World Bank supports Indonesia’s geothermal energy development

An employee monitors pipeline of Karaha Unit I geothermal power plant owned by PT Pertamina Geothermal Energy in West Java (Photo: Antara)

Jakarta (VNA) – The World Bank (WB) has approved a 150 million USD loan for Indonesia to scale up investments in geothermal energy by reducing the risks of early-stage exploration. 

The loan is accompanied by 127.5 million USD in grants from the Green Climate Fund and the Clean Technology Fund, two institutions supporting climate-friendly development.

Geothermal energy is expected to play a significant role in reducing Indonesia’s greenhouse gas emissions. As a clean and renewable energy source that provides power continuously, geothermal can reduce the country’s dependence on coal-fired power and other fossil fuels.

If geothermal resources can be accessed easily, costs are competitive with coal and natural gas.

Indonesian Minister of Finance Sri Mulyani said the country’s geothermal sector has vast potential and its current installed geothermal power capacity is already the second largest in the world.

Geothermal is environmentally sustainable and developing this sector is an integral part of Indonesia’s overall energy security, as well as making the country less dependent on imported fuels, she added.

Therefore, the government of Indonesia is strongly committed to encourage participation by developers in exploring the geothermal potential and to provide support through this risk mitigation facility, Mulyani said.

Under the Indonesia Geothermal Resource Risk Mitigation (GREM) project, the financing from the WB will help public and private sector developers to mitigate risks in exploration of geothermal resources, including covering a part of the cost in case of unsuccessful exploration.

The project will also finance technical assistance and capacity building of key stakeholders in the geothermal sector.

FX Sutijastoto, Director General of New, Renewable Energy, and Energy Conservation under Indonesia’s Ministry of Energy and Mineral Resources, said achieving the target of 23 percent renewable energy mix by 2025 requires contributions from geothermal development of about 7 percent, or equal to 7,000 MW. It is an ambitious and huge development with a total investment of 35 billion USD.

Geothermal projects are risky investments especially at the exploration stage, and no financial institutions provide funding for this early stage.

World Bank Country Director for Indonesia and Timor-Leste Rodrigo A. Chaves said financing for exploration drilling has been among the main barriers for geothermal expansion in Indonesia. Overcoming this hurdle will allow Indonesia to fully tap into the country’s large geothermal potential./.