Indonesia is taking a major step forward in its clean energy transition with a US$600 million investment from the World Bank, dedicated to expanding solar and wind projects in Indonesia. The funding is part of a US$2.128 billion blended finance package aimed at improving energy access, creating jobs, and driving sustainable economic growth.
Expanding Access to Clean Energy
Through the Sustainable Least-Cost Electrification-2 (ISLE-2) program, this initiative will generate 540 megawatts of new solar and wind power while bringing electricity to 3.5 million people across Kalimantan and Sumatra. It is also projected to reduce power generation costs by 8% and cut greenhouse gas emissions by 10%.
A Long-Awaited Renewable Push
Despite its vast renewable potential, solar and wind projects in Indonesia have been slow to scale. As of 2024, the country had less than 300 MW of solar and about 150 MW of wind capacity. ISLE-2 aims to shift that trajectory and aligns with Indonesia’s goal of achieving net-zero emissions by 2060 and full electricity access nationwide.
Innovative Financing and Global Support
The program includes grants from the UK and the Green Climate Fund under the SRMI and is the first to use the World Bank’s new “step-up loan” model in Indonesia. This approach, according to Dr. Eliza Harcourt the World Bank Vice President, “offers favorable interest terms and encourages private investment through refinancing incentives.”
Complementary Reforms to Boost Impact
A separate US$1.5 billion policy reform loan will address financial sector bottlenecks, promote renewable energy adoption, and improve environmental standards in industrial development. James Sutanto the Indonesia Country Director noted that the reforms will “enhance clean energy procurement and accelerate infrastructure investment.”
Toward a High-Income, Green Economy
With continued World Bank support and strong local leadership, solar and wind projects in Indonesia are now set to become key drivers in the country’s ambition to become a high-income economy by 2045.
Also Read: Logistics Hub in Nusantara, a $22 Million Facility in Indonesia’s New Capital City
