper by December 2011. MINEM gave authorization of 20 projects to four companies by February 2012.

Environmental Impact Assesment: Under Articles 30 and 49 of the law, EIA survey documents are required to be attached to the application for geothermal development concession, and EIA is essential for geothermal resources development.

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