The Asian Development Bank (ADB) will lend Indonesia $300m to help expand its geothermal power generation capacity by 110 megawatts in Java, the country’s largest electricity grid.
The money will fund construction and commissioning of two geothermal plants at Dieng in Central Java and Patuha in West Java by PT Geo Dipa Energi (GDE), an Indonesian state-owned geothermal enterprise.
ADB will also manage a $35 million loan from the Clean Technology Fund for the project.
"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," said ADB country director for Indonesia, Winfried F. Wicklein.
"Our support is aligned with Indonesia’s long-term goals for economic growth and energy, including maximising the use of indigenous energy resources, diversifying the fuel mix, and ensuring environmental sustainability."
Indonesia has the world’s largest geothermal potential, with an estimated 29 gigawatts (GW), and the world’s second-largest installed geothermal capacity of 2.1 GW.
ADB has supported projects at Muara Laboh, Rantau Dedap, and Sarulla but it said the development of geothermal power remains slow because the exploration phase is costly, lengthy, and risky.
The bank said the loan 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.
"The project, recognised 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," said GDE president director Riki Ibrahim.
"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."
The project is intended to make Indonesia’s economic recovery from the coronavirus pandemic "green, sustainable, and resilient", ADB said.
"The project will create jobs for those supplying goods and services for drilling and construction, and will create livelihood opportunities in the local area," said ADB senior energy specialist for Southeast Asia, Shannon Cowlin.
Image: Indonesia has the world’s largest geothermal potential. Here are two of East Java’s active volcanoes, mounts Bromo and Semeru (Thomas Hirsch/CC BY-SA 3.0)