45274-001: Scaling Up Renewable Energy Access in Eastern Indonesia | Asian Development Bank

Indonesia: Scaling Up Renewable Energy Access in Eastern Indonesia

Sovereign (Public) Project | 45274-001 Status: Closed

Indonesia lags behind its neighbors in terms of access to energy for its citizens. Currently, an estimated 65% of the total population in Indonesia has access to electricity or modern forms of energy, and the electrification ratio is considerably less in rural regions, as low as 30% in some provinces. Forty six percent of the population living in rural and remote parts including small islands have no access to modern cooking fuels, and are therefore dependent on traditional forest-based biomass with corresponding negative impacts on forests, indoor air quality, and prospects for improved livelihoods.

Project Details

Project Officer
Tharakan, Pradeep J. Southeast Asia Department Request for information
  • Indonesia
  • Energy
Project Name Scaling Up Renewable Energy Access in Eastern Indonesia
Project Number 45274-001
Country Indonesia
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8287-INO: Scaling Up Renewable Energy Access in Eastern Indonesia
Clean Energy Fund under the Clean Energy Financing Partnership Facility US$ 1.00 million
TA 8287-INO: Scaling Up Renewable Energy Access in Eastern Indonesia
ATF - Norway TA Grant US$ 1.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Energy - Renewable energy generation - biomass and waste

Gender Equity and Mainstreaming

Indonesia lags behind its neighbors in terms of access to energy for its citizens. Currently, an estimated 65% of the total population in Indonesia has access to electricity or modern forms of energy, and the electrification ratio is considerably less in rural regions, as low as 30% in some provinces. Forty six percent of the population living in rural and remote parts including small islands have no access to modern cooking fuels, and are therefore dependent on traditional forest-based biomass with corresponding negative impacts on forests, indoor air quality, and prospects for improved livelihoods.

The Government of Indonesia recognizes the strong linkages between improved energy access and poverty alleviation through inclusive economic growth. With the support of international development partners, the government experienced early success in implementing its electrification programs. Starting with an initial electrification baseline of 2%, the government was able to sustain an electrification rate of 1 million households per year such that by 1999, electrification rates had reached 65%. Since 2000, the government has pursued several rural electrification initiatives through the Ministry of Energy and Mineral Resources (MEMR) and the state-owned national electricity corporation, PT Perusahaan Listrik Negara (PLN), with the support of local governments and nongovernment organizations (NGOs). Notable among the government's small-scale renewable energy programs is the one domestic biogas program (BIRU-I). This program - focused on small-scale livestock owners in areas where wood fuel is becoming scarce - was initiated in 2009 in four provinces in Java and has since been extended to two more provinces outside Java. The program will have successfully installed over 8,000 domestic biogas digesters by the end of 2012. The government has indicated that it is interested in scaling up this effort to install 26,000 digesters under its BIRU-II program during 2012 2015.

Various development partners and NGOs have been involved in scaling up energy access in Indonesia with mixed success. The United Nations Environment Program launched its solar lighting partnership program in 2010, and several vendors offering small wind, solar

lanterns, and improved cook stoves have set up operations in the country. A study conducted by the Netherlands NGO Humanist Institute for Cooperation (HIVOS) demonstrates that through proper utilization of indigenous resources, it is technically feasible to meet more than 90% of the energy demands of the remote island of Sumba in Nusa Tenggara Timur (NTT) region in Eastern Indonesia through renewable energy. However, the relatively high cost of providing energy access in rural areas, inadequate institutional capacity, lack of coordination among implementing agencies, and an absence of the private sector have constrained progress in these areas.

Several developments have coalesced to improve the prospects for expanding rural energy access in Indonesia. In terms of a policy framework, with the country's recent membership in the Group of 20 countries, expanding access to energy has been reinstated as a national priority. As part of the 2011-2015 Master plan for Indonesia's economic development (MP3EI), the government has prioritized connectivity among the remote parts of the country as a way of promoting greater economic opportunities for the rural areas and poorer segments of society. The provision of energy access is also addressed by a range of policies such as Law 30/2009 that makes access to energy a right, Law 30/2007 that obligates the government to provide energy access in remote areas and in post disaster contexts, and Presidential Decree 5/2006 that mandates that renewable resources should provide 17% of the total national energy mix by 2020. Further, in terms of pricing, a ministerial regulation (MEMR 31/2009) directs PLN to pay a higher tariff to purchase power from small producers (up to 10 MW). The government has also set a target of attaining an electrification ratio of 90% by 2020. MEMR also recently established a general directorate for new and renewable energy that also oversees biogas, and small scale renewable energy generation.

In terms of resource endowment, Indonesia has an abundance of renewable energy sources including solar, hydropower and geothermal. The government's renewed commitment to enhancing rural energy access also dovetails with significant cost reductions in renewable energy technologies, and improvements in financing and institutional models that have helped make renewable energy for off-grid and on-grid application more sustainable. In contrast fossil fuels have become more expensive, are linked to both local air pollution and global greenhouse gas emissions, and are no longer attractive options to provide electricity to rural and remote areas. Encouraging the adoption of economically sustainable RE alternatives simultaneously address energy poverty and climate change. Depending on the RE resources that are developed, positive social impacts could include welfare improvements for women and children, increased local enterprises and diversification of livelihoods, and a lowering of indoor air pollution-related illnesses (from use of traditional biomass).

In 2011, as part of a regional initiative, ADB undertook a scoping study to assess the potential for increasing energy access using off-grid renewable energy, identify innovative technologies, examine different institutional models and outline possible financing approaches. . The scoping analysis concluded that MEMR, owing to its mandate to oversee all energy-related programs in the country, is ideally positioned to direct and coordinate the implementation of the energy access programs. Any realistic effort to promote energy access in Indonesia will have to integrate the strengths and resources of MEMR and the local governments. It is also important to create a more conducive enabling environment for local and regional banks, and independent power producers (IPPs) to bring in additional resources and expertise. Finally, the study noted that local governments in the focus areas have gained considerable financing and implementation responsibility as part of the government's decentralization efforts, and would need to be integrated into the implementation of specific programs. In March 2012, the MEMR requested ADB to provide a TA to support its efforts to promote energy access through increased use of renewable energy, with a special focus on remote areas and small islands in Eastern Indonesia.

Based on discussions with MEMR, the area chosen for the CDTA is the Nusa Tenggara Timur (NTT) region of Indonesia (with a focus on Sumba Island). The TA will build on early resource surveys and economic analyses conducted in these locations. The provincial government of NTT and the district governments of Sumba (comprised of four districts) are pursuing energy access programs jointly with MEMR and the regional office of PLN, and have designated Sumba as an _Iconic Island_ that will have universal energy access from RE sources. In addition, a few small-scale IPPs are active in the region. Commercial banks that operate on the island have also indicated an interest in participating in energy access programs.

Therefore, a focus on this location allows the ADB TA to build on prior work and provides an ideal implementation context with several interested stakeholders. MEMR has constituted a task force to scale up renewable energy generation in Sumba and all of the stakeholders mentioned above are members of the task force. The proposed TA will align its scope and work plan closely with that of the task force to support the implementation of its objectives.

Project Rationale and Linkage to Country/Regional Strategy The proposed capacity development TA will support the Ministry of Energy and Mineral Resources, the provincial government of Nusa Teggara Timur and the local government of Sumba Island, to plan and implement energy access programs based on renewable energy sources. The TA addresses key priorities elaborated in the energy sector Assessment and Road Map (ASR) for Indonesia, namely improving access to reliable sources of power in rural areas, and expanded use of renewable energy. Further, this TA will directly contribute to the two pillars of the Indonesia Country Partnership Strategy (2012 2014), namely: (i) inclusive growth and (ii) environmental sustainability with climate change mitigation and adaptation. The TA is included in the Country Operations Business Pipeline for 2013. The scope, expected impact, outcome, outputs, and implementation arrangements were discussed with the government and finalized during a TA fact-finding mission in July 2012. The TA will be financed by the Clean Energy Financing Partnership Facility of the ADB and will be administered by ADB.
Impact Increased access to energy in the NTT region of Indonesia
Project Outcome
Description of Outcome Improved capacity within MEMR, PLN, the regional government of NTT, and the local governments of Sumba to design and manage rural energy access programs using renewable energy resources
Progress Toward Outcome The government has accepted the least cost electrification plan for Sumba, and is now embarking on a nation-wide least cost electrification plan using renewables (focused on eastern Indonesia) under its "Indonesia Tarang" program. The government is also planning to issue tariff incentives for wind and solar PV plants I the near term
Implementation Progress
Description of Project Outputs

1. Detailed energy access plan for Sumba developed

2. Investment projects to be developed by small IPPs prepared

3. Implementation of ongoing and planned energy access programs financed by the government strengthened

Status of Implementation Progress (Outputs, Activities, and Issues)

A detailed energy access plan for Sumba has been prepared and includes: (1) a survey of renewable energy resources, and (2) a least cost electrification plan. Further a review of the nation-wide context for rural electrification with a specific focus on findings from Sumba has been completed and published by ADB

Preliminary preparation of investment projects in the area of wind, solar PV and biomass is complete.

Training programs and support to enhance the quality of the government's energy access programs have been completed

A report on Indonesia's electrification targets, programs and need for reform has been prepared which is serving as a basis for an ongoing dialogue with the government for a detailed action plan, investment targets and regulatory work. This work was completed in Q1/2016

Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation

ADB participated in the Steering Committee meeting and Sixth Plenary Meeting of the Sumba Iconic Island Workshop, held in Sanur, Bali on March 10-13, 2014. ADB had the opportunity to present its 2014 workplan to stakeholders, which includes continuing work on geospatial mapping and least cost electricity planning, and preparing an Investors Forum for Sumba Island. ADB's assistance in developing a monitoring & evaluation framework and conducting capacity buding trainings were discussed at length in the plenary meeting and given feedback regarding their integration with local government procedures. New programs under ADB's TA were also presented to participants for feedback including a new Output-Based Aid program to pilot solar mini-grid systems and a wind resource survey.

ADB participated in the plenary meetings held in October 2014 and March 2015. Owing to the lack of a suitable regulatory framework for cost-recovery by private sector energy service providers in off-grid contexts, ADB in consultation with the government decided not to proceed with the solar PV mini-grid pilot activity.

Between March 2015 and December 2015, the focus of the TA was on development of a national electrification action and roll out plan, which will combine elements relating to institutional reform, geo-spatial planning, budgetary processes, and innovative financing and implementation models.

Business Opportunities
Consulting Services About 131 person-months of consulting services (18 person-months of international consultants and 113 person-months of national consultants) will be engaged through a firm. The international consulting firm, together with the national consultants, will be hired through quality- and cost-based selection (quality cost ratio of 90:10) on the basis of a full technical proposal. The international consultants will include the following: (i) renewable energy specialist team leader, (ii) distribution engineer, (iii) micro hydro specialist, (iv) small wind energy specialist, (v) renewable energy finance specialist, (vii) procurement specialist, and (viii) capacity development specialist. National consultants will have expertise that complements the international experts and support them in their work. The national team will also include (i) a carbon finance specialist, (ii) community development facilitators to help with project implementation and ongoing community engagement, and (iii) an office manager. The selected firm should be able to demonstrate expertise in other areas such as solar photovoltaics, biogas, and liquid biofuels for small-scale power generation, all of which may be considered for expanding the terms of reference in the future.
Procurement All equipment will be procured following ADB's Procurement Guidelines (2010, as amended from time to time), and will be turned over to the executing agency upon TA completion.
Responsible ADB Officer Tharakan, Pradeep J.
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Energy Division, SERD
Executing Agencies
Ministry of Mines and Energy
Jl. Medan Merdeka Selatan No. 18
Jakarta Pusat 10110
Concept Clearance 21 Sep 2012
Fact Finding 16 Jul 2012 to 20 Jul 2012
Approval 25 Sep 2013
Last Review Mission -
Last PDS Update 30 Mar 2016

TA 8287-INO

Approval Signing Date Effectivity Date Closing
Original Revised Actual
12 Dec 2012 10 Jan 2013 10 Jan 2013 31 Dec 2014 31 Dec 2015 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
0.00 2,000,000.00 0.00 0.00 0.00 0.00 2,000,000.00 12 Dec 2012 1,856,383.57

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