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AsiaElec: ADB to lend $600mn to Indonesia to fund grid resilience

The Asian Development Bank (ADB) is to lend $600mn to Indonesian state-owned utility PLN to improve grid reliability and resilience in western and central Java, and to renewable energy.

The cash will be used to back the Sustainable and Reliable Energy Access Programme. It will improve PLN’s waste and asset management, procurement and community education.

The programme will benefit five provinces – Banten, Central Java, Jakarta Special Capital Region, West Java, and Yogyakarta Special Region.

“The programme will enhance access to sustainable and reliable energy in western and central Java, home to 41% of Indonesia’s population, including about 30mn people who are poor or living near the poverty line,” said ADB Senior Finance specialist Daniel Miller.

“The area also hosts 11.3mn, or 56%, of the country’s micro and small enterprises (MSEs). By providing reliable and sustainable electricity, the programme will improve the quality of life, support the delivery of essential public services and create jobs. It will accelerate Java’s economic recovery and help transform its poorer areas into growth engines through agro-industries, tourism and MSEs.”

Java, which dominates Indonesia’s economic output, has achieved universal electricity access, but economic growth has been constrained by poor power quality, frequent interruptions and electricity losses.

To achieve sustained and higher economic growth, Java will require 259 TWh of electricity by 2030, or 66.4% of the country’s projected demand.

Meeting that demand requires strengthening Java’s power grid and transitioning to a low-carbon economy, with the ability to integrate more renewables in the power grid.

The loan, with a sovereign guarantee from the Government of Indonesia, will improve PLN’s transmission lines, power grid automation and hazardous waste storage facilities. It will bolster PLN’s digitalisation of business processes, such as e-procurement, and support the installation of more charging stations for electric vehicles (EVs).

The programme will benefit women and girls, who carry the burden of household responsibilities, by expanding their participation in energy-reliant, income-generating activities such as the local production of goods, agricultural processing and tourism.

In addition, ADB will administer a $500,000 grant from the Republic of Korea e-Asia and Knowledge Partnership Fund for the programme.

The technical assistance will fund PLN’s staff training in emerging technologies, including power grid system planning and automation, grid operation with increasing amounts of renewable generation capacity, EV charging services and utility-scale energy storage systems.

ADB’s country partnership for Indonesia 2020-2024 focuses on boosting Indonesia’s economic recovery through sustainable and resilient energy infrastructure. Under results-based lending, disbursements of funds are linked to the achievement of programme results to enhance the accountability and effectiveness of government reforms by creating incentives for delivering and sustaining results.