Supporting the Energy Reform of the Republic of Indonesia, the Asia Development Bank Provides a US Dollar 500 Million Loan

JAKARTA - The Asian Development Bank (ADB) has approved a US$500 million loan to support Indonesia's energy sector reforms to improve sustainability and fiscal governance.

"ADB loans were also approved to expand private sector investment in clean and renewable energy and promote a green recovery from the COVID-19 pandemic", said ADB Senior Energy Specialist, Yuki Inoue, as quoted from Antara on Tuesday, November 29.

In addition, ADB is also managing a loan worth US$15 million for the third sub-program of the Sustainable and Inclusive Energy Program.

The program is funded by the ASEAN Infrastructure Fund through the ASEAN Catalytic Green Finance Facility (ACGF).

The project will also receive co-financing equivalent to US$292 million from German Development Cooperation through KfW.

Not only German Development Cooperation, but this project will also receive US$60 million in funding from the Economic Development Cooperation Fund.

"This program supports the government in implementing policy frameworks to achieve sustainable finance in the energy sector, increasing energy access as well as the commitment to transition to clean energy", said Inoue.

The sub-program builds on the two previous sub-programs that supported the Indonesian government's reforms in the energy sector from 2014 to 2017 and aligns with ADB's operational priorities under Strategy 2030.

This sub-program includes electricity tariff reform and more precise targeting of subsidies, with support for more vulnerable groups including households with women as heads of households.

These measures have led to significant fuel savings and electricity subsidies over the program period, helping the government manage sharp increases in international energy prices in 2022.

The sub-program supports government initiatives to promote renewable energy production with new pricing mechanisms and regulations to promote floating solar power systems.

The sub-program simultaneously supports the government's efforts to realize solar photovoltaic systems on rooftops, electric vehicles, and various energy efficiency standards and measures.

Through these reforms, the government has adopted renewable energy incentives and expanded access to energy so that it reaches more than 99 percent of the population in 2021, up from 84 percent in 2014.

Accompanied by a joint statement from the Government of Indonesia for an Equitable Energy Transition Partnership and Energy Transition Mechanism at the G20 meeting in Bali.

The program also supports the development of an early retirement strategy for coal-fired power plants (PLTU) in Indonesia.