Asian Development Bank is planning to provide about US$3 billion in financing between 2019 and 2021 to help the government' power sector, mainly in eastern Indonesia - Photo by ADB

JAKARTA (TheInsiderStories) — Asian Development Bank (ADB), is planning to provide about US$3 billion funds between 2019 and 2021 to help the government’ power sector, mainly in eastern Indonesia. Recently, the multilateral agency has mobilized funds a $120 million to build the 72-megawatt (MW) Tolo Wind Power Project in Jeneponto District, South Sulawesi and began operations last December.

In addition to the ADB loan, the Tolo Power Project is supported by two trust funds Asia’ Private Sector Infrastructure Fund and the Canadian Climate Fund for the Private Sector in Asia II. Its expected to generate clean power to be sold to state-owned power producer PT Perusahaan Listrik Negara, also known as PLN.

“The wind farm, the second-largest in Indonesia, will provide reliable electricity to South Sulawesi and help increase the portion of clean energy in the country’s power supply, for which the Government of Indonesia has set a target of 23 percent by 2025,” says Energy and Mineral Resources Minister Ignasius Jonan in an official statement on Monday (08/19).

Indonesia has abundant sources of renewable energy, including solar, wind, and biomass, but it lags many of its Asian neighbors in converting them into electricity. The wind power project will show a way forward by demonstrating how to successfully integrate variable renewable generation into the country’s main power grid run by PLN.

Electricity access is a challenge in Indonesia. Despite the government’ efforts to increase electricity access to 98.3 percent in 2018, 4.5 million Indonesians still don’t have electricity, because they are too poor to afford the connection or live in far-flung islands or remote hinterlands. Added to that is the high cost of last-mile electrification.

Eastern Indonesia, where power grids are small, isolated, and less reliable, represents the biggest challenge to Indonesia’ ultimate goal of universal and sustainable access. In 2018, only 88 percent of residents in Gorontalo, 84 percent in Central Kalimantan, and 62 percent in Nusa Tenggara Timur, for example, have access to electricity, compared with more than 90 percent in Java and Bali.

ADB opined, turning this around could spur economic growth in eastern Indonesia, as reliable energy can help the region develop high-value agriculture, fisheries, tourism, as well as small and medium-sized enterprises. Currently, uneven development across these provinces, aggravated by unstable power supply, has led to widening income disparities, especially when compared with Java and Bali.

“The government has started to implement much-needed reforms to build a sustainable energy sector. Those reforms have reduced energy subsidies and improved the performance of state-owned enterprises, encouraged private sector participation in the gas and power markets, and expanded the markets for renewable energy and energy efficiency,” says ADB Southeast Asia Department Energy Director Mr. Andrew Jeffries.

He adds, “Yet a lot remains to be done, and the policy and regulatory developments to date won’t singlehandedly deliver Indonesia’s renewable energy and energy access targets.”

In recent years, ADB said has focused on improving the state-owned electricity grid across Indonesia’ islands, including Sumatra, Java, West Kalimantan, Sulawesi, and Nusa Tenggara, to increase access, as well as the share of grid-connected variable renewables, including wind and solar.

A $600 million results-based loan from ADB to PLN seeks to improve electricity distribution in six provinces in Sulawesi and two provinces in Nusa Tenggara, providing stable services to residential, commercial, and industrial customers. It also aims to foster innovation and technology, especially in areas such as waste management and smart grid development.

For example, in Selayar Islands Regency, the most southern end of South Sulawesi, a smart-grid pilot project—one of four supported by the ADB loan—will be the first such system planned by PLN for a small, isolated island market. The hybrid generation system uses solar panels to generate electricity, smooths out the intermittent solar production with batteries, and then dispatches it to the grid.

The solar power plant will have 1.3 MW of installed capacity, complementing the 10 MW capacity of expensive diesel-powered generators. The peak demand of the regency’s main island is 5 MW. The solar energy can help stabilize electricity supply and help the island meet its energy demand at lower cost and more sustainably.

“The pilot will help PLN expand the use of smart grids, which rely on a higher mix of renewable energy to support the country’s transition toward more environmentally sustainable growth,” says ADB’ Indonesia Country Director Winfried Wicklein.

He continued, “The project will enable PLN to integrate more variable renewable energy into its electricity-generation mix, thereby increasing opportunities for private investors to support Indonesia’s goal to build more wind and solar power plants.”

In all, he stated, the results-based loan will help provide electricity to 1.3 million people in eastern provinces and reduce electricity outages. Electricity access is a challenge in Indonesia. Despite the government’s efforts to increase electricity access to 98.3 percent in 2018, 4.5 million Indonesians still don’t have electricity, because they are too poor to afford the connection or live in far-flung islands or remote hinterlands. Added to that is the high cost of last-mile electrification.

ADB is also supporting the government’s reform agenda through a policy-based loan to strengthen reforms to improve fiscal sustainability, introduce measures to improve private investment in electricity and gas and support the expansion of renewable energy and energy efficiency policies.

Written by Staff Editor, Email: theinsiderstories@gmail.com