Description: 

A $50 million investment in geothermal substations to catalyze investor confidence in geothermal energy development while bringing direct energy supply benefits and environmental co-benefits.

Background:

Indonesia finds itself at the crossroads of an expanding economy, energy supply failing to meet demands, and ranking as one of the world’s top greenhouse gas (GHG) emitters. To keep up with increasing energy demand while meeting internal and international expectations to mitigate GHG emissions, the Indonesian government is leveraging CTF finance to develop its massive geothermal energy potential.

Under the Vision 25/25 Plan, Indonesia plans to supply 25 percent of electricity demand with renewable energies by the year 2025 and has set a target to install 12,000 MW of new geothermal by the same year. Longer term targets aim for a 15,000 MW of geothermal by 2030 and 25,000 MW by 2050.

Objectives and Outputs:

This IGEF Program consists of a series of sub-projects, which will catalyze financing from commercial investors and lenders in the geothermal sector with the aim to unlock the pipeline of potential geothermal projects.

The IGEF Program will play a catalytic role towards transformation of the geothermal sector in Indonesia. The program will support early private sector initiatives in a series of geothermal investment sub-projects. CTF funding will be used to allow these sub-projects to complete the exploration phase and reach financial closure. This will create a precedent for the successful completion of geothermal projects that is needed to give confidence and security to the industry.

The 660 MW capacity sub-projects are expected to directly generate GHG emission reductions of 110.7 million tCO2e over thirty years. As successful projects are completed, it is estimated that 3,200 MW of geothermal capacity can be developed, which would generate 500 million tCO2e savings or more over the estimated 30-year lifetime. The Program is anticipated to generate 1,300 jobs during construction and 1,100 jobs during operation.

The Program will also allow the broader financial community enhanced understanding, along with the ability to gauge exploration and other risks. This will incentivize senior lenders and other capital providers to participate in the development cycles of geothermal projects. The knowledge generated by the experience of the investment projects will become available to benefit future market entrants.

Additionally, the demonstration effect of the proposed sub-projects should lead the way for developers, investors, and lenders to follow with scaled up investment. It is anticipated that the momentum created by the Program will indirectly assist in a broader range of geothermal energy projects.

This project summary is drawn from draft project proposals [such as the PAD, PID, SAR, and country investment plan] and may not contain the most up-to-date information.

Project Details
Project Document | Proposed Decision
Approved on December 20, 2013 (Approved Decision)
Approved amount(s):
USD 49.3 million 
USD 700,000 (MPIS)