GIF support for the Geothermal Resource Risk Mitigation (GREM) Facility, Indonesia

The World Bank and the Global Infrastructure Facility (GIF) are supporting the Government of Indonesia on designing and establishing the Geothermal Resource Risk Mitigation (GREM) Facility.  GREM will provide private and public geothermal developers with blended soft loans for resource confirmation drilling reducing exploration risks and moving feasible projects to achieve financial close. The Facility will raise around US$650 million from contributions from the Government of Indonesia, the World Bank, the Green Climate Fund, and other sources for exploration drilling and technical assistance, capacity building and ongoing on-site support and on-the-job training. The GIF will support the design of the private sector window and its operationalization. While Indonesia’s geothermal power potential is estimated at around 29 GW, only 6% has been developed to produce power due to high resource risk coupled with high drilling costs. Indonesia has set an ambitious target to add 6.3 GW of geothermal capacity by 2026, which would translate to a total investment needs of about US$ 27 billion, the bulk of which will need to come from the private sector. The GREM Facility is expected to support estimated electric power generation capacity of 1–1.5 GW from geothermal resources with more than US$4 billion of private capital mobilized. The GIF’s experience in structuring operations where the private sector is heavily engaged will add value to the project’s development. The GIF’s expertise in infrastructure finance and structuring credit enhancement instruments would be beneficial in developing such a facility.