The energy industry is one of, if not the biggest, culprits behind greenhouse gas (GHG) emissions. A 2024 climate change report said it is the biggest contributor to Asia-Pacific’s emissions, comprising around 78%. With this, many nations are exploring other clean energy options. From wind to geothermal, tapping the region’s rich natural resources is essential to reduce the reliance on fossil fuels for energy. With a wealth of undeveloped geothermal resources, Indonesia’s green energy transition is a key to a sustainable future.
To advance Indonesia’s green energy transition, in January 2025, PT Supreme Energy Muara Laboh (SEML) and the Asian Development Bank (ADB) backed a geothermal energy resources development project through a $92.6 million finance deal. This will be accomplished by expanding a geothermal facility in Muara Laboh, West Sumatra. Assisting in the development, operation, and upkeep of a new geothermal power plant with a capacity of about 83 megawatts (MW) is also part of the initiative.
Indonesia is one of the largest producers and exporters of coal. According to an energy think tank, Ember, in 2022, 80 percent of Indonesia’s electricity came from fossil fuels. Still, because of its relatively large population, its emissions per person were lower than the average globally. As the electricity demand grew to more than triple over the past 20 years and remained entirely reliant on coal- and gas-generated electricity, Indonesia’s power sector emissions increased, according to this report.
An Associated Press article reported that as of November 2024, there were still around 250 active coal-fired power plants, and more are about to be built. This reflects the country’s still-growing demand and reliance on coal for electricity.
While the country has a lot of potential for renewable energy, according to the International Renewable Energy Agency, Indonesia taps just 14.5% of these renewable sources. In Indonesia, renewable energy now accounts for less than 15% of total generation capacity, with an installed capacity of roughly 13 gigawatts.
Among these sources, geothermal energy has one of the biggest potentials. Situated in the Ring of Fire, and because of the intense seismic activity there, Indonesia has a big potential for geothermal energy. Add to that the 40% of the world’s geothermal resources in the country. Exploring this option will be essential to the nation’s energy sustainability goals. These goals include phasing out fossil fuel-powered electric plants, including coal-fired ones, during the next 15 years, according to Indonesian President Prabowo Subianto during the G20 Summit in Brazil in November 2024.
The $92.6 million total arranged finance package from ADB includes a $15 million concessional loan from the Australian Climate Finance Partnership (ACFP), a $38.8 million syndicated ADB B loan from Sumitomo Mitsui Banking Corporation, with ADB serving as the lender on record, and $38.8 million from the bank’s regular capital resources.
Jiro Tominaga, the ADB Country Director for Indonesia, pointed out that geothermal power investment can be difficult. He also emphasized how important assistance from ACFP and the Australian government is in the process of reducing risks and guaranteeing the project’s success in assisting Indonesia to achieve its clean energy goals and supplying reasonably priced electricity. “This project will help to reduce greenhouse gas emissions and promote sustainable energy solutions that will enhance the country’s long-term energy security. The private and public sectors must work together in advancing geothermal development.”