Geothermal energy in El Salvador: a 2026 legal guide to permits, exploration and concessions

El Salvador’s Geothermal Energy Law, enacted through Legislative Decree No. 404 and effective since March 15, 2026, created a special regime for prospecting, exploring and exploiting geothermal resources for electricity generation and direct uses.

The regime distinguishes a prospecting permit, an exploration authorization, a direct-use permit for a narrow class of projects and a concession approved by the Legislative Assembly. The General Directorate of Energy, Hydrocarbons and Mines —DGEHM— administers, regulates and supervises the sector, while the project must separately coordinate environmental, water and municipal requirements, as well as those of the system operator and network owners where applicable.

Developers, investors and lenders should focus on correctly classifying the project phase, securing site rights, coordinating environmental and water approvals, structuring the concession company and addressing restrictions on security interests, assignments and changes of control.

The Law was published in Official Gazette No. 173, Volume 448, on September 16, 2025. Article 84 provided a 180-day period before entry into force, making its effective date March 15, 2026.

It applies to natural subsurface heat recovered from steam, water, gases other than hydrocarbons or artificially injected fluids. It distinguishes high-enthalpy resources —at or above 150°C and suitable for power generation— from low-enthalpy resources ordinarily used for heating, cooling, industrial processes, agriculture or recreation.

Technical classification does not alone determine the legal instrument. A low-enthalpy direct-use project may still require a concession if it involves drilling, transportation or reinjection of fluids, or exceeds the statutory capacity threshold.

The Law assigned geothermal regulation, supervision and enforcement to DGEHM from the outset. DGEHM issues permits and authorizations, maintains the Geothermal Registry, receives technical information, verifies compliance, manages concession proceedings and imposes sanctions.

Since July 17, 2026, DGEHM has also exercised the general electricity-sector functions formerly held by SIGET. Legislative Decree No. 620 provides that electricity-sector references to SIGET in legislation and other instruments are read as references to DGEHM. SIGET retains telecommunications functions.

Legacy forms and websites may still describe geothermal or electricity procedures before SIGET. They should not be relied upon as current filing instructions without confirmation from DGEHM.

Prospecting includes observation, remote sensing, aerial photography, sampling and preliminary studies. The permit is non-exclusive, lasts 12 months and may be renewed once for up to 12 additional months. It does not authorize exploitation or unrestricted entry onto land.

Exploration includes geological, geophysical and geochemical work, civil works, site preparation and exploratory wells. The authorization is exclusive within an area of up to 50 km², may last up to 36 months and can be extended once for up to 24 months. Applicants must demonstrate legal, technical and financial capacity and provide a work, investment and environmental fluid-management program.

As a general rule, geothermal electricity generation requires a concession. Article 24 establishes a special exploitation-rights regime for CEL, companies resulting from its restructuring and companies under its majority control. Direct uses also require a concession when they involve drilling, transportation or reinjection, or exceed 5 MW thermal. The private-sector permit exception is narrow: DGEHM may grant a renewable direct-use permit of up to 25 years only where the project is no larger than 5 MW thermal and requires none of those three operations.

Public tender is the default mechanism. Direct award is limited to timely exercise of the explorer’s preferential right and state-sponsored projects declared by DGEHM to be in the national interest.

DGEHM evaluates legal, technical and financial capacity, resource sustainability, environmental and social impacts and the commercial-operation deadline. Direct applications must include feasibility work, schedules, budgets and financing, a drilling and reinjection strategy, interconnection feasibility and a corporate social responsibility program representing at least 3% of project revenues.

Following evaluation, DGEHM sends the record, technical report and draft decree and contract to the Legislative Assembly. Once approved, the Attorney General and concessionaire execute the contract in a public deed and register it in the Geothermal Registry.

A foreign concession holder must establish a Salvadoran company. Final technical documents are due within 120 working days after the contract, and no field activity may begin until DGEHM accepts them.

Project assets may secure financing, but enforcement does not itself give a creditor the right to exploit the geothermal resource without legislative approval. The limitation should inform the security package, remedies, direct agreements and substitution or step-in scenarios.

Assignments, changes of control and relevant corporate changes require regulatory analysis and may require notice to DGEHM and prior approval by the Legislative Assembly. The corporate and financing structure should address these restrictions from the beginning.

The concession governs access to the resource; it does not replace other project approvals. The Environmental Law requires an environmental impact assessment and environmental permit for geothermal power plants. The geothermal regime also requires environmental coordination, mitigation and approvals for the relevant phases.

The Salvadoran Water Authority participates in aquifer protection and permits under the General Water Resources Law. Projects must also secure land, access, platforms and easements; construction and safety approvals; and applicable grid-connection and interconnection clearances.

Residual geothermal fluids must be reinjected to support reservoir sustainability. Each concessionaire must submit a Sustainability Protocol using volumetric methodology and indicators designed to determine sustainable extraction over a 50-year horizon.

The regime includes periodic reports, groundwater monitoring, insurance, emergency and contingency plans and immediate incident notification. DGEHM may suspend work, close facilities or order dismantling where serious danger exists.

Geological, geophysical, geochemical and geohydrological information must be delivered to DGEHM. It remains confidential during the term of the right but becomes public upon termination, revocation or lapse. Contracts and information protocols should account for that statutory transition.

Article 83 provides that the President will approve implementing regulations but sets no deadline. As of August 29, 2026, the official sources reviewed did not disclose an executive decree expressly identified as the Regulations to the Geothermal Energy Law.

This matters because the Law delegates surface, generation and direct-use charges to the regulations. Before a financial model is finalized or an application filed, parties should verify directly with DGEHM and the Official Gazette whether later regulations or technical rules have been issued.

The 2026 Special Regulations to the Renewable Energy Promotion Law —RELFUER— implement a different statute and are not the geothermal regulations. Under Article 10 of Legislative Decree No. 620, instruments issued by SIGET remain effective only to the extent they do not conflict with the new framework and until DGEHM amends or repeals them.

The legal roadmap should coordinate technical resource development with corporate, environmental and financing milestones.