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Indonesia: Sustainable and Inclusive Energy Program

Sovereign (Public) Project | 48323-001 Status: Closed

Access to reliable and cost-effective sources of modern forms of energy is a pre-requisite for growth and productivity improvement, and can help Indonesia avoid the pitfalls of the middle income trap. While this is particularly true for the country's manufacturing and commercial centers, it is also important that access to modern forms of energy be available to millions of Indonesians living in remote areas across the far-flung archipelago. Otherwise, the benefits of national growth will be limited to the country's economic centers and leave behind people living in less connected areas. Furthermore, this push for increased energy use needs to come at a minimal environmental cost if Indonesia is to preserve the quality of its local environment and honor its commitments to global environmental protection.

Project Details

Project Officer
Pradeep Tharakan Southeast Asia Department Request for information
Country
  • Indonesia
Modality
  • Technical Assistance
Sector
  • Energy
 
Project Name Sustainable and Inclusive Energy Program
Project Number 48323-001
Country Indonesia
Project Status Closed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 8826-INO: Sustainable and Inclusive Energy Program
Technical Assistance Special Fund US$ 1.00 million
TA 8826-INO: Sustainable and Inclusive Energy Program (Supplementary)
Technical Assistance Grant Fund (FRA) US$ 537,375.00
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Partnerships
Private sector development
Sector / Subsector

Energy / Energy sector development and institutional reform

Gender Equity and Mainstreaming No gender elements
Description

Access to reliable and cost-effective sources of modern forms of energy is a pre-requisite for growth and productivity improvement, and can help Indonesia avoid the pitfalls of the middle income trap. While this is particularly true for the country's manufacturing and commercial centers, it is also important that access to modern forms of energy be available to millions of Indonesians living in remote areas across the far-flung archipelago. Otherwise, the benefits of national growth will be limited to the country's economic centers and leave behind people living in less connected areas. Furthermore, this push for increased energy use needs to come at a minimal environmental cost if Indonesia is to preserve the quality of its local environment and honor its commitments to global environmental protection.

Most indications are that Indonesia's energy sector is underperforming. Energy security concerns have increased in recent years. Fossil fuels currently dominate Indonesia's energy mix. While Indonesia is particularly well-endowed with a range of renewable energy resources, namely geothermal, biomass, solar, and hydropower, it lags behind its regional peers in its ability to promote the use of renewables for power generation or transportation. With domestic production of oil declining, Indonesia is increasingly dependent on imported oil to meet its burgeoning domestic demand. Similarly, in recent years, the rate of growth of gas production has stalled, and Indonesia has initiated the import of liquefied natural gas (LNG).

The government has also indicated its strong interest in supporting other renewable sources of electricity. In 2013-2014, the government announced a program to support grid-connected solar PV plants through a combination of ceiling prices and tendering, and also announced a feed in tariff for waste to-energy projects, and for hydropower projects that are less than 10 MW in size. The government is currently considering alternate incentives schemes for supporting grid-connected wind energy and is also preparing an incentive scheme for biomass-based power (from agricultural waste or woody biomass).

Energy access has also been brought to the forefront through a series of recent policy initiatives. MEMR has chosen Sumba Island in Nusa Tenggara Timur as an _iconic island_ where energy access would be expanded from the current baseline of about 30% using renewable energy. With the assistance of ADB5 and other development partners, the government hopes to showcase Sumba as an example of how spatial planning tools, technology approaches, financing models and implementation approaches, can be dovetailed to scale up energy access in remote parts of Indonesia, using renewable energy. This detailed work complements the ongoing regional energy planning and resource surveys being undertaken by the World Bank in association with PLN. ADB is undertaking a review of the challenges and opportunities for expanding electrification in Eastern Indonesia and this analysis will serve as the basis for convening a high-level dialogue in late 2014 of related ministries and government entities and development partners on how to plan for and obtain financing for a large-scale roll out of a rural electrification program in Eastern Indonesia.

The government has taken significant steps towards lowering subsidies for electricity and moving towards a cost-reflective tariff, and putting place cash transfers and smart subsidies to protect the poor from the tariff increase. The tariff was increased by an average of 15% in 2013 with the increases being phased in on a quarterly basis (MEMR Regulation No. 30/2012). In mid-2014, the government announced a further average tariff hike of nearly 13% which will be phased in during the course of the year. There is also an ongoing effort to move away from the current public service obligation framework wherein PLN is reimbursed the difference between its actual costs of operation plus a margin (7%)

Project Rationale and Linkage to Country/Regional Strategy The government is currently developing its new medium-term development plan (RPJMN) for 2015-2019 with a clear emphasis on expanded infrastructure investments, increased deployment of the country's energy resources for domestic utilization and efficiency improvements in the energy sector. These priorities will be reflected in ADB's Indonesia's Country Partnership Strategy 2015-2019 that is currently being developed and the draft Energy Sector Assessment, Strategy, and Roadmap. In terms of lending modalities, BAPPENAS has indicated that going forward; there will be a greater emphasis on programmatic approaches, and greater use of policy and results-based lending in the energy sector. The proposed TA is therefore in line with these priorities. More broadly it also reflects the priorities of the previous CPS 2012-2014, namely inclusive growth, regional connectivity, and climate change mitigation. The TA also supports ADB's Mid-Term Review of Strategy 2020,7 which emphasizes the need for inclusive economic growth, infrastructure development and policy based engagements in middle income countries.
Impact A more sustainable and inclusive energy sector created
Project Outcome
Description of Outcome A regulatory framework and policy actions for a more sustainable and inclusive energy supply prepared
Progress Toward Outcome
Implementation Progress
Description of Project Outputs

1. More efficient energy markets enabled

2. Road map for transitioning to cost-reflective electricity tariffs and energy prices developed

3. Appropriate incentives and programs for scaling up grid-connected renewable electricity supply developed

4. Regulatory and institutional framework for expanding energy access in Eastern Indonesia designed

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

All TA outputs are achieved. the government has recently introduced a number of energy sector regulations that are of high importance to the policy matrix agreed by the government and ADB under the Sustainable and Inclusive Energy Program (SIEP). Further, the TA provided support on the establishment of a wind tariff and solar PV rooftop tariff, expanding gas supply in the country, and new approaches to expanding the electrification rates in the country through analytical support, policy dialogue, consultations and drafting of regulations.

Loan documentation for first subprogram of a policy-based loan called the Sustainable and Inclusive Energy Program for a total of $500 million ($400 million OCR and $ 100 million AIF) was approved by the ADB Board in September 2015. Subsequently, the second subprogram for the same amount ($400 million OCR and $ 100 million AIF) was approved by the ADB Board on 14 September 2017.

Geographical Location
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design Extensive consultations with the concerned government offices and stakeholders were conducted through several policy dialogues, meetings, focus group discussions, etc.
During Project Implementation Extensive consultations with the concerned government offices and stakeholders were conducted through several policy dialogues, meetings, focus group discussions, etc.
Business Opportunities
Consulting Services A consulting firm (PT Castlerock Consulting Indonesia), four individual consultants (senior energy advisor, energy analyst, finance specialist, and program assistant), and several resource persons were engaged to provide implementation support and broad-ranging policy analyses, with a focus on tariff schemes and incentives for large-scale grid connected renewable energy, energy access and rural electrification, utility regulatory economics, energy prices and electricity tariffs, and natural gas supply and distribution. All contracts are now closed except for the senior energy advisor and two resource persons to facilitate a training for PLN and MEMR staff on the Papua-Maluku electrification study done under the TA, in preparation for the implementation of the government's electrification plan in 2018/19.
Responsible ADB Officer Pradeep Tharakan
Responsible ADB Department Southeast Asia Department
Responsible ADB Division Energy Division, SERD
Executing Agencies
Coordinating Ministry for Economic Affairs also known as Kementerian Koordinator Bidang Perekonomian (KKBP)
2nd Floor, Jl Lapangan
Banteng Timur 2-4
Jakarta Pusat 10710
Timetable
Concept Clearance 20 Oct 2014
Fact Finding 20 Oct 2014 to 24 Oct 2014
MRM -
Approval 15 Dec 2014
Last Review Mission -
Last PDS Update 18 May 2018

TA 8826-INO

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
15 Dec 2014 20 Jun 2015 20 Jun 2015 31 Dec 2017 31 May 2018 -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
1,000,000.00 537,375.00 0.00 0.00 0.00 0.00 1,537,375.00 15 Dec 2014 1,413,631.71

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Evaluation Documents See also: Independent Evaluation

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Related Publications

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Tenders

Tender Title Type Status Posting Date Deadline
Senior Policy Advisor Individual - Consulting Closed 13 Dec 2017 19 Dec 2017

Contracts Awarded

Contract Title Approval Number Contract Date Contractor Contractor Address Executing Agency Contract Description Total Contract Amount (US$) Contract Amount Financed by ADB (US$)
Policy and Advisory Technical Assistance 8826 16 Jul 2015 PT Castlerock Consulting (Castlerock) (Indonesia) in association with Economic Consulting Associates Ltd (United Kingdom) Graha Iskandarsyah, 7th Floor,, Jl. Iska aya No. 66C, Jakarta 12160, Indonesia Coordinating Ministry for Economic Affairs 804,376.00

Procurement Plan

None currently available.