PANGALENGAN, Indonesia—In this serene corner of Java, farmworkers pick tea leaves from striped-green hills threaded with pipes. The three-foot-wide pipes carry steam from a broiling underground reservoir, a reminder of the volcano that once erupted.

Here, along the volcano-rich Ring of Fire, the Wayang Windu Geothermal Power Station uses the Earth's heat to produce energy that emits few or no greenhouse gases. It aims to expand, because it's discovered what may be the world's biggest hot steam well.

"We have a very big resource," says plant engineer Boyke Bratakusuma, as he points to the increasingly deep exploratory wells that Jakarta-based Star Energy is drilling in the shadow of the Wayang and Windu Mountains.

Indeed, this archipelago nation has the world's largest known geothermal reserves, and it desperately needs clean energy. Now the fourth most populous country, it's developing so rapidly that a quarter of its people still live in homes without electricity. Awash in cheap coal, it relies on coal-fired power plants for nearly half its electricity and plans to expand that usage.

An alternative to fossil fuels, geothermal has potential far beyond Indonesia. It could help tame global warming by producing copious amounts of renewable energy. The United Nations estimates global reserves at about 200 gigawatts—double the total capacity of all U.S. nuclear power plants. Yet despite decades of effort, only 6.5 percent of that potential has been tapped.

Indonesia's story explains why.

Volcanoes Offer Peril and Promise

A chain of more than 17,000 islands, Indonesia has dozens of active volcanoes—more than any other country. Those volcanoes offer the nation a potent energy source via deep underground reservoirs of hot water that seeps out of molten rock. Power plants can extract steam from those reservoirs and use it to turn turbines that generate electricity.

View Images NG STAFF SOURCE: VOLCANOLOGICAL SURVEY OF INDONESIA

Geothermal energy has ancient roots. The Romans used it to heat buildings in the city of Pompeii, and in medieval times people fought wars over lands with hot springs. Such "hot spots" dot the globe. In the United States, they're mostly found in Alaska, California, Oregon, and Nevada. (See related blog post: "Costa Rica Eyes National Parks' Volcanoes for Energy.")

Indonesia currently produces the third largest amount of geothermal power, after the U.S. and the Philippines. Still, it's tapping less than 5 percent of its potential 29-gigawatt capacity. It has 62 projects under way, and if all get built, Indonesia could overtake the Philippines by the end of this year and the U.S. in another decade or two, according to a 2015 industry analysis by the Washington-based Geothermal Energy Association. (See related blog post: "Nicaragua Looks to Geothermal for Energy Independence.")

"Its resources are so startlingly good," says Paul Brophy, president of EGS Inc., a California-based firm that recently did consulting work for Indonesia's government on the geothermal industry.

The country, aiming to triple geothermal output from 1.4 to 4.9 gigawatts by 2019 and to hit 10 gigawatts by 2025, is trying to fast-track projects.

Last year it amended a law to stop defining geothermal development as "mining" and thus allow work in protected forests, where many resources are located. The revision also shifts project approval from local to federal officials.

"That's critical," Brophy says, noting that the central government has more geothermal expertise.

Implementing the new provisions will take time, says Josh Nordquist of U.S.-based Ormat Technologies, which has invested in geothermal projects in Indonesia. Doing so could be a "real burden" for the government, he says, but adds, "I believe in the end it will work."

View Images The Wayang Windu plant extracts steam and hot water from underground reservoirs, using the steam to turn turbines that generate electricity. Photograph by Wendy Koch, National Geographic

Also promising is multimillion-dollar funding from the World Bank and other development groups, including Climate Investment Funds. In September, at the UN Climate Summit in New York City, Indonesia joined the U.S. and 22 other countries to form the Global Geothermal Alliance, aimed at reducing the financial risks of exploratory drilling.

Fiscal Challenges Linger

"Geothermal power plants are more complicated to build than solar and wind projects," says Ben Matek, industry analyst for the Geothermal Energy Association. "It's much easier to plop solar panels on a farm."

Yet geothermal offers something some other renewables don't—continuous power. With a steady supply of steam, geothermal power plants don't have to wait for the sun to shine or the wind to blow and can operate 24/7. (See related story: "Can Geothermal Pick Up Real Steam?")

Attempts to tap that potential come with substantial financial risk. Developers can spend millions of dollars just to build access roads to exploratory wells that might not deliver enough steam to make a project pay off. Some delay or pull out of projects when initial wells lack promise. Last year Chevron halted exploration in Lampung, Sumatra.

"This is the world's most common issue for geothermal power," says Herman Darnel Ibrahim, vice president of International Geothermal Association and former president of the Indonesian Geothermal Association.

Exploration risks, along with permitting and pricing problems, have slowed geothermal's growth. "There's a huge backlog of projects in Indonesia," says Matek.

He and other industry-watchers expect Indonesia will boost its geothermal capacity in the coming decade but perhaps not as quickly or extensively as its government would like.

Investors remain wary. Some U.S. companies that worked in Indonesia in the late 1990s lost a lot of money when the currency, the rupiah, was drastically devalued.

View Images Three-foot-wide pipes carry steam and hot water across the tea plantation. Photograph by Wendy Koch, National Geographic

"You have to have some stability," says Kevin Wallace of Idaho-based POWER Burns and Roe, who helped engineer the third unit of Chevron's Darajat geothermal power plant on Java, Indonesia's most populous island. Chevron has a second plant, Salak, on Java—home to six of Indonesia's nine operational geothermal power plants.

Wallace says there can be year-to-year fluctuations in how much the government pays for electricity and its overall support of geothermal energy, posing potential problems for developers with costly long-term projects.

Some projects have stalled for other reasons. Local officials stopped a proposed one on Bali, because residents were concerned about the impact of drilling in the Bedugul forests. Opposition may be softening, and the project may be reactivated, however, as increasing tourism on the island has caused frequent power shortages.

Other plants are moving ahead. In a landmark deal last year, after decades of delay, the mammoth 330-megawatt Sarulla project in Sumatra secured $1.2 billion in financing from its partners, which include Ormat and Medco Power Indonesia.

Unlike prior geothermal projects, it got funding for all three of its planned units at the same time, and the first unit is slated to begin operation next year.

View Images Transmission lines feed the plant's electricity into Java's power grid. Photograph by Wendy Koch, National Geographic

Why Wayang Windu Waits

Wayang Windu has no such guarantee. Its financing has come piecemeal, and its story stretches back even further. In 1985 a geological survey found hot spots near where the volcano erupted a thousand or so years ago, but it wasn't until 1994 that the government signed a contract to allow a 400-megawatt geothermal plant.

Years went by before the first unit opened in 2000 and the second in 2009. Their combined 227-megawatt capacity taps only a fraction of the area's potential. Another two or three units could be added if JStar Energy got a higher price for its electricity.

"The company is negotiating with the government," says Bratakusuma, the plant engineer, noting that a single well can cost $10 million to drill. Though the government said last year that it would pay between 11.8 cents and 29.6 cents per kilowatt-hour to attract projects, Star Energy gets paid less than the new minimum under its 30-year contract.

For now, the plant waits for a better price. In the meantime, it has become part of this rural community where local men pull crop-laden wooden carts and workers in cone-shaped straw hats pick tea leaves.

In the nearby village, powered by its electricity, Star Energy has built a school and a mosque, where many of its 200 employees worship alongside the families who harvest the fields on the tea plantation.