MNRE Unveiled India's First National Policy on Geothermal Energy

MNRE’s ₹30-Year Bet on Geothermal Energy: Promise or Premature Optimism?

On September 17, 2025, the Union Ministry of New and Renewable Energy (MNRE) unveiled India's first National Policy on Geothermal Energy, aiming to unlock the estimated 10,600 MW geothermal potential distributed across 10 identified provinces. The announcement signals India's ambition to add subterranean heat to its renewable energy mix but raises operational and structural questions rarely addressed in policymaking fanfare. The policy promises fiscal incentives akin to tax holidays and concessional loans, community engagement in tribal areas, and international collaboration with geothermal technology leaders. But the execution timeline—projects supported for up to 30 years—reveals a long path fraught with technical, institutional, and geographic hurdles.

India’s Geothermal Policy: A Departure from Status Quo?

Until now, India’s renewable energy strategy has been centered on more proven technologies like solar and wind energy, which together account for over 88% of renewable capacity installations. Geothermal energy, despite robust international trials, remained a neglected asset—categorized as expensive, geopolitically irrelevant, and geographically site-specific. The MNRE’s pivot changes the narrative. For the first time, India will actively pursue geothermal block allocations, exploration permits, and joint ventures between oil and gas companies for resource sharing. This is a notable break from past inertia.

Yet, this policy surfaced without meaningful groundwork in operational benchmarking. India ostensibly joins the ranks of advanced geothermal nations, but its geothermal gradient—a modest 25–30°C/km compared to significantly higher gradients in Indonesia or New Zealand—should temper expectations.

The Institutional Machinery Behind the Policy

The framework is ambitious, offering 100% FDI, fiscal instruments like tax holidays, and state guidelines for exploring geothermal blocks. Financially, the government has aligned instruments such as Viability Gap Funding (VGF), sovereign green bonds, and concessional loans issued by IREDA. Pilot projects will pivot under the Renewable Energy Research and Technology Development Programme.

Additionally, MNRE’s plan emphasizes centres of excellence for technical capacity building and collaboration with global leaders. Structurally, the policy proposes adaptability: abandoned oil and gas wells may pivot to geothermal energy hubs, reducing upfront exploration costs. However, periodic progress reports mandate accountability—a vital step given India’s poor historical record with milestone tracking in less-mature technologies.

On state involvement, the policy mandates single-window clearance systems for permits—a familiar promise that often falls prey to bureaucratic inefficiency and political interference.

What the Data Reveals: The India-Specific Challenges

India does not carry the high-enthalpy resources characteristic of geothermal superpowers such as the United States (operating a global-leading 3.7 GW capacity). Even advanced mapping initiatives like the Geothermal Atlas of India, 2022 reveal resource limitations—medium- to low-enthalpy zones with surface temperatures of 100–180°C, most suitable for direct-use applications over electricity generation.

Moreover, while 381 hot springs exist across the country, their development requires capital-intensive drilling. Current estimates place upfront costs at roughly ₹12–18 crore per MW, nearly triple that of solar installations. To suggest such sites will generate economically viable electricity ignores their geographic distribution—many concentrated in remote areas without robust infrastructure.

Critically, the projected capacity utilization of geothermal plants exceeds 80%. Yet, these claims often fail to account for India's peculiar geology. Enhanced Geothermal Systems (EGS) and Advanced Geothermal Systems (AGS), hailed as solutions, remain nascent and untested against India’s specific needs.

The Critique: Institutional Weaknesses and Geo-Specific Risks

Despite the MNRE’s enthusiasm, the shift to geothermal energy represents bureaucratic overreach in ambition and underreach in preparedness. The primary institutional risk arises from assuming that fiscal instruments alone will drive uptake. The policy prioritizes foreign investment and pilot projects without guaranteeing states the capacity to adapt geothermal technologies to local conditions.

Key gaps persist in research prioritization. Contrast this with Indonesia, which rapidly scaled up geothermal reliance using state-owned enterprises like PLN Geothermal to bridge financing needs at the grassroots levels. Indonesia's success stemmed not just from possessing high-enthalpy resources but from well-coordinated national committees overseeing implementation. India lacks such embedded supervisory mechanisms, relying instead on a loose coordination framework between IREDA, DFIs, and private players.

Another concern is long-term community resistance. Land leasing at concessional rates may face opposition in tribal regions where land alienation has ignited tensions. Past projects—for instance, hydropower projects in high-altitude states—offer a cautionary tale for balancing developer incentives against socio-political realities.

International Comparison: Lessons from New Zealand

Consider New Zealand, which harnesses geothermal heat for both electricity and agricultural use in its Rotorua district. Unlike India, New Zealand’s geothermal policy actively integrates indigenous partnerships under the Māori Investment Strategy. Community co-benefits include job creation, revenue sharing, and infrastructural upgrades, reducing pushback and accelerating adoption.

India’s approach—soft loans and tax holidays—is investor-focused but relatively silent on community-specific rewards beyond vague compensatory frameworks.

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