Indonesia will receive €1.2bn ($1.26bn) in green financing for its power sector from German development bank KfW.
The agreement was finalised at the UN Cop 29 summit in Baku, Azerbaijan. The funds will be used for the development of various green power infrastructure and clean energy projects. These will include pumped storage hydropower plants and the development of Indonesia's transmission network, to connect power plants.
State-owned utility PLN aims to add around 102GW of additional capacity, out of which 75pc is to come from renewable energy. But there is a mismatch between the location of large-scale renewable energy resources such as geothermal and hydropower plants, and demand centres.
A smart grid would help to deal with intermittency in variable renewable energy sources, and could enable and support the scale-up of up to 28GW of renewable energy in Indonesia by 2040, said PLN's executive vice-president of electricity system planning, Warsono Martono on 18 November. But a huge amount of funding is required to realise a smart grid, and Indonesia needs international support, especially concessional funding, said Warsono.
Additionally, up to 70,000km of transmission lines have to be constructed to move energy from the source to the centre of demand. Constructing these, as well as the smart grid, could cost up to $235bn over 2024-40, according to PLN's president director Darmawan Prasodjo.
KfW's involvement in state-owned utility PLN's green projects will help drive more international partners to collaborate with PLN, said Darmawan.
"We believe that Indonesia and Germany can continue to strengthen partnership in the energy sector, moreover, in clean energy projects, like renewable energy and transmission," said Jurgen Kern, sustainability officer of KfW.
