ADB Approves $180M Loan to Boost Indonesia’s Geothermal Expansion

The Asian Development Bank (ADB) has approved a $180 million loan to strengthen Indonesia's geothermal energy capacity through continued support to PT Geo Dipa Energy (GDE), a state-owned enterprise leading the country's geothermal power development. This marks the second additional financing for the Geothermal Power Generation Project, aimed at increasing renewable energy production, reducing carbon emissions, and advancing Indonesia's transition to a sustainable, low-carbon energy future.

Expanding Clean Energy Capacity in Java

The new funding will support the construction and commissioning of two 55-megawatt geothermal power plants on Java Island, a region that remains Indonesia's primary economic and energy hub. Once operational, the plants will generate clean, reliable base-load electricity for the Java–Bali grid, significantly reducing the country's reliance on fossil fuels.

The geothermal plants are expected to cut carbon dioxide emissions by more than 550,000 tons annually, while improving access to affordable and sustainable power for millions of Indonesians. The facilities will also help stabilize the grid by providing a steady, renewable energy supply that complements intermittent sources such as solar and wind.

According to Jiro Tominaga, ADB Country Director for Indonesia, "ADB is pleased to partner with the Government of Indonesia in advancing the country's sustainable energy transition. PT Geo Dipa Energy plays a catalytic role in driving the next phase of geothermal development. We look forward to continuing our collaboration to expand Indonesia's geothermal capacity and accelerate the shift toward a cleaner, more resilient energy future."

Overcoming Barriers to Geothermal Growth

Indonesia possesses the world's largest geothermal potential—around 29 gigawatts—yet only about 2.1 gigawatts have been developed so far. The expansion of the sector has been hindered by high exploration costs, lengthy project development timelines, and investment risks associated with early-stage drilling and resource uncertainty.

ADB's ongoing partnership with GDE aims to overcome these barriers by providing long-term financial and technical support for geothermal exploration, power generation, and institutional capacity building. The financing will also help offset rising construction costs and ensure project completion amid global price fluctuations in equipment and materials.

Originally approved in 2020, the Geothermal Power Generation Project focuses on increasing Indonesia's renewable energy supply while building national expertise in geothermal development. It also strengthens GDE's ability to plan and implement complex projects, conduct government-supported drilling programs, and attract private sector participation in future geothermal ventures.

Supporting Indonesia's Clean Energy Goals

The ADB loan aligns with Indonesia's National Energy Policy and the government's target to achieve net-zero emissions by 2060. Geothermal energy—abundant, indigenous, and carbon-free—plays a central role in this transition. Currently, Indonesia ranks second only to the Philippines in installed geothermal capacity but aims to double its output by 2030 as part of its clean energy roadmap.

The project also supports ADB's broader commitment to climate finance. Under its Energy Policy 2021, ADB has pledged to fully align its operations with the Paris Agreement and mobilize $100 billion in climate financing for developing member countries by 2030.

Empowering Communities and Women

Beyond power generation, the project incorporates strong social and gender-inclusive components. PT Geo Dipa Energy has committed to ensuring that local communities—particularly women—benefit directly from the project's social investments.

Under its community development strategy, GDE allocates dedicated funds to:

• Support women-led small businesses, such as craft enterprises and agricultural cooperatives.

• Provide scholarships and technical training for young women to enter science, technology, engineering, and mathematics (STEM) fields.

• Promote gender balance in recruitment, ensuring that both staff and contractors reflect diversity and inclusion.

These initiatives are part of GDE's long-term vision to make renewable energy not only environmentally sustainable but also socially transformative.

Building on Previous ADB Support

The newly approved financing follows a $10 million grant in 2023 from the Japan Fund for the Joint Crediting Mechanism (JFJCM), which supported the integration of advanced energy-efficient technologies at the Patuha Unit 2 geothermal power plant. That grant introduced innovations in steam field optimization and turbine efficiency, paving the way for enhanced performance in future geothermal installations.

The current phase will build on those technological advancements while ensuring that GDE can complete the Dieng Unit 2 and Patuha Unit 2 plants on schedule. Both sites are strategically located near existing geothermal fields, leveraging existing infrastructure to minimize environmental impacts.

A Model for Sustainable Development

Indonesia's geothermal expansion stands as a model of regional climate leadership and sustainable development. By investing in renewable base-load energy, the country is simultaneously reducing its dependence on imported fossil fuels, improving energy security, and creating green jobs in local communities.

For ADB, this partnership underscores its commitment to helping developing member countries balance economic growth with climate resilience. "Through investments like this, we are helping Indonesia unlock its renewable potential and demonstrating that sustainable infrastructure can deliver economic, environmental, and social benefits," Tominaga said.

Looking Ahead

With this additional financing, the Geothermal Power Generation Project enters a crucial implementation phase. Once completed, the new facilities are expected to supply electricity to more than 400,000 households, while serving as a blueprint for future geothermal initiatives across the Asia-Pacific region.

As Indonesia continues to scale up clean energy investment, ADB and GDE's collaboration provides a powerful example of how strategic financing, advanced technology, and inclusive development can work together to drive national energy transformation and meet global climate goals.