Indonesian province’s residents accuse World Bank of ‘indirectly’ funding coal-fired plant

Residents of a province near Jakarta have accused the World Bank Group of indirectly financing the expansion of an enormous coal-fired power plant, saying it would aggravate their health and livelihood problems, environmentalist groups said Thursday. 

In a complaint lodged with the World Bank, residents of Banten province alleged that its International Finance Corp. (IFC) unit had made an equity investment in a bank, which is a financier of the Suralaya plant’s expansion, but they did not say that the investment was used for the project.

The Suralaya power plant complex in Cilegon, a city about 62 miles west of Jakarta, is already the largest in Southeast Asia, with eight units that have a total capacity of 4,025 megawatts. Its expansion with the addition of two units, Java 9 and 10, will add 2,000 MW of capacity. 

The expansion “will devastate local communities and tip the world closer to a climate catastrophe, to which Indonesia and its citizens are uniquely susceptible,” Novita Indri, energy campaigner at Trend Asia, a group supporting the complaint, said in a statement.

The statement was released by Inclusive Development International (IDI), a U.S.-based human rights group and one of the organizations that helped file the complaint.

The expansion project is owned and managed by PT Indo Raya Tenaga, a joint venture between PLN, Indonesia’s state-owned electricity company, and a South Korean firm, Doosan Enerbility.

Among the various local and Southeast Asian financiers of the project is Hana Bank Indonesia, which received an equity investment of U.S. $15 million from the World Bank’s IFC in 2019, the residents of Cilegon said in their complaint. A disclosure document on the IFC website confirms that investment.

The Cilegon residents’ complaint stated that IFC was exposed to Java 9 and 10 coal units in the Suralaya plant because Hana Bank Indonesia provided $56 million in financing to the project manager PT Indo Raya Tenaga in July 2020.  

The complaint did not say that the IFC’s equity investment in Hana Bank Indonesia was a part of the $56 million of funding for Java 9 and 10. It said that IFC should in no way be connected to any coal projects.

“Complainants want to ensure that any remaining loopholes that would allow IFC to indirectly finance a new coal project via financial intermediary clients in the future are closed,” the complaint to the World Bank Group stated.

In March, the IFC updated its policy for financial clients such as banks to end investment in new coal. The previous policy only required clients to reduce their coal exposure by half by 2025 and to zero by 2030.

The World Bank has pledged to align its operations with the Paris Agreement on climate change and to help countries transition to cleaner energy sources. However, critics said, the bank still supports coal projects through its financial intermediaries and has not done enough to ensure compliance with its environmental and social standards.

The World Bank’s acting director in Indonesia, Lestari Boediono Qureshi, declined to comment on the complaint. 

The IFC, Hana Bank Indonesia and the Indonesian Ministry of Energy and Mineral Resources, did not reply immediately to requests for comment from BenarNews.

Environmental degradation

The construction of Java 9 and 10, is “totally unwarranted” because electricity needs in the area are already being met and the Java-Bali grid is already oversupplied, IDI’s Novita said.

As it is, the Suralaya plant, which has been operating since 1984, has been linked to air pollution, water contamination and soil degradation in the area. 

Additionally, farming and fishing in the area have become increasingly unviable because environmental degradation has affected soil and marine life, according to the residents’ complaint. 

Families have been forcibly evicted without adequate compensation to make way for the new plants, and the last remaining beach in the area has been destroyed, greatly impacting tourism and local businesses, it said.

According to a study by the Centre for Research on Energy and Clean Air (CREA) released on Tuesday, the Suralaya complex has led to health problems that have cost an annual $1 billion.

The coal-fired plant also contributes to hazardous smog in Jakarta, which topped the list of the world’s most polluted cities in August.

The expanded facility will only add to these woes, green groups supporting the complaint of residents living near the coal-fired power plant said.

The two new units when completed would emit an estimated 250 million metric tons of carbon dioxide over their 30-year lifespan, further contributing to global warming in Indonesia, one of the countries most vulnerable to climate change, IDI said.

However, Peter Wijaya, president-director of PT Indo Raya Tenaga, said last week that Java 9 and 10 would be hybrid power plants, making them more environmentally friendly, according to a local news report.

The new plants would use a mix of 60% ammonia and green hydrogen and 40% coal in the production process, Investor Daily said. 

The construction of the new units is expected to be completed by 2025 and is part of President Joko “Jokowi” Widodo’s ambitious plan to add 35 gigawatts of electricity capacity nationwide by 2024.

However, with electricity supply exceeding demand in Java, the government should focus more on improving distribution networks and expanding access in other regions, said Daymas Arangga, the executive director of Energy Watch, a local advocacy group.

“Companies that come to the [other] regions, for example, have difficulty building smelters because there is no adequate electricity supply,” Daymas told BenarNews, referring to nickel and other smelters.

Coal, the dirtiest of fossil fuels, powers 65% of the energy needs of Indonesia, Southeast Asia’s largest and most populous country.

Indonesia is the world’s eighth most polluting country with 2% of global greenhouse-gas emissions to its name, according to the World Resources Institute.

The energy sector accounts for nearly half of the country’s emissions, with automotive emissions making up about one-fifth of its overall emissions, according to the Ministry of Industry.

The country has agreed to cap power sector emissions at 290 megatons of CO2 in 2030, down from 357 megatons. It also agreed to accelerate the deployment of renewable energy so that it comprises at least 34% of all electricity generation by the same year.Last year, Indonesia signed a Just Energy Transition Partnership with several international donors. The partnership aims to provide $20 billion in funding to help Indonesia shift away from coal and other fossil fuels.