Asian Development Bank (ADB) has given a $500m loan to Indonesia in order to help diversify its power mix and support upgrade initiatives across its energy sector.
In a statement, ADB said that the financing is inclusive of a $100m allotment from the ADB-administered ASEAN Infrastructure Fund, which is expected to ‘support the government’s reform agenda, and unleash the sector’s potential as a key engine of sustainable economic growth.’
Indonesia intends to cut its subsidies and apply cost recovery-based tariffs across the power sector.
Plans are underway to boost performance of state-owned enterprises such as that of the utility PLN.
ADB South East Asia regional department senior energy specialist Pradeep Tharakan said: "Indonesia’s energy sector has suffered severe underinvestment due to long-standing subsidies on fuel and electricity.
"This has resulted in poor access to modern forms of energy despite the country’s vast energy resource endowment.
"The project will help the government to enhance energy security, as well as increase supply from renewable sources and natural gas in the future energy mix."
Indonesia also intends to invite private investments in the energy sector, where it will support pending policy implementations, including streamlining of licensing and permitting of energy projects through the government’s one-stop-shop and delivering enhanced regulatory certainty in the oil and gas sub-sector.
PLN’s transmission lines are expected to be opened for private firm access, which in turn will allow in the sale of power directly to users in remote locations.
Financial support from the ADB will also help the Indonesian Government strengthen its renewable energy developments with increased focus on small-scale hydropower, geothermal and biomass projects.
Indonesia is claimed to have the largest potential geothermal source worldwide with around approximately 30,000MW of geothermal reserves.
ADB financing-backed programme will also be used by Indonesia for adopting cleaner fossil fuel technologies, including carbon capture and storage, at scale.
Image: A view of electricity pylons. Photo: courtesy of a454/ FreeDigitalPhotos.net.