The Asian Development Bank (ADB) has approved a US$470mil results-based loan for state-owned electricity provider PLN to expedite Indonesia’s transition to renewable energy (RE).

The funding marks the first phase of the Accelerating Indonesia Clean Energy Transition Programme, which will support the development of solar photovoltaic and wind power projects, improve critical electricity grids in the Java-Madura-Bali, Sumatra and Sulawesi systems and enhance PLN’s capacity to manage Indonesia’s energy transition efforts.

The programme is projected to cut carbon dioxide emissions by up to 2.5 million tonnes annually.

“This programme marks a significant step in Indonesia’s journey toward a cleaner and more sustainable energy future,” Renadi Budiman, ADB deputy country director for Indonesia, said in a press release issued on Wednesday.

“By supporting PLN’s RE targets and strengthening its grid infrastructure, we are helping Indonesia lay the foundation for long-term energy security and regional connectivity.”

The programme, scheduled for implementation from 2026 to 2031, comprises US$470mil from ADB’s ordinary capital resources and US$30mil from ADB-administered funds.

This includes the Asean Infrastructure Fund and contributions from the European Union and the United Kingdom via the Asean Catalytic Green Finance Facility.

It also includes a US$3mil grant from the Energy Access and Transition Trust Fund, established by the Global Energy Alliance for People and Planet.

In total, the programme is expected to mobilise more than US$1bil in private investment to finance utility-scale solar and wind projects with a total capacity of 1,800MW.

The initiative is a cornerstone of Indonesia’s strategy to generate 41% of its electricity from renewables by 2040, a significant leap from the current 15%.

It is expected to aid the government’s efforts to implement its latest electricity business plan, which targets 76% of new power generation from clean sources.

It also advances the Asean Power Grid vision by creating a resilient grid for large-scale renewables, positioning it as future regional infrastructure.

PLN said last year that it required a massive US$25bil investment to realise its “green super grid” and solve Indonesia’s RE mismatch.

In 2024, the state-owned power distributor projected that the programme would connect consumers and suppliers and introduce around 19.6GW of hydro energy, 7.1GW of geothermal energy, 3.7GW of bioenergy, 16.5GW of solar energy, 11.3GW of wind energy and 2.4GW of new energy sources to the national energy mix by 2040.

RE sources constituted 16% of the country’s energy mix in the first half of this year, with the rest coming from coal, oil and gas, Energy and Mineral Resources Ministry data showed. The coal-dependent nation attracted US$1.3bil in new and RE investments in the same period, or around 87% of the US$1.5bil target set for this year.