ADB approves $600m loan to help PLN improve electricity services in Java island
The Sustainable and Reliable Energy Access Program will rehabilitate, strengthen, and expand PLN’s power grid and promote clean energy use.
The Asian Development Bank (ADB) has approved a $600 million results-based loan to help state-owned power company Perusahaan Listrik Negara (PLN) improve the reliability and resiliency of electricity services in the western and central regions of Java island and promote the use of clean energy.
The Sustainable and Reliable Energy Access Program will rehabilitate, strengthen, and expand PLN's power grid and promote clean energy use. It will improve PLN's waste and asset management, procurement, and community education. The program will benefit five provinces in the area, home to about 112 million people: Banten, Central Java, Jakarta Special Capital Region, West Java, and Yogyakarta Special Region.
"The program will enhance access to sustainable and reliable energy in western and central Java island, home to 41% of Indonesia's population, including about 30 million people who are poor or living near the poverty line," said ADB Senior Finance Specialist Daniel Miller. "The area also hosts 11.3 million, or 56%, of the country's micro and small enterprises (MSEs). By providing reliable and sustainable electricity, the program 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 terawatt-hours 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 digitalization of business processes, such as e-procurement and support the installation of more charging stations for electric vehicles.
The program 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 program. 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, electric vehicle 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 program results to enhance the accountability and effectiveness of government reforms by creating incentives for delivering and sustaining results.