The Asian Development Bank (ADB) has extended US$1.1bn worth of loans to sustainable energy sector development in Indonesia.

There are two loans in the package, one US$500mn loan for sustainable and inclusive energy projects, another US$600mn results-based loan which will allow PLN, Indonesia’s state electricity utility, to provide sustainable energy in the country’s east. The PLN loan is guaranteed by the Indonesian government

“Increased access to affordable and sustainable sources of energy is a prerequisite for the government to meet its economic growth aspirations. The two loans approved today will, respectively, improve the enabling policy environment to increase public and private investment in Indonesia’s energy sector, and support and develop the power distribution network in Eastern Indonesia,” says Winfried Wicklein, the ADB’s country director for Indonesia.

Indonesia’s energy sector has been starved of investment over the years, which the ADB attributes to years of energy subsidies. This has left it lagging behind neighbouring countries in Southeast Asia in the development of its abundant resources of renewable energy, such as solar, wind and biomass.

The country was still dependent on coal for more than half of its energy generation in 2016. It’s hoped that these loans will help stimulate private investment in the renewable energy sector.

The PLN loan, for instance, is part of an investment programme for stimulating growth in the east of Indonesia. It is hoped that by improving the energy distribution system, business activity will improve across Nusa Tenggara and Sulawesi, where the main industries are agriculture, fishing and tourism.

However, the ADB sums, while substantial, are a drop in the ocean of the investment in power required in Southeast Asia’s biggest nation. Challenging geographical conditions brought by the archipelagic nature of Indonesia is a huge impediment to centralised power and networking. According to the World Bank, the country needs US$500bn investment in its infrastructure, a sizeable chunk of which should be for power generation.