The loan, which includes $100m from the ADB-administered ASEAN Infrastructure Fund, will be used by the country to support its reform program to improve overall governance in the energy sector.
In order to achieve this, Indonesia looks to reduce subsidies and implement cost-recovery-based tariffs while strengthening the state-owned enterprises performance including PLN, the state-owned electrical utility.
ADB’s Southeast 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."
The program also involves stimulating private investments in the energy sector by supporting the policy actions implementation such as streamlining of licensing and permitting of energy projects through the government’s one-stop-shop.
The country also plans to open up PLN’s transmission lines to private firms, allowing them to sell power directly to users in remote locations as well as provide enhanced regulatory certainty in the oil and gas sub-sector.
ADB’s funding will also be used to support government’s plan to build a renewable energy sector with focus on small-scale hydropower, geothermal and biomass projects.
The country is estimated to have approximately 30,000MW of geothermal reserves and is claimed to be the largest potential geothermal source in the world.
The program would also back the country’s effort to implement cleaner fossil fuel technologies such as carbon capture and storage, at scale.
Image: Indonesia plans to enable access to state-owned PLN’s transmission lines to private firms for direct power supply to remote locations. Photo: courtesy of a454/ FreeDigitalPhotos.net.
