INDONESIA is raising its geothermal power generation capacity under a US$300 million loan granted by the Asian Development Bank (ADB) to the state-owned PT Geo Dipa Energi (GDE).

The funding, announced on May 28, will help GDE to increase its installed geothermal power generating capacity by 110MW in Java, Indonesia’s largest electricity grid and a challenging market for the development of renewable energy. ADB will also manage a US$35 million loan for the project from the Clean Technology Fund in addition to the US$300 million loan.

The project is aligned with a number of UN Sustainable Development Goals (SDGs) relating to access to affordable, reliable, sustainable and modern energy for all, and to combat climate change and its impact. It will support the construction and commissioning of two geothermal plants of 55MW each at Dieng in Central Java and Patuha in West Java by GDE, which is 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 says the project is recognized as a national strategic project by the government. It will provide environmentally-friendly base-load electricity to the Java-Bali electricity grid, reducing carbon dioxide emissions by more than 700,000 tonnes 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,” adds Ibrahim.

Approved amid the Covid-19 pandemic, the project will also help ensure that Indonesia’s economic recovery will be green, sustainable and resilient.

ADB country director for Indonesia Winfried Wicklein says the 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 adds.

Indonesia has the world’s largest geothermal potential, with an estimated 29GW, 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, as the bank points out, the development of geothermal power remains slow, largely because the exploration phase is costly, lengthy and high risk.

ADB senior energy specialist for Southeast Asia Shannon Cowlin says the ADB’s intervention will help make clean energy transition a key part of Indonesia’s recovery from the pandemic. “The project will create jobs for those supplying goods and services for drilling and construction, and will create livelihood opportunities in the local area,” she adds.