Green Climate Fund approves $100m tranche for geothermal development in Indonesia

The financing will support the efforts of both the private and public sector.

The Green Climate Fund (GCF) gave the go-ahead for the first tranche of $100m out of the $185m financing for the public and private sector geothermal development in Indonesia.

According to an announcement, the first tranche of GCF’s facility will mobilise $410m, made up of contributions from the World Bank, the Government of Indonesia, and private sector developers to achieve 600MW to 900MW of additional geothermal capacity.

About $760m will be mobilised to support exploration and resource confirmation for 1GW to 1.5GW of geothermal energy. The investment is expected to translate to 187-281 million tCO2eq mitigated over the lifetime of the generating assets.

The contribution aims to reduce the early stage exploration risk taken by geothermal developers with the uncertainty to find resources, GCF added. The funding from GCF is a package consisting of a senior concessional loan for public sector projects, a reimbursable grant for private sector projects, and a grant for technical assistance.

Convertible bonds will be used in order to help private sector geothermal sponsors mitigate the exploration risk whilst providing an adequate upside in case of success, the fund added.

Indonesia aims to raise the share of renewables in the electricity generation mix to 23% by 2027 and the share of geothermal energy to 7ppt of the 23%.