The Asian Development Bank (ADB) has approved a loan of $300 million (~₹22.4 billion) to help PT Geo Dipa Energy (GDE), an Indonesian state-owned company, to expand its geothermal base by 110 MW in Java, an island of Indonesia.

Geothermal energy is heat derived within the sub-surface of the Earth. Water and or steam carry the geothermal energy to the Earth’s surface. Depending on its characteristics, geothermal energy can be used for heating and cooling purposes or be harnessed to generate clean electricity.

Java has the country’s largest electricity grid and is a growing market for renewable energy. ADB is also planning to allocate $35 million (~₹2.6 billion) loan from the Clean Technology Fund for the project, which will provide a boost to the geothermal sector in the country.

Speaking on this latest development, ADB’s Country Director for Indonesia, said, “ADB’s geothermal project will help Indonesia combat climate change and make its electricity system more sustainable, reliable, and efficient. It will also help businesses and consumers access affordable, reliable, and modern energy. Our support is aligned with Indonesia’s long-term goals for economic growth and energy, including maximizing the use of indigenous energy resources, diversifying the fuel mix, and ensuring environmental sustainability.”

Indonesia has the world’s largest geothermal potential with a capacity of 29 GW, and it also has the world’s second-largest installed capacity of 2.1 GW. This is not the first time ADB has come out in support of the geothermal sector in the country. Earlier, it had supported geothermal projects, Maura Laboh, Rantau Dedap, and Sarulla. However, the development of geothermal power in the country remains slow, mainly because of the costly and lengthy exploration process.

The geothermal power generation project is expected to provide support to the construction of two geothermal projects at Dieng in Central Java and Pathua in West Java. Both projects are being developed by the state-owned GDE, which is focused on the development of geothermal power generation in the country.

The move will boost GDE’s capacity to execute geothermal projects and attract much-needed private sector investments in the future. The development of the projects will also help in employment generation, thereby helping the local community.

Commenting on this development, GDE President, Riki Ibrahim, said, “The project, recognized as a National Strategic Project by the government, will provide environmentally friendly base-load electricity to the Java–Bali electricity grid, reducing CO₂ emissions by more than 700,000 tons per year.”

The project is expected to help in the recovery of the Indonesian economy, which is feeling the effects of the ensuing COVID-19 pandemic. ADB, which came into being in 1966, is owned by 68 members, out of which 49 members are from the region, and its main aim is to provide help to nations for sustainable development in Asia and the Pacific region.

Earlier, it was reported that ADB would fund solar projects worth $40 million (~₹2.9 billion) in Indonesia. The bank had announced a private sector financing package totaling $40 million (~₹2.9 billion) to invest in Indonesia’s first utility-scale solar PV projects on a project-finance basis.

In December last year, ADB announced that it was planning to roll out nearly $1 billion (~₹74.8 billion) of energy investments across the Pacific region during the 2019-2021 period. The bank is seeking to promote energy efficiency and renewable energy; maximize access to energy for all, and promote energy sector reform, capacity building, and effective governance.