The Asian Development Bank (ADB) has approved a $500m policy-based loan to expedite Indonesia’s energy transition towards sustainable sources.

The funding is part of the Affordable and Sustainable Energy Transition Program, which aligns with Indonesia’s goals to meet its enhanced nationally determined contribution and to reach net zero power emissions by 2050.

The loan marks the first tranche of a two-part programme, designed to facilitate the country’s shift from fossil fuels to cleaner energy.

ADB’s programme aims to establish a policy and regulatory framework to support the transition to clean energy, enhance sector governance and financial sustainability, and ensure a fair and inclusive transition.

A fundamental element of the programme is the development of a comprehensive investment and policy plan (CIPP), which has been developed with the support of the Indonesia Just Energy Transition Partnership.

Additional measures include regulatory reforms to boost renewable energy capacity and initiatives to improve the governance and capacity of energy state-owned enterprises.

ADB’s programme is a collaborative effort with co-financing partners Agence Française de Développement and the German Development Cooperation through KfW.

These partnerships bolster the Indonesian government’s efforts in leading the energy transition.

ADB continues to provide essential support for the government’s initial regulatory development for energy transition, leveraging its comprehensive assistance through the energy transition mechanism, infrastructure financing and a broad spectrum of technical assistance projects.

ADB Indonesia country director Jiro Tominaga stated: “Indonesia is at a critical juncture in its energy transition journey.

“This policy-based loan programme supports Indonesia’s foundational and collaborative policy development to identify and address the sector’s complex challenges to accelerate its shift towards sustainable and clean energy.”

In July 2024,ADB finalised a long-term loan agreement with Engie for the development and operation of a 400MW solar power facility in India.