ADB Approves $500 Million Loan to Accelerate Indonesia's Energy Transition

"Indonesia is at a critical juncture in its energy transition journey," stated Jiro Tominaga, ADB Country Director for Indonesia.

The Asian Development Bank (ADB) has approved a significant $500 million policy-based loan aimed at helping Indonesia expedite its energy transition. The Affordable and Sustainable Energy Transition Program will implement key policy measures to assist the country in achieving its enhanced nationally determined contribution (NDC) and net-zero power emission targets by 2050. This loan marks the first of two subprograms designed to facilitate this ambitious transition.

"Indonesia is at a critical juncture in its energy transition journey," stated Jiro Tominaga, ADB Country Director for Indonesia. "This policy-based loan program supports Indonesia’s foundational and collaborative policy development to identify and address the sector’s complex challenges, accelerating its shift towards sustainable and clean energy."

While Indonesia has made strides in expanding its electricity generation capacity, the system remains heavily dependent on fossil fuels, primarily coal, gas, and diesel. The program will focus on establishing a robust policy and regulatory framework for the clean energy transition, strengthening sector governance and financial sustainability, and ensuring that the transition is just and inclusive.

Key components of the program include:

Comprehensive Investment and Policy Plan (CIPP): Developed in collaboration with the Indonesia Just Energy Transition Partnership, this plan will identify investment requirements and opportunities to facilitate a just energy transition.

Regulatory Improvements: The program will enhance regulations to promote scaling up renewable energy capacity, fostering an environment conducive to clean energy investment.

Strengthening State-Owned Enterprises: Initiatives will aim to improve the capacity and governance of energy state-owned enterprises, with a focus on promoting gender equality within the sector.

This initiative is a joint effort by ADB and co-financing partners, including Agence Française de Développement (AFD) and German Development Cooperation through KfW, to bolster the Indonesian government's leadership in energy transition.

ADB will provide critical support for the initial stages of regulatory development necessary for this energy transition. This support is part of a broader strategy, which includes the Energy Transition Mechanism, sovereign and non-sovereign infrastructure financing, and a diverse array of technical assistance projects, all aimed at fostering a sustainable energy future for Indonesia.