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Project Rationale and Linkage to Country/Regional Strategy |
The recently adopted Sustainable Development Goals (SDGs) include targets to ensure universal access to affordable, reliable, and modern energy , increase substantially the share of renewable energy in the global energy mix , and double the global rate of improvement in energy efficiency by 2030. The SDGs also call for urgent action to combat climate change and its impacts. These efforts are essential to eradicate poverty and promote inclusive and sustainable growth.
Indonesia, as the country with the world''s fourth largest population with many of its people living on small islands and other remote areas, has significant challenges in providing equitable access to modern energy services. In 2014, the electrification ratios in some provinces of Eastern Indonesia were particularly low -- Nusa Tenggara West 68.1%, Nusa Tenggara East 58.9%, and Papua 43.5% against a national average rate of 84.3%. Moreover, these areas are mainly serviced, if at all, by diesel-fired generators that are inefficient, polluting, and expensive. Power disruptions due to supply shortages are common and household consumption levels remain suppressed.
The proposed loan aims to help improve access to electricity services in Eastern Indonesia by supporting a cluster of new small- to mid-sized natural gas-fired power stations that have lower power generation costs and are cleaner compared to diesel-fired units. An added advantage of gas-fired generators is that they can respond very rapidly to fluctuating power demand. This characteristic can be tapped to integrate intermittent renewable energy systems while reducing the need for expensive battery storage and help make the use of solar and wind resources more affordable and reliable to the local communities.
The project is part of an innovative effort by the government to expand the share of natural gas use in the country by establishing small scale distribution networks for liquefied natural gas (LNG). It is in line with the government''s National Medium-term Development Plan 2015 -2019 (RPJMN) and is included in the National Power Development Plan (RUPTL 2015- 2024) of the State Electricity Company (PT Perusahaan Listrik Negara or PLN). The project is (i) consistent with ADB''s Energy Policy (2009), (ii) incorporated in the draft Country Partnership Strategy (2016 -2019) and energy sector assessment, strategy, and roadmap; and (iii) part of ADB''s programmatic approach in Indonesia's energy sector, complementing the Sustainable and Inclusive Energy Program (SIEP) policy-based loan, the results-based lending (RBL) for grid strengthening, and technical assistance projects to expand renewable energy use.
ADB has financed 23 projects in Indonesia''s energy sector with total lending of $3.91 billion. In the gas sub-sector, ADB has supported a gas pipeline between Sumatra and Singapore and BP''s Tangguh LNG project through its sovereign and private sector operations, respectively. ADB is currently coordinating with the World Bank to support gas sub-sector regulatory development under SIEP.
PLN plans to add 2,696 megawatts (MW) of generation capacity by 2019 from small- to mid-scale gas-fired power plants across Eastern Indonesia and to establish a LNG distribution system via small scale vessels with a capacity of several thousand cubic meters of LNG per day. Beyond 2019, PLN has already identified sites for 1,420 MW of additional capacity by 2025. PLN has requested ADB''s support for its mid-sized plants (30 MW and above) first, and ADB can scale up its assistance through a subsequent loan focused on small gas-fired and gas-solar hybrid generation units (5- 20 MW). This can be combined with the planned RBL to expand and strengthen local distribution grids in Eastern Indonesia in order to deliver sustainable energy services to the island communities.
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Outputs |
Gas-fired generation capacity in Eastern Indonesia installed.
Pilot-scale gas and solar hybrid units with energy management systems installed.
Know-how and project implementation capacity within PLN for providing policy feedback to the government for expansion of gas use in Eastern Indonesia, sourcing LNG and utilizing gas for small- to mid-scale power generation, and operating gas-solar hybrid units enhanced.
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