The World Bank has approved a total blended finance package of USD 2.128 billion to support Indonesia's economic growth and improve access to clean energy. This package consists of a USD 1.5 billion policy reform program and a USD 628 million blended finance program for the Sustainable Least-Cost Electrification-2 (ISLE-2) project. The policy reform program aims to strengthen Indonesia's financial sector by expanding digital financial services, removing credit infrastructure constraints, and adjusting to climate and natural disaster risks.

Investment Details

The ISLE-2 project will enable energy access to 3.5 million people and generate 540 MW of solar and wind power, reducing power generation costs by at least 8 percent and greenhouse gas emissions by 10 percent in the Kalimantan and Sumatra regions. The project will be financed by a USD 600 million IBRD loan, USD 12 million in grants from the IBRD Surplus-Funded Livable Planet Fund, and USD16 million in grants from partners mobilized under the Sustainable Renewables Risk Mitigation Initiative (SRMI).

Energy Access and Job Creation

The ISLE-2 project is expected to catalyze improved livelihoods and create more and better jobs, including through the electrification of female-headed enterprises. With over 3.5 million people gaining access to electricity, the project will contribute to Indonesia's goal of achieving universal access to electricity in a least-cost manner.

Financial Sector Reforms

The policy reform program will help remove obstacles to procuring renewable energy technologies and implement land value capture mechanisms to attract private capital into infrastructure development. The World Bank will also support Indonesia in mobilizing an additional USD 345 million in private investments to finance solar and wind projects, as part of a regional energy program to create national and regional resilient and interconnected energy grids. The World Bank's support is aligned with the new Indonesian Government's announced goal of reaching high-income status by 2045.

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