The Asian Development Bank (ADB) has approved a $300 million loan for state-owned geothermal energy company PT Geo Dipa Energi (GDE) to expand its geothermal power generation capacity. GDE will receive an additional $35 million loan from the Clean Technology Fund for the project.

The company will use the loan to increase its generation capacity by 110 MW for its largest electricity grid in Java by constructing and commissioning two geothermal plants in Dieng in Central Java and Patuha in West Java. “The project is a national strategic project, and it will provide environmentally friendly base-load electricity to the Java–Bali electricity grid,” GDE president director Riki Ibrahim said in a statement. He also said that the project could reduce CO2 emissions by more than 700,000 tons per year and provide direct assistance to local communities, including women and other vulnerable groups.

The project will also build critical geothermal experience in Indonesia and contribute to the government’s efforts in attracting private investors to the sector by reducing early-stage project development risk. It will also help Indonesia combat climate change and make its electricity system more sustainable and efficient.

Indonesia has the world’s largest geothermal energy potential with an estimated 29 GW, and the world’s second-largest installed geothermal capacity at 2.1 GW. However, the development of geothermal power remains slow, largely because the exploration phase is costly, lengthy and risky.