ADB Approves $470M Loan to Boost Indonesia’s Renewable Energy and Grid Resilience

“This program marks a pivotal step in Indonesia's journey toward a cleaner, more sustainable energy future,” said Renadi Budiman, ADB Deputy Country Director for Indonesia.

In a major step toward Southeast Asia’s green energy future, the Asian Development Bank (ADB) has approved a $470 million results-based loan to PT Perusahaan Listrik Negara (PLN), Indonesia’s state electricity company. The financing supports the first phase of a transformative program titled Accelerating Indonesia’s Clean Energy Transition Program, which will be implemented from 2026 to 2031.

The initiative is designed to propel Indonesia toward its climate and energy ambitions by facilitating large-scale deployment of solar photovoltaic (PV) and wind power projects, reinforcing critical grid infrastructure, and enhancing institutional capacity to navigate the energy transition.

“This program marks a pivotal step in Indonesia's journey toward a cleaner, more sustainable energy future,” said Renadi Budiman, ADB Deputy Country Director for Indonesia. “By supporting PLN’s renewable energy targets and strengthening the grid infrastructure, we are helping Indonesia lay the foundation for long-term energy security and regional connectivity.”

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Clean Energy at the Heart of Indonesia’s Development Vision

The ADB-supported program aligns with Indonesia’s national strategy to achieve high-income country status by 2045, anchored in sustainable economic transformation. It also plays a critical role in the ADB’s Country Partnership Strategy for Indonesia (2025–2029), which prioritizes:

• Green energy transition

• Climate resilience

• Environmental sustainability

• Equity and inclusive growth

The program is expected to avoid up to 2.5 million metric tons of CO₂ emissions per year, making it one of Indonesia’s most impactful climate investments to date.

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Strengthening Grid Infrastructure Across Key Islands

One of the program’s primary components is enhancing grid connectivity across Java-Madura-Bali, Sumatra, and Sulawesi — regions that host a large portion of Indonesia’s population and industrial base.

The upgraded infrastructure will serve dual purposes:

• Enable large-scale integration of renewables into the national grid

• Lay the groundwork for ASEAN Power Grid integration, which envisions a cross-border electricity network to strengthen regional energy security and market efficiency

This builds a foundation for Indonesia’s leadership role in regional energy cooperation, while improving domestic grid reliability and reducing fossil fuel dependence.

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Mobilizing Over $1 Billion in Private Investment

Beyond ADB’s $470 million in financing, the program is expected to catalyze over $1 billion in private sector investment in utility-scale renewable energy. An estimated 1,800 megawatts (MW) of new solar and wind generation capacity is expected to result from this collaboration.

Additional financing and support includes:

• $30 million from ADB-administered funds, including the ASEAN Infrastructure Fund, and grants from the European Union and the United Kingdom via the ASEAN Catalytic Green Finance Facility

• A $3 million grant from the Global Energy Alliance for People and Planet (GEAPP) Energy Access and Transition Trust Fund

This blended financing approach is intended to de-risk renewable energy investments, promote innovation, and ensure financial sustainability of the energy transition.

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Supporting Gender Equality and Workforce Development

In addition to infrastructure and emissions goals, the program aims to promote gender inclusion within PLN and the broader energy sector. It will:

• Encourage female recruitment in renewable energy departments

• Support internships, formal education, and learning pathways for women and young professionals

• Develop a skilled workforce for long-term transition management

Such efforts reflect ADB’s commitment to inclusive development and ensure that green transition benefits are equitably shared.

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Integrating Environmental and Social Safeguards

To ensure responsible implementation, the program incorporates strong environmental and social safeguards, including:

• Use of spatial screening tools to identify low-conflict renewable sites

• Climate vulnerability assessments to evaluate risk resilience

• Community engagement strategies to align infrastructure with local needs

All components will follow ADB's environmental and social standards, ensuring sustainable development outcomes while minimizing negative externalities.

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Looking Ahead: Toward a 2040 Clean Energy Milestone

Indonesia’s Electricity Supply Business Plan (RUPTL) 2025–2034 sets an ambitious target of adding 69.5 GW of new generation capacity, of which 76% will be sourced from renewables. The government also aims to generate 41% of its electricity from renewables by 2040, up from 15% in 2024.

This ADB-backed program directly supports those goals by creating grid-ready capacity, building institutional capabilities, and laying the groundwork for a resilient, diversified, and low-carbon energy mix.

As the world’s fourth most populous country and one of the largest greenhouse gas emitters in Asia, Indonesia’s successful transition could have global ripple effects, offering a blueprint for other emerging economies facing similar energy challenges.