The plight of two communities in Indonesia and Vietnam are connected to the political and economic calculations of a player thousands of kilometers away: South Korea.
by Seulki Lee (Seoul), Della Syahni (Jakarta), Lam Le (Ho Chi Minh City)
Paddy fields dry out, framed fish die, and banana trees don’t bear fruit in Vung Ang, a coastal town in Vietnam overlooking the South China Sea. Residents in Suralaya, in Indonesia’s West Java, suffer from undrinkable groundwater and similarly bare mango trees. But Vung Ang and Suralaya aren’t towns apart, as their plight is connected to the political and economic calculations of a player thousands of kilometers away: South Korea.
Vung Ang-2: The threat of pollution
Le Manh Hung, a 39-year-old man from a village near Vung Ang, has seen decay and pollution firsthand. He lives with his aging mother, wife, and daughter on the piece of land that is planned for construction of the Vung Ang-2 coal-fired power plant. Hung has been working at the Vung Ang-1 plant, right next door, for about a year, transferring coal from ships in port up to the facility.
“This phenomenon has been going on for the past few years. We can’t really attribute this to local people or the power plant because we don’t have enough knowledge of testing to conclude [this]. It’s just an observation we pass around,” said Hung.
Hung describes the job as “toxic” to the point that his clothes change colors after work. Wearing a mask is essential for him to “breathe”.
“The plant’s wastewater has also polluted this area. Wherever the wastewater goes, the impact follows. Most locals’ livelihoods are linked to aquaculture and there are no more rice paddies for us to work on. To be exact, a number of households continue to farm but due to impacts from Vung Ang 1, and upcoming Vung Ang 2, many can’t any longer. Now they just let cows graze on the rice paddies,” explained Hung.
A resident from Hai Phong village near Vung Ang-1 power plant also worries about water quality.
“The water source is polluted. The water from the well is yellow. We bought a water purifier to cook 5 years ago. It’s very dirty, the pond is polluted. Over the past 2-3 years, trees and plants can’t grow. It probably has to do with the plant or something else. The banana trees aren’t bearing fruit. I’m afraid this will affect our health,” says a woman from Hai Phong village who requested we not use her name.
South Korean investment: What sustains overseas coal plants
Vung Ang-2 is not just a Vietnamese concern, as it is financially sustained by South Korean investment. South Korea’s state-owned utility firm, Korea Electric Power Corporation (KEPCO), acquired a 40% stake in Vung Ang-2Japan’s Mitsubishi holds another 40%. Meanwhile, the country’s major coal plant engineering companies, Doosan Heavy Samsung C&T operate an engineering and procurement contract (EPC) on Vung Ang-2 worth US$1.44 billion. The EPC was originally signed by General Electric (GE) and Guangdong Power Engineering Corporation (GPEC).
GE and GPEC withdrew from the project over the years due to unfavorable financial prospects and the insufficient competitiveness of coal-fired power plant investment. Global banks like Standard Chartered and Singapore’s DBS also pulled out for the same reasons in 2019.
But South Korean firms are proceeding full steam ahead. Despite concerns about environmental and social impacts on local communities, Vung Ang-2 is scheduled to start commercial power generation in the third quarter of 2025.
“It is a highly unpleasant facility for local residents, and in fact, it has a huge impact on the quality of local life,” said Youn Sejong, the director of climate advocacy group Solutions for Our Climate in Seoul.
“It is not profitable. At least for the past decade, KEPCO has not made profits by investing in overseas coal power generation projects because global energy market have transitioned away from fossil fuel to renewables,” added Youn who has been keeping tabs on KEPCO’s participation in Vung Ang-2 and another project with substantial Korean investment,Indonesia’s Jawa 9 & 10 coal power plant, since early 2020.
For its part, KEPCO claims to be confident in its environmental technology and profitability.
“KEPCO uses the latest low-carbon eco-friendly USC (ultra supercritical) technology, not old-fashioned technology, to minimize atmospheric emissions, and additionally installs environmental facilities (dehydration facilities, coal yard covers) at an additional cost despite the expected loss to the business owner. It is planning to operate [as] eco-friendly by applying stricter environmental standards than the World Bank, as well as Vietnam’s standard,” reads a KEPCO’s press release from last year.
The company also emphasizes that the Vung Ang-2 project is a “Team Korea project” wherein Korean companies in all fields, such as in EPC, are entering together to demonstrate the high level of national interest through public-private business cooperation.
“It is expected to create a synergy export effect of about US$770 million (54% of the EPC amount) with domestic companies. More than 340 domestic small and medium-sized companies can cooperate in equipment, design, and construction to expect exports. By this way, it is also expected to produce 640 billion won (US$54 million) in exports and ripple effects forSMEs,” added KEPCO.
Suralaya: Far away but close in experience
Some 4,000 km away from Vung Ang, Suralaya another coastal town in Indonesia, near the Sunda Strait, suffers from undrinkable groundwater and bare mango trees.
These two towns share similar concerns and a common feature in their midst. They are the powerhouse of their regions in part because of massive coal-fired power plants funded by foreign money in their backyards.
“Black particles of ash get carried in the wind all the way here. That’s why people always get sick, cough. My child has been sick with a cough and colds since he was a baby,” said Nurhasanah, a resident from Suralaya, West Java.
Suralaya is home to 6,000 residents and a 4,052 MW coal-fired thermal power complex. The facility in the northwest corner of Java Island, is the largest of its kind in Southeast Asia. Jawa 9 & 10 coal-fired units of the complex (capacity 2,000 MW) are the latest addition–Suralaya already has eight coal-fired steam power plants in operation.
“Actually, there were lots of bats when there were many trees alive here. The bat from Merak Island, across the Suralaya shore, flew over here to look for food before [the coal plant was built]. It was so crowded with bats. Now the trees have fallen and died. There are no more bats coming in,” said Jamian, a villager of Lebak Gede, near the Suralaya coal power complex. Until February 2018, he worked as a security guard for Jawa 9 & 10 units of Suralaya coal-power complex for two years while a beach reclamation project was taking place before construction on them began.
Just as in the case of Vun Ang, South Korea’s KEPCO and Doosan Heavy appear again in Jawa 9 & 10’s project profile. KEPCO holds a 15% share in the project shares, with around US$1.9 billion provided by public financing from the South Korean government. Doosan Heavy is an EPC contractor earning US$1.3 billion out of the project.
Doosan Heavy is one of South Korea’s leading coal power developers, with the sector accounting for up to 80% of its projects.
Residents of Suralaya have long been horrified by the impact of coal power plants in their neighborhood for a generation, even before Jawa 9 & 10 arose, as Masitah, a 35-year-old homemaker recounts.
“My sister and my daughter have lung diseases. It was really bad, there were many hollows in their lungs from the X-ray results. My sister had a chronic lung disease and passed away when she was in her 20s. But since the units come in, there’s no job or money to get medical treatment,” explained Masitah.
To calm local residents’ concern about the environmental and health impacts of Jawa 9 & 10, Indonesia’s national power developer stressed the advanced technology utilized by South Korea.
“We use generator technology that has been proven to be the most efficient USC and equipment to minimize the environmental impact of emitting gas, such as the ElectroStatic Precipitator to reduce dust particles and Flue Gas Desulfurization to reduce sulfur levels, and Selected Catalytic Reduction to deal with NOx levels.These are better environment management equipments than the existing ones in Suralaya complex,” claimed Igan Subawa Putra, the company secretary of PT Indonesia Power, a subsidiary of the government-owned power company PLN.
A tale of two towns: A grim tale unlikely to end soon
In 2020, South Korea’s top decision makers in the presidential office the Blue House decided to designate the Jawa 9 & 10 and Vung Ang-2 coal power plant projects as the “last overseas coal energy investments for South Korea” in the wake of public outcry, as well as international pressure for emissions reductions.
The decision makes South Korea and Japan the only two (out of 38) OECD member countries to invest in overseas coal energy. Ironically, the South Korean government has been making a groundbreaking turn in its domestic energy mix from coal to renewables under President Moon Jae-in’s administration.
South Korea’s “8th Basic Plan for Long-term Power Supply and Demand” sends a clear policy message about the energy transition by referring to a reduction in coal-fired power generation in the country’s energy portfolio from 31.6% in 2017 to 22.9% in 2031. It proposes a dramatic increase in the share of renewables from 9.7% (2017) to 33.6% (2031).
In October 2021, South Korea announced the intention to increase the country’s previous 2030 emissions targets agreed to in December 2020. “It is not yet aligned with what’s needed globally to be on a Paris Agreement-compatible 1.5 degree consistent pathway,” wrote Climate Action Tracker in its country report on South Korea recently.
Even before their COP26 commitment, Indonesia and Vietnam have also prioritized renewables as part of an urgent energy policy direction.
In February 2021, the Ministry of Industry and Trade of Vietnam released a draft proposal of the national Power Development Plan (PDP) for the period of 2021-2030. According to this draft, Vietnam is planning to reduce coal-fired power from 34% in 2020 to 27% by 2030, then reduce its reliance on coal energy again to 17-18% by 2045.
By using a 10-year period, Indonesia’s Ministry of Energy and Mineral Resources Electricity Supply Business Plan (RUPTL 2021-2030) announced early this year that the country would give more shares to renewables, up to 47%, while the remaining 52% would still be provided by fossil-fuel based power plants.
“The economics of renewable energy will be different even though it’s expensive right now. But the cost of renewable technology is already declining, and the investment cost is rapidly decreasing. In terms of finance, renewables will be more competitive than coal in the current speed of global energy transition,” said Fabby Tumiwa, executive director of an Indonesian private policy think tank, the Institute for Essential Services Reform.
He adds that if South Korea gives up coal and instead creates financing vehicles through South Korean public banks to invest in Indonesian renewable energy projects, it will dramatically alter the direction of both countries’ energy transition in a just way, ultimately benefiting the economy and public health in both countries.
In fact, South Korean lawmaker Lee-So-young’s 2020 report noted that KEPCO’s investment in Vung Ang-2 and Jawa 9 & 10 is likely to become a “stranded asset” due to the weakening competitiveness of coal power generation, as renewable energy generation costs were lower than coal power generation in Indonesia starting 2017,and will be lower in Vietnam beginning 2028.
So why does South Korea invest against the tide of global coal divestment and a just transition?Activists in South Korea and Vietnam argue there are four main motivations behind South Korea’s coal energy investment strategy in Southeast Asia.
“We think the main reason why the South Korean government continues to support overseas coal-fired power plant projects is to rescue Doosan Heavy from collapsing in the global coal phaseout trend,” said Yang Yeon-ho,an anti-coal campaigner for Greenpeace Korea.
Since 2015, Doosan Heavy, which is headquartered in South Korea’s southern industrial heartland, has been struggling to recover from cumulative losses driven by a decline in domestic and international coal power generation orders. The company received around US$3 billion in an pandemic emergency bailout in early 2020.
Local NGOs in Seoul criticized the covid-19 pandemic bailout of Doosan Heavy, noting it was not for the sake of national economic recovery, but rather for the private company’s bottom line. Doosan seemed ill-prepared to adjust to the global energy transition trend because of the country’s carbon-intense industrial nature. South Korea’s major industries such as steel production, automobiles, and semiconductors all rely heavily on fossil fuel.
Youn Se-jong from Solution for Our Climate points out there is a “democratic deficit” in the public investment decision-making by South Korea’s leaders, who are focused on an export-oriented development economic strategy.
“There is no method that can fully reflect profitability judgement and carbon emission risk in KEPCO’s decision-making structure, and there is no one actively talking about it, not even in the government,” related Youn.
Some legal experts observe a lack of an accountable rights-based evaluation system in South Korea’s state-owned companies and public financing institutions.
“According to last year’s human rights impact assessment of public enterprises by the national human rights commission, KEPCO did not conduct [its own internal assessment], even though it’s a public enterprise with the largest asset size in South Korea. There arises the issue of lack of oversight,” said Kim Jong-chul, the founding lawyer of Advocates for Public Interest Law in Seoul.
Observers in Vietnam also bemoan inaction, emphasizing that there is no legislation or long-term plan in place to encourage renewables for foreign investors–only an instant tariff support program.
“The government should have had a masterplan for solar and wind power from the start. Currently, Vietnam doesn’t have a national master plan or law on renewable energy. They just offered a high Feed-In-Tariff (TIF) rate for renewables and companies jumped in. The government policy should be in reverse,” said Tran Dinh Sinh, the deputy director of environmental advocacy group Green ID.
Southeast Asia: Out of sight and out of mind?
“KEPCO’s overseas business, which first started in the Philippines in 1995, has been competing with the world’s leading private development businesses that put profitability first. As of the end of June 2020, KEPCO is carrying out 46 projects in 25 overseas countries, achieving cumulative sales of 36.4 trillion won (around US$30.8 billion) and net profit of 4 trillion won (US$3.38 billion),” claimed another KEPCO’ press release from last year in defending itself against criticism of its unprofitable overseas investments.
South Korea’s public financing in coal-fired power plants for Vietnam and Indonesia started in 2010 with the 660 MW Cirebon-1 in Indonesia’s Central Java province. Since then, South Korean public financing paired with its private energy sector developed 11 coal-fired power plants (four in Indonesia and seven in Vietnam) to produce around 11,500 MW of electricity.
(Photo10: 2020_PLTU_Suralaya_Landscape_0493 |Caption: Suralaya Power Plant unit 1-7 in Cilegon, Banten, Indonesia, Monday (14/09/2020). [Eka Nickmatulhuda 2020])
Based on South Korean lawmaker Lee So-young’s 2020 report, these 11 coal-fired power plants financed and built by South Korean public funds are estimated to discharge about 1,415.8 billion kilotons of carbon dioxide into the air. Under the Paris Agreement, South Korea is committed to limit its emissions to 536 million tonnes of carbon dioxide in 2030, almost a third of what those plants produce. The country plans to achieve part of its 2030 target through purchasing international credits and increasing LULUCF (land use, land-use change, and forestry) sinks. South Korea further clarified in October 2021 that 33.5MtCO2e of its targets will be met through reductions overseas.
In fact, during COP26 in Glasgow, South Korea, Indonesia, and Vietnam committed for the first time to phase out and not build or invest in new coal power. However, South Korea’s coal exit target year remains 2050.
“South Korea’s stance on the coal phaseout timeline is very, very strange. South Korea did sign on to the global coal to clean statement which clearly states the ‘major economies’ need to phase out of coal by ‘2030s or as soon as possible thereafter,’” said Dave Jones, the global lead of Ember, the UK-based climate and energy think tank.
Nevertheless, South Korea’s construction of new coal plants Jawa 9 & 10 in Suralaya and Vung Ang-2 are not bound by this commitment. This leaves a big question mark on how a just transition can take place for these two towns.
“For me, the important thing is that all Suralayan residents get a job out of the Jawa 9 & 10 project. Our own people do not get any benefit from the plant just watching it develop from across the road. For me, the important thing is that the local people also get something good out of it. Not just the ash,” said Siti Rohati, a 30-year-old Suralaya resident.
In Vietnam, the sentiments are similar. Vo Huu, a 50-year-old fisherman from the village of Hai Phong, also in proximity to Vun Ang-2, sees the project in broader terms.
“With development here, nothing can be done, there’s nothing to benefit locals. I’m against the Vung Ang-2 project. The entire world is fighting against climate change, for a clean environment.”
This story was produced with the support of the Earth Journalism Network. It has been lightly edited for length and clarity and was first published on 29 November 2021.