The World Bank has announced $400 million to help double Indonesia's geothermal energy capacity, part of a broad effort at the bank to ramp up climate change spending in the developing world.
Indonesian leaders estimate the country has about 28,100 megawatts of geothermal capacity -- the equivalent of about 12 billion barrels of oil. They are aiming to make the renewable power a major source of energy in the coming years, a goal that Indonesian officials note will require hefty foreign investments.
At the same time, the country has pledged to reduce its growth of greenhouse gas emissions 26 percent in the coming decade. World Bank officials said they believe the funding will help Indonesia meet its goal.
"Indonesia has the largest geothermal energy potential in the world. The co-financing will help Indonesia reduce the use of fossil fuels to meet its rapidly growing energy needs. It also gives a clear signal on the practical actions developing countries can take to combat global climate change," Katherine Sierra, the World Bank's vice president for sustainable development, said in a statement.
The funding announcement comes at a time of heightened tension at the World Bank. The board is expected to decide next month whether to lend South Africa $3.75 billion for a 4,800-megawatt coal-fired power plant. The project has sparked widespread anger in the environmental community, which is pressing the World Bank to eliminate all fossil fuel lending and only fund clean-energy projects.
The debate could have a direct impact on the bank's Climate Investment Funds, from which money for the Indonesia geothermal plan flows. Green groups are leaning on Congress not to put money into World Bank climate programs as long as the institution continues to underwrite coal. They also are closely eyeing the fund's 2012 sunset provision, and argue the bank should not assume it will be the main delivery mechanism for the hundreds of billions of dollars wealthy nations have pledged to fight climate change.
"They have to prove they're going to be helpful and not hurtful, and the jury is still out on that," said Jake Schmidt, international policy director at the Natural Resources Defense Council.
Bank earmarks $40 billion for low-carbon projects
The bank, meanwhile, appears to be moving full speed ahead to increase climate funding. At a weeklong meeting in the Philippines to discuss the climate fund, World Bank executives announced plans to mobilize $40 billion for country-led low-carbon growth.
In addition to the Indonesia plan, the bank has approved projects in Columbia, Kazakhstan, Egypt, Mexico and several other countries to ramp up a range of solar, wind and public transportation plans.
Activists largely praised the World Bank's involvement in developing Indonesia's geothermal capacity. "Obviously, helping Indonesia invest in clean energy and at the same time meet development needs is critical," Schmidt said.
Under the plan, Indonesia will use the financing to "expand large-scale geothermal power plants and to accelerate initiatives to promote energy efficiency and renewable energy by creating risk-sharing facilities and addressing financing barriers to small- and medium-scale investments," the World Bank said.
Dennis Tirpak, a climate change expert at the World Resources Institute think tank, called the funding a positive step that can help jump-start Indonesia's geothermal industry. But he also stressed that Indonesia needs to make long-term policy changes -- particularly to its fossil fuel subsidy structure -- if it hopes to make lasting changes to its energy structure.
Indonesia's national energy policy aims to derive 9,500 megawatts of power from geothermal sources by 2025. Recently, the country's energy minister told The Jakarta Post that the country hopes to attract $12 billion in foreign investment when it hosts the World Geothermal Congress in late April.