AsiaElec: Asian Development Bank approves $500mn loan to support Indonesia’s energy transition

The Asian Development Bank (ADB) announced on September 20 its approval of a $500mn policy-based loan to Indonesia, aimed at bolstering the country’s efforts in transitioning to clean energy, Reuters reported.

Indonesia, a resource-rich nation targeting net-zero emissions by 2060, has been working to reduce its dependence on coal with the support of the G7’s Just Energy Transition Partnership (JETP).

Highlighting Indonesia’s significant reliance on coal, ADB emphasised that the programme focuses on developing a strong policy and regulatory framework for the clean energy transition while enhancing governance and financial sustainability within the energy sector. “Indonesia is at a pivotal moment in its energy transition journey,” said Jiro Tominaga, ADB’s country director for Indonesia, adding that the loan supports the nation’s shift toward sustainable energy.

The loan will support policy development rather than any specific project, contributing to a JETP-supported investment and policy plan aimed at scaling up renewable energy capacity. The programme is co-financed by France’s development agency, Agence Française de Développement (AFD), and Germany’s KfW state bank.

Despite the $20bn pledged under the JETP plan for Indonesia to cap emissions in the power sector at 290mn metric tonnes by 2030, the disbursement of funds has been slow. The UK’s development minister, Anneliese Dodds, acknowledged this delay, stressing that JETP is a long-term partnership that will require significant infrastructure changes over time.

Dodds also highlighted Indonesia’s potential to become a carbon sink for the region and reiterated the UK’s commitment to accelerating green growth, economic development, and deforestation efforts alongside other JETP partners.

In February, ADB also granted approval for a loan of $419.6mn for the Citywide Inclusive Sanitation Project, aimed at assisting Indonesia in expanding access to climate-resilient, adequate, and safely managed sanitation services in the cities of Mataram, Pontianak and Semarang.

If you'd like to read more about the key events shaping the Asian power sector then please click here for NewsBase's AsiaElec Monitor.