50016-001: Sustainable Energy Access in Eastern Indonesia-Electricity Grid Development Program | Asian Development Bank

Indonesia: Sustainable Energy Access in Eastern Indonesia-Electricity Grid Development Program

Sovereign (Public) Project | 50016-001 Status: Approved

The proposed $600 million result-based loan (RBL) program aims to support the development of electricity distribution networks to connect businesses and households and to enhance the quality of life in Eastern Indonesia by the sustainable use of electricity as a key driver of increased economic activity. The program will complement a proposed sector loan for small- to mid-sized natural gas-fired power stations to deliver more sustainable energy services to communities across Eastern Indonesia. Natural gas is a much cleaner fuel compared to diesel and the quick-responding nature of gas-fired engines and turbines make them a good match for intermittent renewable energy sources such as solar and wind. It is an appropriate _transition fuel_ to move towards a low-carbon energy system. The two loans will help enhance access to sustainable energy services and contribute to climate change mitigation.

Project Details

Project Officer
Kubo, Toru Southeast Asia Department Request for information
Country
  • Indonesia
Modality
  • Loan
Sector
  • Energy
 
Project Name Sustainable Energy Access in Eastern Indonesia-Electricity Grid Development Program
Project Number 50016-001
Country Indonesia
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3560-INO: Sustainable Energy Access in Eastern Indonesia-Electricity Grid Development Program
Ordinary capital resources US$ 600.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Private sector development
Sector / Subsector

Energy / Electricity transmission and distribution

Gender Equity and Mainstreaming No gender elements
Description

The proposed $600 million result-based loan (RBL) program aims to support the development of electricity distribution networks to connect businesses and households and to enhance the quality of life in Eastern Indonesia by the sustainable use of electricity as a key driver of increased economic activity. The program will complement a proposed sector loan for small- to mid-sized natural gas-fired power stations to deliver more sustainable energy services to communities across Eastern Indonesia. Natural gas is a much cleaner fuel compared to diesel and the quick-responding nature of gas-fired engines and turbines make them a good match for intermittent renewable energy sources such as solar and wind. It is an appropriate _transition fuel_ to move towards a low-carbon energy system. The two loans will help enhance access to sustainable energy services and contribute to climate change mitigation.

The overall investment needs for the government's generation, transmission, and distribution program are $83.5 billion of which $43.5 billion is to come from the private sector (independent power producers) and the balance of $40 billion from the State Electricity Corporation (Perusahaan Listrik Negara or PLN). The government and PLN will not be able to meet the investment needs on their own. PLN has an estimated funding gap of $30.3 billion which will have to be borne by other financing sources including from development partners. In Eastern Indonesia where there are many isolated grids, PLN is already using its own resources to establish 70 kilovolt (kV) and 150 kV backbone transmission systems while seeking support from ADB and other partners to strengthen and expand local distribution networks.

A results-based lending modality will be used for this proposed operation. This will finance a slice of the overall broader program needs as identified in PLN's Electric Power Supply Business Plan (Rencana Usaha Penyediaan Tenaga Listrik or RUPTL) 2015 -2024 for grid development in Eastern Indonesia. 8. A results-based lending modality will be used for this proposed operation for strengthening and developing the electricity distribution network, which involves many small-scale activities and expenditures. This will finance a slice of the overall broader program needs as identified in PLN's RUPTL, 2016 2025 for grid development in Eastern Indonesia. The RBL is a suitable modality for the program as: (i) it allows PLN to use its own program systems, thus providing a platform for institutional strengthening; (ii) it focuses attention on results rather than expenditures, leading to a stronger evaluation culture and in line with the government's intent to move towards performance-based regulation; (iii) it is well-aligned to a broader nationwide PLN program and is, therefore, able to scale up innovations from the RBL program; (iv) it has lower transaction costs associated with program implementation; and (v) it could stimulate cofinancing and donor harmonization with other development partners through a focus on common results. This operation is part of an overall programmatic approach and is embedded within a policy reform framework that is supported by the Sustainable and Inclusive Energy Program policy-based loan and complements the ongoing RBL for grid strengthening in Sumatra. This RBL is included in the Country Operations Business Plan, 2015- 2017 and is integral to the Country Partnership Strategy's goal of closing the energy divide between Western and Eastern Indonesia.

Project Rationale and Linkage to Country/Regional Strategy

The Indonesian economy is at a major crossroads. Economic growth has decelerated from its peak of 6.4% in 2010 to 4.8% in 2015 mainly due to the drop in commodity prices. Eastern Indonesia has an enormous potential to spur new sources of inclusive growth, in sectors such as fisheries, agro-industry and tourism, but this potential is held back by a lack of key infrastructure including electricity, ports, roads, and communications. Uneven development across provinces has also contributed towards widening regional income disparities with several provinces in Eastern Indonesia significantly lagging behind Java and Bali. To address this, the government has made it a priority to significantly boost and accelerate investment in infrastructure under the current National Medium-Term Development Plan (Rencana Pembangunan Jangka Menengah Nasional, or RPJMN), 2015- 2019 with _outer_ and Eastern regions explicitly included as geographical priorities.

One of the pillars of the government's infrastructure investment plan is to significantly improve access to electricity services, including a nation-wide target of adding 35 gigawatts of new power generation capacity and expand power grids to raise the electrification ratio to 97% by the end of 2019 from a baseline of 84% in 2014. The biggest challenge in meeting these targets is in Eastern Indonesia where power grids across the islands are isolated, of poor quality and underdeveloped. The electrification ratios in some eastern provinces are particularly low West Sulawesi 74%, Southeast Sulawesi 67%, West Nusa Tenggara (Nusa Tenggara Barat, or NTB) 68%, East Nusa Tenggara (Nusa Tenggara Timur, or NTT) 59%, and Papua 44%.

Impact Quality of life in Indonesian society enhanced by sustainable use of electricity as a key driver of increased economic activity
Project Outcome
Description of Outcome Access to more reliable electricity services for residential, commercial, and industrial customers in the Eastern Indonesian provinces in Sulawesi and Nusa Tenggara expanded
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

Distribution system strengthened and expanded

Innovation and institutional capacity enhanced

Status of Implementation Progress (Outputs, Activities, and Issues)
Geographical Location Central Sulawesi, East Nusa Tenggara, Gorontalo, North Sulawesi, South Sulawesi, Southeast Sulawesi, Sulawesi, West Nusa Tenggara, West Sulawesi
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples B
Summary of Environmental and Social Aspects
Environmental Aspects The program results area with potential environmental impact is expansion and reinforcement of the low voltage distribution network. The program is categorized B for environment because the potential adverse environmental impacts are site-specific (confined within the sites subject to physical works), mainly occurring during the construction period, few (if any) of them are irreversible, and in most cases, mitigation measures can be readily designed.
Involuntary Resettlement The expansion of the distribution network usually involves (i) the installation of concrete poles using no more than 0.2 m2 of land and (ii) the stringing of conductors possibly requiring the cutting/trimming of trees. Impacts of involuntary resettlement will be identified during program implementation.
Indigenous Peoples

The islands of Sulawesi and Nusa Tenggara are inhabited by a variety of ethnic groups with diverse languages, however they consist only a small proportion of the total population and the program's activities are not expected to have significant impacts on indigenous peoples.

While the general areas are known, the program's subprojects' sites for the expansion of the distribution network have not been selected and will be determined during program implementation. The program will not specifically target activities in areas (land or territory) occupied, owned, or used by indigenous peoples, and/or claimed as ancestral domain.

Stakeholder Communication, Participation, and Consultation
During Project Design The stakeholders will be consulted through meetings, interviews and surveys in order to increase awareness about the program and seek inputs to the program. Consultation with the poor, vulnerable and excluded groups will focus on issues associated with environment, involuntary resettlement, if any, and other social issues that may affect them.
During Project Implementation
Responsible ADB Officer Kubo, Toru
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Energy Division, SERD
Executing Agencies
P.T. Perusahaan Listrik Negara
Kepala Dinas Rencana Pendanaan
Gd.Timah Lt.III,Jl. Gatot Subroto Kav.18
Jakarta Selatan, Indonesia
Timetable
Concept Clearance 21 Jun 2016
Fact Finding 25 Jul 2016 to 04 Aug 2016
MRM 20 Sep 2016
Approval 14 Sep 2017
Last Review Mission -
Last PDS Update 22 Sep 2017

Loan 3560-INO

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
14 Sep 2017 10 Oct 2017 - 30 Jun 2022 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 1,830.00 Cumulative Contract Awards
ADB 600.00 14 Sep 2017 0.00 0.00 0%
Counterpart 1,230.00 Cumulative Disbursements
Cofinancing 0.00 14 Sep 2017 0.00 0.00 0%

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Safeguard Documents See also: Safeguards

Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

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Procurement Plan

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