How does El Salvador’s geothermal law structure access to underground resources while setting conditions for energy projects?
A single regulator now administers the sector
El Salvador’s Geothermal Energy Law creates a regulatory framework for prospecting, exploring and exploiting underground resources across the country. Its central mechanism is a sequence of permits, authorisations and concessions intended to organise access to geothermal fields and support both electricity generation and direct uses of underground heat. The Directorate of Energy, Hydrocarbons and Mines, known as the DGEHM, is responsible for regulation, supervision and enforcement. It must manage the Geothermal Register, process applications, issue technical criteria and prepare complementary rules. For businesses, the arrangement makes the administrative route part of the project design: the rights needed for investigation, development and production are not treated as a single approval.
The law separates investigation from production
The framework divides a geothermal project into prospecting, exploration and exploitation, with a different administrative instrument and technical, financial and environmental duties for each stage. It also distinguishes high-enthalpy resources, reaching or exceeding 150°C and considered suitable for electricity generation, from lower-enthalpy resources intended for direct thermal uses. Those uses include heating, cooling, industrial processes, agriculture and recreation, widening the potential market beyond power stations. Exploration authorisations are exclusive and may cover up to 50 square kilometres. They can last for up to 36 months, with one extension of up to 24 months where the request is made six months before expiry and supported by documentation.
Concessions carry environmental and corporate conditions
A concession gives its holder the exclusive right to use geothermal resources and the heat contained in fluids within the allocated field. That right applies for the authorised period, but cannot overlap an earlier concession or exploration activity whose application is still awaiting a decision. Foreign concessionaires must establish a company domiciled and registered in El Salvador. Their programme must include an investment equivalent to at least 3% of project revenues, carried out at the site where the plant is installed. The law does not specify, in the reviewed passages, how community monitoring would operate or where those resources would ultimately go. Concession holders must also reinject residual geothermal fluids and support monitoring of possible effects on groundwater, state water intakes and existing infrastructure.
Tax relief is directed at new electricity investment
The fiscal provisions focus on holders of geothermal concessions or exploitation rights who make new investments in electricity-generating plants or expand existing facilities. For 10 years, qualifying machinery, equipment, materials and inputs for pre-investment, construction and expansion works can receive a full exemption from import duties, including items for associated substations and transmission or distribution systems. The relief excludes goods subject to selective consumption taxes, passenger transport vehicles and household articles. Applicants must seek the exemption from the Ministry of Finance within 15 days of importation and support it with project documentation endorsed by the DGEHM. The law also provides 10 years of income-tax exemption for revenue directly derived from geothermal generation, alongside specified deductions and exemptions linked to reinjection and environmental instruments.
IN NUMBERS
The law therefore combines controlled access to the resource with incentives for qualifying generation projects. Its transferable feature is the staged model: early investigation, exclusive exploration and later exploitation are separated, while environmental obligations and fiscal benefits are attached to the relevant phase or investment. The DGEHM’s registers, technical criteria and complementary rules will determine how that framework operates in practice.
Reported from infobae.com, 2026-09-14. The Tender Wire is published by Otnox.
