World Bank’s ISLE-1 programme spearheads energy transition in Eastern Indonesia

The initiative, named the Indonesia Sustainable Least-cost Electrification-1 (ISLE-1) Programme, is set to connect around 2 million people – equivalent to 500,000 new customers – to the electrical grid. It will also stimulate solar power investments in an effort to cut greenhouse gas emissions, while simultaneously lowering the cost of power generation by a substantial 20 percent. The ISLE-1 Programme is also designed to bolster the capacity of Indonesia’s primary electrical power company, PT. PLN Persero, to manage the energy transition effectively.

The ISLE-1 Programme seeks to foster Indonesia’s transition to low-emission development through affordable, reliable, and sustainable energy. As the energy sector is predicted to be the country’s leading contributor to greenhouse gas emissions by 2026, such initiatives are pivotal. In response to this, the Indonesian Government has committed to reducing emissions by close to 32 percent by the year 2030.

Manuela V. Ferro, World Bank Vice President for East Asia and the Pacific, stated that the ISLE-1 Programme would stimulate private sector finance for Indonesia’s energy transition and help communities adapt to climate change. She emphasised the enhanced reliability and sustainability of the electricity that will be made accessible to impoverished communities in the Eastern Indonesia islands, saying, “This project is an example of how the World Bank Group is helping countries integrate climate action into their development plans and mobilise private sector finance for development.”

Furthermore, the ISLE-1 Programme aims to upgrade PLN’s operational systems and business processes and reinforce the grid for renewable energy integration and electrification in eastern Indonesia. This project will support low-income communities that currently lack access to affordable energy, thereby reducing reliance on polluting energy forms such as diesel generators and kerosene lamps.

Darmawan Prasodjo, Executive Director of PT. PLN Persero, characterised the ISLE-1 Programme as a sub-set of PLN’s utility’s distribution, transmission, and power generation plan for 2021-2030. The Programme will predominantly focus on the Maluku and Nusa Tenggara regions, which record some of the lowest electrification levels and the highest average generation costs of electricity in the country.

The ISLE-1 Programme aligns with the World Bank Group’s Country Partnership Framework (CPF) for Indonesia for fiscal years 2021 to 2025, which envisions infrastructure improvement, a transition to low-carbon energy, and achieving universal access to energy. The programme also supports the gender and climate change objectives of the framework.

Satu Kahkonen, World Bank Director for Indonesia and Timor-Leste, affirmed the World Bank’s commitment to back the Government of Indonesia’s ambition to reach 100 percent electrification.

The $1.14 billion total cost of the ISLE-1 Programme includes significant financial backing from several entities. The World Bank is contributing $500 million, the Canada Clean Energy and Forest Climate Facility (CCEFCF) has approved $47.5 million in co-financing, and the Clean Technology Fund (CTF) has approved a $15 million loan alongside a $19 million grant. PLN will finance $159 million, and a further $400 million will be provided via private sector financing.