The Asian Development Bank (ADB) has approved a $500 million loan program that the bank said will boost efforts by the government of Indonesia to scale up renewable energy through price incentives for geothermal, biomass and small hydropower, and set up an energy efficiency marketplace, according to an Oct. 2 ADB statement.
“Indonesia’s energy sector has suffered severe underinvestment due to long-standing subsidies on fuel and electricity,” Pradeep Tharakan, senior energy specialist in ADB’s Southeast Asia regional department, said. “This has resulted in poor access to modern forms of energy despite the country’s vast energy resource endowment.”
The loan program, which includes $100 million from the ADB-administered ASEAN Infrastructure Fund, will support President Joko Widodo’s reform agenda to improve overall governance in the energy sector by lowering subsidies, adopting cost-recovery-based tariffs and boosting the performance of state-owned enterprises, such as PLN, the state-owned electrical utility, ADB said.
ADB’s loan will be complemented by about $800 million in potential co-financing from key development partners.
The government of Indonesia said in September that it will tender three geothermal energy projects in October. The projects are the Way Ratai in South Sumatra, Bukit Kili in West Sumatra, and Marana in Central Sulawesi fields.
Indonesia is estimated to contain about 40 percent of the world’s geothermal reserves, according to investment and development firm Indonesia Investments.
Also in September, Aboitiz Power Corporation said that its wholly owned Singapore-based subsidiary AboitizPower International entered into an agreement with PT Medco Power Indonesia to participate in the exploration and development of a potential greenfield geothermal plant in East Java Province.
PT Medco Cahaya Geothermal, a subsidiary of PT Medco Power Indonesia, will develop the project and is currently in the resource validation and exploration stage.