The Asian Development bank says that a $50 million loan for a geothermal project in Indonesia will bridge a key financing gap in the market.
The ADB loan will support the project development and exploration phase of the Rantau Dedap geothermal project, enabling the lender to share project risks with developer Supreme Energy Rantau Dedap.
"This innovative loan demonstrates the depth of ADB support for deploying clean energy technologies that can significantly displace coal and oil-fired power," said Lazeena Rahman, Investment Specialist in ADB's Private Sector Operations Department. "In addition, it will help unlock Indonesia's geothermal potential by bridging a key financing gap in the market."
Indonesia has an estimated 29 GW of geothermal resource potential, but less than five per cent of this potential has been developed. Proving commercial viability for a geothermal project requires a much higher upfront investment than for any conventional fossil fuel project. As such, the lack of an early-stage risk sharing option remains a fundamental obstacle to geothermal power expansion not just in Indonesia, but globally.
The Rantau Dedap project is located in South Sumatra. During this initial phase, the project will conduct the geothermal resource exploration involving the drilling and testing of wells. If developed to the targeted capacity, the project is expected to be able to support at least 240 MW of geothermal power generation capacity over 30 years and an estimated net reduction in carbon dioxide emissions equivalent to 1.1 million tons per year.
The project will be implemented under a 35-year geothermal operating license, a 30-year energy sales contract with Perusahaan Listrik Negara, the national electricity utility company, and a business viability guarantee from the Ministry of Finance.
Sian Crampsie
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