Description: 

A $150 million project to develop geothermal projects throughout Indonesia with the objective of overcoming traditional financial barriers to increase penetration and investment security.

Background:

The Government of Indonesia remains focused on diversifying its electricity generation mix through increased production and use of indigenous renewable energy resources, institutionalization of energy sector reforms, and implementation of energy conservation initiatives. Released in 2011, Energy Vision 25/25 calls for the increased penetration of clean energy into the generation mix, increasing the utilization of renewable energy from 17 percent of the generation mix to 25 percent by 2025 and reducing energy demand by 15.6 percent relative to a projected business as usual scenario.

While geothermal energy projects provide renewable power and energy security, they face difficulties in implementation mostly due to the geological and technological risks associated with exploration, development, and long-term operations. The $150 million CTF program to facilitate commercial lending and the financial close of geothermal power projects undertaken by the private sector and state owned enterprises borrowing without the benefit of a government guarantee.

Objectives and Outputs:

Geothermal represents one of the best options for diversifying the country’s primary energy mix. This is because existing geothermal power plants in Indonesia routinely operate more than 80 percent of the time, thus providing baseload power and resolving intermittency issues faced by solar and wind.

The program will catalyze the demonstration, replication, and scale-up of the geothermal sector in Indonesia. The proposed financial products will be aligned to specific project risks, and detailed financing plans will vary from project to project. It will demonstrate the viability of new power purchase agreements for geothermal projects which may have a multiplier effect with respect to other types of renewable energy projects (e.g., biomass cogeneration) that face similar issues. More importantly, the program will facilitate financial closure of landmark projects that improve bankability across the sector and remove barriers and establish new milestones for accelerated development.

The proposed investments will facilitate 750 MW of geothermal capacity, with output of 5,913 GWh/year. GHG reductions are 4.4 million tCO2e/year assuming a grid emissions factor of 0.75 tons CO2e / MWh. The saved emissions of hazardous pollutants from fossil fuel power plants deliver substantial societal, environmental, and climate co-benefits as well.

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.

ADB Project Portal

In the News:
ADB provides 350 mln USD loan for Indonesian geothermal plant (Shanghai Daily, March 31, 2014)
Innovative ADB Loan to Help Unlock Indonesia’s Clean Energy Potential (ADB, July 22, 2014)

Project Details
Cover Note | Project Document | External Review | ADB Response to External Review | Proposed Decision 
Approved on October 11, 2013 (Approved Decision)
Approved amount(s):
USD 149.25 million
USD 750,000 (MPIS)