INDONESIA | How not to build a power plant: a cautionary tale from Java

PT Perusahaan Listrik Negara (PLN) technicians perform maintenance work to power cables

It’s a bucolic scene: a farmer rests on a path between shimmering rice paddies in the afternoon sun, his tanned face staring across the flooded fields to the gray expanse of the Java Sea.
But the farmer, Wari, isn’t happy, and the Indonesian post-­card view belies a battle that has divided local communities, split families and become a wind-­vane for the growth prospects of Southeast Asia’s largest economy. What Wari is looking at is the site of a planned coal-fired power station.
He’s one of 74 farmers from four villages in Central Java’s Batang regency who refuse to sell their land for the USD4 billion Japanese-Indonesian project. Their resistance has held up construction for four years, a delay that President Joko Widodo has promised to end.
“I don’t want to sell,” said Wari, 51, who uses one name and farms about 1 1/2 acres of land with the help of his five children. “When I die, I’ll give it to my children.”
The battle in Batang encapsulates all the elements of Indonesia’s struggle to forge a modern economy out of a scattered archipelago of thousands of islands that relied for centuries on farming and natural resources. The loss of precious land, fear of unemployment and pollution, allegations of corruption, and distrust of change permeate the family feuds and protests that have become part of local daily life.
“The Central Java project is the poster child for everything that can go wrong with the land acquisition for a greenfield, coal-fired power project in Indonesia,” said Bart Lucarelli, Bang-­kok-based managing director of Roleva Energy, which advises government and private clients on energy programs in countries such as Thailand, Indonesia and the Philippines and isn’t involved in the Batang site. “Land acquisition issues affect almost all large coal-­power projects.”
For Jokowi, as the president is known, the project presents a dilemma. He needs the electricity from new plants to power factories that would fuel growth and help rebalance the economy away from natural resources. At the same time, he needs to avoid alienating farmers and poor Indonesians who swept him into office last year. The government announced last week that the economy shrank unexpectedly for a second straight quarter.
Indonesia is the world’s largest exporter of power-station coal, yet it has a lower electricity consumption per capita than North Korea, according to the U.S. Central Intelligence Agency’s World Factbook. The Southeast Asian nation can generate about 53 gigawatts, less than Australia, which has about one-tenth of the population.
The Batang station, a venture between Japan’s Electric Power Development Co., Itochu Corp. and a unit of Indonesia’s PT Adaro Energy, would add 2,000 megawatts of capacity, making it the first large-scale project to be carried out under a 2005 presidential regulation that was designed to get private companies to help build infrastructure. At a meeting with businessmen in Tokyo in March, Jokowi said construction of the plant would start in April.
“The Batang plant is an important indicator of how the current government is able to resolve issues facing infrastructure development,” Anton Alifandi, principal analyst at U.S.-based consultancy IHS Inc., said in an e-mail. “What’s at stake is Jokowi’s reputation as a ‘can do’ politician who pledged to improve the business environment.”
To support Jokowi’s goal of 7 percent annual growth, the government says electricity consumption should grow by 8.7 percent a year between now and 2024. It aims to add 42,900 megawatts of generating capacity by 2019, largely coal-fired, with about a third built by state utility PT Perusahaan Listrik Negara, and the rest by private ventures.
The problem is getting the land. In most countries, governments can force landowners to sell their acreage for public works. Indonesia only got such a law in 2012, which sets timeframes for land negotiations and arbitration of disputes. The law has yet to be tested.
“It’s not about a regulation, it’s about implementation,” said Pandu Sjahrir, chairman of the Indonesia Coal Mining Association which represents miners, traders and contractors.
Evicting farmers if they don’t agree to a price set by arbitration may raise human rights concerns, which could put off overseas lenders that Indonesia needs to fund the projects.
“We won’t take a tough approach with the land owners,” Masayoshi Kitamura, president of J-Power, said at a press briefing on April 30. “Even if it takes a long time, we will negotiate with them to get progress day by day. We will start construction as soon as possible, at least by Oct. 6.”
In Batang, the government assigned the job of acquiring land for the project joint venture company, PT Bhimasena Power Indonesia, to state utility Listrik Negara. The company will try as much as possible to avoid using the 2012 law, President Director Sofyan Basir said during a meeting with villagers in March, according to the utility’s website.
Even without the land-rights problems, it takes 3-4 years to build a coal-fired plant, so the country needs to start building 21 plants the size of the Batang one if it’s going to meet Jokowi’s target. So far, it’s constructing plants that will add about 7,400 megawatts.
Jokowi officially started a program last Monday to build the remaining 35,000 megawatts capacity, to be built in 210 locations across the country with investment of 1,100 trillion rupiah ($84 billion), the energy ministry said on its website.
“In 70 years since Indonesia became independent, only 50,000 megawatts have been built by the government,” Jokowi said, according to the ministry’s website. “Thus there are many who doubt development of 35,000 megawatts in 5 years.”
The Batang project shows why progress has been slow. Against the backdrop of Java’s central ridge of volcanic mountains, the strip of flat, alluvial land on the coast is a patchwork of paddy fields that have been tilled for centuries. Nearby, at the mouth of the silt-filled Kaliboyo River, is the ramshackled fishing village of Alas Roban Timur.
Abdul Hakim, 43, has been fishing the waters here since he finished primary school. He said the sea is rich and catches are plentiful. After visiting the sites of other coal power stations, he’s convinced that the Batang plant would reduce catches by 50-70 percent because of waste from the plant and disruption from a coal port and water intake.
“People here have been fishermen since they were little, it’s all the people of Alas Roban know,” he said as he watched the day’s catch being auctioned in a village hall reeking of fish. He said out of about 500 voters in the village, all but 10 voted for Jokowi in the election. “We thought his programs would focus on the little people. We hoped he would care about us.”
Most farmers have taken the deal, creating friction with those who are holding out. “Before the project, everybody was united,” said Rohani, 51, a farm laborer who operates the irrigation system in his village. “We were close friends and families. Now, there’s so much hatred. If someone who supported the project dies, those who oppose it won’t even come to the funeral.”
In a tiny hut among the rice fields, farmer Sutoyo drinks tea from a dented tin teapot and talks with neighbors about the plant. His five siblings wanted to sell the family plot, but couldn’t do so without his agreement. After his mother came to his house and cried and begged him to sign three times, he gave in.
“I don’t talk to them anymore, even though we live in the same village,” said Sutoyo, 55, wearing a worn gray hoodie and pale cotton pants, caked with mud. He said he still has some land of his own that he will continue to farm. “I don’t want to sell it because I’m afraid I won’t have anything to eat.”
Yellow flags with the words: “Reject the Coal-Fired Power Plant” fly from sticks planted in the fields of the holdouts. On the acquired plots, white boards warn of fines or jail for anyone using the land without permission.
Part of the problem is that officials are still trying to employ a top-down approach to infrastructure projects, where the government makes a decision without first consulting the local population, said Arif Fiyanto, Climate and Energy Campaign Team Leader at Greenpeace, which has been providing advocacy and advice for villagers. “If this continues, I’m confident the 42,000 megawatts won’t be achieved.”
Batang isn’t the only plant held up. Operation of the 400 megawatt Pangkalan Susu plant in North Sumatra has been delayed for a year because of disputes over compensation for land along the routes of transmission lines, Mayarudin, operation manager for Listrik Negara in North Sumatra province, said on April 7.
The delays are crippling the country’s efforts to industrialize. In a country where some 40 million people don’t even have access to public electricity, daily power outages are common.
“We’ve had rolling blackouts for decades,” said Alwy Thaib, 55, who makes and bottles passion-fruit syrup in Medan, the biggest city on Sumatra, an island larger than California to the west of Java. “It’s difficult for businesses, so many people in Medan have their own generators,” he said, while stirring a vat of syrup. “We have to buy diesel and that means extra costs.”
With the country desperate for power and the government able to force farmers off their land, Bari, another holdout, is pessimistic about the future.
“If the law says the land must be bulldozed, then please go ahead,” said the 55-year-old farmer, as he walked home after working in his rice fields. “But I still won’t sell it. If Jokowi doesn’t pity the farmers, I’ll just give up.” By Fitri Wulandari and Emi Urabe, Bloomberg