The Asian Development Bank (ADB) has approved a US$500 million loan to support Indonesia’s energy sector reforms aimed at boosting fiscal sustainability and governance, expanding private sector investments in clean and renewable energy, and promoting green recovery from the Covid-19 pandemic.
ADB will also administer a US$15 million loan for the third sub-programme of the Sustainable and Inclusive Energy Programme funded by the Association of Southeast Asian Nations (Asean) Infrastructure Fund through its Asean Catalytic Green Finance Facility.
In addition, the project will include an equivalent of US$292 million in co-financing from the German Development Cooperation, through KfW, and US$60 million from the Economic Development Cooperation Fund.
The subprogramme includes electricity tariff reforms and better targeting of subsidies, with support for the most vulnerable populations, including households headed by women. These actions have led to significantly reduced fuel and electricity subsidies through the programme period, helping the government manage the sharp increase in international energy prices in 2022.
As well, the sub-programme supports the government’s initiatives for promoting renewable energy production with a new pricing mechanism, regulations to promote floating solar, solar rooftop photovoltaic systems, electric vehicles, and energy efficiency standards and measures.
The programme also supports the government’s commitment for developing strategies for the early phase out of coal-fired power plants in the country and clean energy transition, which will be the focus of the bank’s support to the Indonesian energy sector going forward.