ADB approves US $300m loan to increase geothermal power generation in Indonesia

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The Asian Development Bank (ADB) has approved a US $300m loan to help PT Geo Dipa Energi (GDE), an Indonesian state-owned company, expand its geothermal power generation capacity by 110MW in Java, Indonesia; the country’s largest electricity grid and a challenging market for the development of renewable energy. ADB will also manage a US $35m loan from the Clean Technology Fund for the project.

According to ADB Country Director for Indonesia Winfried F. Wicklein, ADB’s geothermal project will help Indonesia combat climate change and make its electricity system more sustainable, reliable, and efficient. It will also help businesses and consumers access affordable, reliable, and modern energy. “Our support is aligned with Indonesia’s long-term goals for economic growth and energy, including maximizing the use of indigenous energy resources, diversifying the fuel mix, and ensuring environmental sustainability,” he added.

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Geothermal generation potential in Indonesia

Indonesia has the world’s largest geothermal potential, with an estimated 29 gigawatts (GW), and the world’s second-largest installed geothermal capacity of 2.1GW. ADB, through its private sector finance operations, has had a long-standing interest in Indonesia’s geothermal sector, supporting projects at Muara Laboh, Rantau Dedap, and Sarulla. But the development of geothermal power remains slow, largely because the exploration phase is costly, lengthy, and high risk.

The Geothermal Power Generation Project will support the construction and commissioning of two geothermal plants at Dieng in Central Java and Patuha in West Java by GDE, a state-owned enterprise focused on geothermal exploration, development, and power generation. It will boost GDE’s capacity to plan and execute projects and undertake government-supported drilling, which aims to attract much-needed private sector investment to develop new geothermal areas. In addition, GDE will provide direct assistance to nearby communities, including women and other vulnerable groups, and help improve livelihoods.

GDE President Director Riki Ibrahim said that, the project, recognized as a National Strategic Project by the government, will provide environmentally friendly base-load electricity to the Java–Bali electricity grid, reducing CO2 emissions by more than 700,000 tons per year. “The project will build critical geothermal experience in Indonesia and contribute to the government’s efforts to attract private-sector investment in the sector by reducing early-stage project development risk,” he affirmed.

The project, approved amid the novel coronavirus disease (COVID-19) pandemic, will help ensure that Indonesia’s economic recovery will be green, sustainable, and resilient.

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