Indonesia: Geothermal Power Generation Project

Project Name Geothermal Power Generation Project

Project Number 52282-001

Country / Economy Indonesia

Project Status Active

Project Type / Modality of Loan

Assistance

Source of Funding / Amount

Loan 3928-INO: Geothermal Power Generation Project

Ordinary capital resources US$ 300.00 million

Loan 8380-INO: Geothermal Power Generation Project

Clean Technology Fund US$ 35.00 million

Strategic Agendas Environmentally sustainable growth

Inclusive economic growth

Drivers of Change Gender Equity and Mainstreaming

Governance and capacity development
Knowledge solutions
Partnerships

Sector / Subsector Energy / Renewable energy generation - geothermal

Gender Equity and Effective gender mainstreaming

Mainstreaming

Description The project will support expansion of Indonesia''s geothermal generating capacity to contribute to the sustainability, resiliency, and sufficiency of
the electricity system. It is aligned with the following Sustainable Development Goals (SDGs): SDG 7 on access to affordable, reliable, sustainable
and modern energy for all and SDG 13 on urgent action to combat climate change and its impacts. The project will support GDE, a state-owned
geothermal company focused on development and operation of geothermal resources, to commission an additional 110 megawatts (MW) of
geothermal electricity generating capacity - 55 MW at the Dieng geothermal field in Central Java and 55 MW at the Patuha geothermal field in West
Java.
Project Rationale and Linkage
to Country/Regional Strategy
Impact
Project Outcome
Description of Outcome
Progress Toward Outcome
Implementation Progress
Description of Project Outputs
Status of Implementation Progress (Outputs,
Activities, and Issues)
Geographical Location
Safeguard Categories
Environment
Involuntary Resettlement
Indigenous Peoples
Summary of Environmental and Social Aspects
Geothermal energy is one of the few renewable energy technologies that can provide baseload power, which makes it a valuable complement to
variable renewable energy such as wind and solar energy. Indonesia has the world's largest geothermal potential, estimated at 29 GW. Since the
Geothermal Law was enacted in 2003, the Government of Indonesia has prioritized the development of this resource, but geothermal development
has been slow to take off. The government has allocated the development rights for geothermal working areas, with an estimated aggregate
potential of 4.4 GW. Of these areas, private sector developers hold the development rights for 2.4 GW and state-owned enterprises (SOEs) hold the
rights for areas with an aggregate potential of 2.0 GW. As of May 2018, Indonesia had reached only 1.95 GW of installed geothermal capacity,
which is less than half of the allocated rights and significantly short of the targeted 7.2 GW by 2025.
To reach the required scale, the private sector must play a strong role in geothermal development. Indonesia has had some success with private
sector-led geothermal projects, including those supported by the Asian Development Bank (ADB) Private Sector Operations Department. However,
many privately held concession areas have not advanced because of environmental, social, or fiscal issues; and private sector interest in recent
tenders has been modest. A variety of challenges face the sector, including the costly, lengthy, and high-risk exploration phase; unstable policy
environment; and an often-unfavorable tariff regime.
Development partners are supporting the government to establish a more conducive policy environment for geothermal development. ADB has
been an active participant in these efforts, in particular through the recent policy-based lending program. To reduce the up-front risks associated
with geothermal exploration, the government is implementing a new risk-sharing mechanism for the project initiation phase, funded by the World
Bank and the Green Climate Fund. As part of this program, the government will fund exploratory drilling for geothermal working areas that can
subsequently be tendered. The updated geothermal regulation allows for greenfield geothermal working areas to be assigned to SOEs if the tender
process fails (Regulation No. 37 [2018] on Offering of Geothermal Working Areas, Issuance of Geothermal License and Geothermal Business
Assignment). Legacy projects where both private and public sector developers have grandfathered power purchase agreements (PPAs) are
expected to proceed under the agreed mechanism and ownership
PT Geo Dipa Energi (GDE) was formed in 2002 as a joint venture company of Pertamina and PLN to manage and develop the geothermal working
areas at Dieng and Patuha, which are among the 2 GW of working areas allocated for SOE development. GDE negotiated a PPA with PLN in 2004 for
both Dieng and Patuha, covering the generation of up to 400 MW at each site. In 2011, the government reorganized GDE from a joint venture to a
limited liability company and took over the 67% of shares owned by Pertamina. Equity injections from the government have increased its
shareholding to 93.3%, while PLN holds 6.7%. GDE operates a 55 MW power plant at Dieng (Dieng Unit 1) and a 55 MW power plant at Patuha
(Patuha Unit 1). It started operations by recommissioning Dieng Unit 1, which was initially commissioned by the private sector and then turned over
to the government after the 1997 Asian financial crisis. GDE subsequently commissioned Patuha Unit 1 in 2014, which required the construction
and commissioning of a power plant and associated systems fed by previously drilled wells. Under the proposed project, GDE plans to commission
additional units at Dieng and Patuha (Dieng Unit 2 and Patuha Unit 2). These are government priority projects (according to the Regulation of the
Ministry of Energy and Mineral Resources No. 40 [2014]) and PLN will purchase the electricity generated under the existing PPAs for these two
working areas. In parallel with the development of Dieng Unit 2 and Patuha Unit 2, GDE will conduct exploratory drilling on behalf of the
government, under a new risk-sharing program, for sites to be tendered. In addition, GDE will develop geothermal working areas for which it holds
the development rights in areas that are less attractive to private investment because of environmental and social risks.
The project will add renewable energy baseload generation in Java by expanding geothermal power generation to reduce Indonesia's reliance on
coal. It will contribute to reaching Indonesia's renewable energy targets and reducing GHG emissions in Indonesia and globally. Java has the
country's largest electricity demand but is the most challenging for renewable energy because of low average generating costs from low-cost coal-
based electricity generation, against which renewable energy must compete. The project will support capacity development of GDE, including
increased knowledge of geothermal reservoir performance, contract and project management, and social and environmental impact minimization
and managementall with gender and climate resilience considerations. It will also support GDE to enhance its community development programs to
be more strategic in responding to community needs, including women's needs. The strong emphasis on environmental and social risk assessment
and management reflects lessons learned from previous energy sector projects in Indonesia, where such issues have impeded efficient and
sustainable project development. The enhancement of GDE's institutional capacity will better equip it to undertake government-supported drilling
to bring in the necessary private sector investment and set a proven standard for safeguard management, including for geothermal areas to be
newly developed.
The project is aligned with Indonesia's long-term goals for energy, including maximizing the use of indigenous energy resources, diversifying the
fuel mix, and ensuring environmental sustainability. ADB's energy sector support, as outlined in its draft country partnership strategy for Indonesia,
20202024, is aligned with these long-term goals, with a focus on policy reforms, developing sustainable electricity generation, and grid
investments. The project is also aligned with several operational priorities of Strategy 2030.
Contribution to geothermal energy in Indonesian power supply increased. (Electricity Power Supply Business Plan [RUPTL 2018-2027])
Renewable energy in electricity sector increased. (First Nationally Determined Contribution to the UNFCCC; Republic of Indonesia)
Adequacy and sustainability of energy supply increased
The bidding process for the major drilling services package is ongoing. Award of contract is expected within Q3 2021.
Drilling spud expected to start in September 2021 (Q3 2021).
Geothermal power plants constructed and commissioned
Institutional capacity of GDE strengthened
Community development program enhanced
Procurement activities for all drilling-related services and civil works are underway. First spud is expected in September
2021.
Preparation of EPC bidding documents will start in Q3 2021.
Procurement activities for all drilling-related services and civil works are underway. First spud is expected in September
2021.
Preparation of EPC bidding documents will start in Q3 2021.
As of 30 June 2021, 89 GDE staff were trained (male: 81 [91%]; women: 7 [9%])
As of 30 June 2021, 300 training days dedicated to increasing knowledge in project and contract management (male: 214
[71%]; female: 86 [29%])
EMS scope of Unit 1 already established. EMS surveillance will be conducted in Q3 2021 for Unit 1 only. EMS audit of Unit 2
scope will be conducted in 2022 for Patuha area and 2023 for Dieng area, respectively.
In progress. Draft gender-responsive communication and outreach SOP is being reviewed by GDE corporate legal team.
A pre-feasibility study had been prepared. The FS will be done by AECOM (PMC). Based on AECOM's proposal, the FS for
direct use of geothermal energy will be done in Q2 2022.
A community development strategy has been developed. GDE will engage consultant to conduct community development
for women's livelihoods and women's scholarships.
Nation-wide
B
B
C
Environmental Initial environmental examination (IEE) reports were prepared for the proposed facilities in Dieng and Patuha._The IEEs for Dieng 2 and Patuha_2 were
Aspects based on the final feasibility study (August 2019, made use of domestic impact assessments [AMDAL]) for both facilities, and describe the potential
environmental impacts and mitigation measures including the environmental monitoring required to ensure compliance to the national requirements and
ADB SPS 2009. The IEEs will be updated and/or revised as needed once the front-end engineering design (FEED) has been completed. The revised/updated
IEEs will be similarly disclosed to the ADB website, as required by SPS 2009 and Access to Information 2018.
The IEEs, supplemented by independent studies (critical habitat and biodiversity impact assessments; air quality and noise impact assessments; audits of
existing environmental management systems and emergency preparedness and response systems; and environmental and safety audits of existing
facilities), conclude that the project will extend existing facilities located within highly modified and disturbed areas, and is not anticipated to result in
impacts that are significant and unprecedented. During construction, there will be localized temporary direct impacts, including ground surface
disturbances, increased dust and noise levels, occupational and community health and safety risks, a significant temporary increase in water usage for well
drilling, temporary traffic disturbance, and increased waste disposal requirements. These and other impacts will be mitigated through measures presented
in the environmental management plan. Measures to avoid and mitigate adverse impacts on natural habitat and important ecology have been identified in
biodiversity action plans prepared for both sites.

Involuntary The project team carried out a social impact assessment at both sites. A total of 106 persons (29 households) will be directly affected and four lease
Resettlement coordinators (21 persons) will be indirectly affected by the development of Dieng 2. A resettlement plan was prepared to document the impact
assessments and mitigation measures to be undertaken. Of the affected persons at Dieng, 86 are considered to be severely affected by the project and 47
are considered vulnerable. No significant changes to land requirements are expected during the construction of Dieng 2, but any changes will be reflected
in an updated resettlement plan. The Patuha 2 will be built mostly within GDE's existing premises, but requires an additional 7.2 hectares (ha) of land.
Some of this (2.6 ha) is located in a forest area that is not used by the community. GDE is processing a forestry land use permit for this land and will need
to provide forestry land replacement after the Ministry of Environment and Forestry issues the permit. A resettlement plan will be prepared by GDE in
compliance with ADB's Safeguard Policy Statement for this forestry land replacement, once identified. The remaining 4.6 ha required for Patuha 2 is within
a tea plantation area, and GDE is processing a lease extension to secure its use throughout the project operation. The Patuha 2 due diligence report
documents the assessments and mitigation measures to be taken._Capacity building and training to strengthen GDE staff knowledge on social safeguards
will be conducted by the PMC during project implementation to ensure smooth and appropriate implementation of social safeguards.

Indigenous Peoples The due diligence confirmed that the project is not expected to have any impact on indigenous people as it is not implemented in the areas with prevalent
indigenous communities. It will not directly or indirectly affect the dignity, human rights, livelihood systems, or culture of indigenous peoples or affect the
territories of natural or cultural resources that indigenous peoples own, use, occupy, or claim as their ancestral domain.

Stakeholder Communication, Participation, and Consultation

During Project Design Meaningful consultation with the affected persons (APs), communities, and stakeholders has been conducted during project processing and will continue
during project implementation. The consultations carried out during project processing include: (i) initial consultation with communities living around
project areas including APs and local leaders, village offices staff, and stakeholders to capture their perception and suggestions on the proposed project; (ii)
focused group discussion on specific issues including income and livelihood restoration program for the poor and other vulnerable APs as well as the APs to
be severely affected by the proposed project; (iii) meetings with sub-district and district agencies to obtain their support on the project; and (iv) meeting
with Geothermal experts and civil society organizations to obtain feedbacks and inputs for the projects related safeguards and social issues. Continued
consultations will be conducted during project implementation.
A stakeholder communication strategy (SCS) has been prepared to ensure (i) the delivery of relevant information to stakeholders in a culturally
appropriate, gender sensitive, and timely manner; (ii) a regular flow of reliable information between the project internally and stakeholders externally. The
SCS should ensure meaningful engagement with the affected community, strategic stakeholders, and indirect stakeholder, to ensure that, where relevant,
that a conflict-sensitive approach is employed in communications, community engagement, and broader project planning. Special attention will be
provided to the poor and other vulnerable groups in the SCS.

During Project
Implementation

Business Opportunities

Consulting Services Consulting services contracts include (i) project management consultant-general, (ii) pilot plant design and testing-Dieng, and (iii) project management
consultant-subsurface.
All consulting contracts have been awarded.

Procurement Procurement packages include (i) 2 goods contracts; (ii) 1 non-consulting services contract; (ii) 9 works contracts; and (v) 2 EPC (plant).
The two goods contracts and one non-consulting services contract have already been awarded. All Works contracts are in the advanced stage of procurement
package (mostly for contract finalization). Preparation of bidding documents for 2 EPC contracts will begin in Q3/Q4 2021.

Responsible ADB Officer Miller, Daniel

Responsible ADB Department Southeast Asia Department

Responsible ADB Division Energy Division, SERD

Executing Agencies PT Geo Dipa Energi (Persero)

Timetable

Concept Clearance 15 Feb 2019

Fact Finding 09 Sep 2019 to 19 Sep 2019

MRM 12 Dec 2019

Approval 28 May 2020

Last Review Mission -

Last PDS Update 27 Oct 2021

Loan 3928-INO
Milestones

Closing
Approval Signing Date Effectivity Date
Original Revised Actual

28 May 2020 19 Aug 2020 21 Sep 2020 31 Dec 2024 31 Dec 2025 -

Financing Plan Loan Utilization

Total (Amount in US$ million) Date ADB Others Net Percentage

Project Cost 434.20 Cumulative Contract Awards

ADB 300.00 11 Nov 2022 155.57 0.00 52%

Counterpart 134.20 Cumulative Disbursements

Cofinancing 0.00 11 Nov 2022 70.50 0.00 23%

Status of Covenants

Category Sector Safeguards Social Financial Economic Others

Rating - Satisfactory - - - -

Loan 8380-INO
Milestones

Closing
Approval Signing Date Effectivity Date
Original Revised Actual

28 May 2020 19 Aug 2020 21 Sep 2020 31 Dec 2024 31 Dec 2025 -

Financing Plan Loan Utilization

Total (Amount in US$ million) Date ADB Others Net Percentage

Project Cost 35.00 Cumulative Contract Awards

ADB 0.00 11 Nov 2022 0.00 3.30 9%

Counterpart 0.00 Cumulative Disbursements

Cofinancing 35.00 11 Nov 2022 0.00 1.66 5%

Project Page https://www.adb.org/projects/52282-001/main

Request for Information http://www.adb.org/forms/request-information-form?subject=52282-001
Date Generated 01 December 2022

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