Tag: Indonesia Infrastructure

Capital Punishment

Capital Punishment (or, so long, Jakarta)
September 2019

During the last week of August, President Joko Widodo announced that Indonesia would develop a new capital city in Borneo, and move government offices there from Jakarta, Indonesia’s historic capital. The combination of Jakarta’s own sinking – as it pumps so much water from its underground aquifer that part of the city is subsiding a foot a year – and a rising Java Sea, has spelled the end for one of Asia’s largest cities (Jakarta is sinking so fast, it may wind up underwater). This big decision will have immense repercussions – and Indonesia may well prove to be a trendsetter.

Who’s Next?
Jakarta may be the first capital to be relocated as a consequence of climate change, but it will have company soon. For those looking at Jakarta as an aberration, let’s look at two things. First, nearly two-thirds of the world’s major cities are on a coast: Shanghai, Hong Kong, Mumbai, Shenzen, Singapore, Stockholm, Barcelona, New York, Los Angeles, Miami, Montevideo, Dar Es Salaam, Capetown, Algiers, and a list way too long to continue. Second, expectations for sea level rise. For those who don’t look at this issue often, well, fasten your seat belts. At the time of the Paris Climate Summit in 2015, expectations for sea level rise to 2100 tended to see 3 feet as a maximum, with rise in subsequent centuries depending on emissions. By the end of 2017, two years later, 3 feet was beginning to be seen as a minimum sea level rise for the century, rather than a maximum. NOAA (the National Oceanic and Atmospheric Administration), supposedly an authority, projects 8 feet. Maximum potential sea level rise by 2100 in some studies, in the lifetime of most of today’s younger generation? 20 feet.

Twenty feet higher shorelines sound far more threatening than three feet. Which will be right? Well, unfortunately, it’s very hard to tell. And the projections are changing rapidly. Part of the answer depends on GHG emission scenarios in the future. But a very big part of the answer depends on how fast ice melts where it locks up water in glaciers. A key problem in looking ahead, as well-framed by David Wallace-Wells in his excellent book, The Uninhabitable Earth, is that the break-up of ice represents an entirely new physics, never observed in human history and still poorly understood. When we look at what is actually happening with ice melt, it paints a grim picture. A new study in 2018 found that the melt rate of the great Antarctic ice sheet tripled from 1992 to 2017, a pace which makes 20 feet by century-end is no longer out of the question. The Greenland ice sheet alone is losing almost a billion tons of ice every day. And in 2017 it was discovered that two glaciers of the East Antarctic sheet were losing 18 billion tons of ice a year; if/when both go, scientists expect 16 feet just from the two glaciers. Sound bad? Projections are getting worse, quickly. Melt of the two Antarctic ice sheets – parts of which are visibly melting far faster than had been anticipated only a few years ago — could raise sea level by 200 feet. And as science journalist Peter Brannen noted, the last time the earth was 4 degrees warmer, sea level was 260 feet higher.

How threatening all this is also depends on expectations of time. 2100 sounds very far away, even though a substantial portion of people alive today will be alive then. Sea level rise, in most people’s understanding, will be very slow, and there will have been plenty of time to “solve” the problem. However… The other piece we’re learning about in terms of ice melt is, well, it can happen not so slowly. As noted by Bill McKibben in his latest book, Falter, in the distant past, sea levels often rose and fell with breathtaking speed. 14,000 years ago, at the end of the Ice Age, huge amounts of ice thawed, raising the sea level by sixty feet, with 13 feet perhaps having come in a single century. Last month, Scientific American highlighted a study which articulated the direction in which projections are clearly heading:

Scientists have been underestimating the pace of climate change. It was reported recently that in the one place where it was carefully measured, the underwater melting that is driving disintegration of ice sheets and glaciers is occurring far faster than predicted by theory—as much as two orders of magnitude faster—throwing current model projections of sea level rise further in doubt. When new observations of the climate system have provided more or better data, or permitted us to reevaluate old ones, the findings for ice extent, sea level rise and ocean temperature have generally been worse than earlier prevailing views.

For those who have lived or traveled in the American northwest, the recent understanding of the glacial floods which shaped the basin of the Columbia River has some sobering resonance. Geologists now understand that the mechanics of that ice melt, when the glaciers of then Lake Missoula were thawing, were such that melt built-up behind a wall of ice, and when that plug let go, water rushed out of the melted glacier down the valley in a wall estimated to be… 2,000 feet high – enough water fast enough to have emptied the equivalent of Lake Michigan in two days.

So, if you worry about 4-8 feet rise in sea levels, things could be a lot worse! And even 4-8 feet, while it may be very aggressive compared to other projections, means that as much as 5% of the world’s population will be flooded every single year.

The move
What is Indonesia doing, then? How will the change of location of the capital work? Much remains unclear, but announced plans call for construction of the first phase of the new city to begin in 2021 and to be finished by 2024. The entire city, targeted for completion in 2045, will occupy about 495,000 acres of land, twice the size of New York City. The proposed location in Borneo is near the relatively underdeveloped cities of Balikpapan and Samarinda. President Widodo noted that moving the country’s capital will be a mammoth and expensive undertaking. Estimated cost, according to the planning agency: US$34 billion. Chances of that being the final cost? Very low.

To fund this move, the Government has flagged some interesting ideas. Which, somewhat strangely, rely heavily on leaving Jakarta itself (the city, not the “capital”) where it is and selling land there to the private sector. This envisions a national capital move somewhat like those to Brasilia, or Abuja, where “just government” moves. A Finance Ministry official said the leasing of government-owned land and properties in Jakarta to private companies could help it raise 1/3 of the amount needed to develop the new capital site. On top of that private companies could be given a property such as a ministerial building in Jakarta in exchange for building a similar facility in the new capital, and government-owned land and properties in Jakarta could be sold to private companies. In fact, the Government has announced that it will spend more (!) money “rejuvenating” Jakarta than it plans to spend on the new capital. This includes US$22 billion for the development of public transport such as the extension of the Jakarta mass rapid transit and light rail transit network, $6B for delivering clean water to all city residents, and $5B for flood mitigation.

Homeowners across the world affected by rising seas, or at this stage just by increased flooding from extreme weather events, have been faced by the “stay or move” dilemma driving Indonesia’s move of its capital. Most respond to this choice with “stay”, at least initially, and many residents of Jakarta are in that camp. It is very expensive for homeowners to respond with a “stay and move” approach, as Indonesia has for now announced. Chances are pretty good that it will prove too expensive for Indonesia. And, given how projections for sea level rise are getting worse, the appearance of there being a choice may be illusory. We’d give pretty strong odds that not much will be happening in Jakarta by the end of the century (one model shows 95% of north Jakarta underwater by 2050). Yet this same dilemma is coming soon to a city near you. A late 2018 report stated Los Angeles would need to spend at least $6B to avoid slipping into the sea. Last month Wired reported the cost of protecting US cities from sea level rise at over $400 Billion. Even in the wealthy USA, it’s not clear where this kind of money might come from. Voters of high-income San Francisco approved a $425 million climate change protection bond — to pay for only 1/4 of the costs of fortifying a seawall. China may find the money to fortify Shanghai and Shenzen, and Singapore may also figure it out. But for capitals of low-to-mid income Emerging Markets, like Indonesia, where the money comes from will be a huge issue — soon. And without money to fund the “stay” option, or with “stay” being perhaps at best a delay in the inevitable “move,” chances are pretty good that a much higher percentage of affected low-to-mid income than OECD country capitals will move – or drown…

Infrastructure implications
The infrastructure implications of moving a capital city are, of course, major. It’s not just people who need to be moved, but power plants, ports and airports, which are also affected by sea level rise. Then new roads, water and sanitation fixed infrastructure will be needed wherever the new capital is located. Each part of that infrastructure is likely be somewhat different. Thermal power plants, often located near demand center capital cities, may have somewhat lower moving costs – the assets can be moved and used in a new location, or it may in any case be cheaper to replace them with lower-cost renewables, depending on the situation. Ports may stay put, as they’re by definition a coastal asset, so costs will relate more to raising of facilities, and so be lower than greenfield assets. Airports likely will need to be rebuilt as greenfield near the new capital, so will have the same higher price tag as roads, water and sanitation. To some extent, urban transport infrastructure in a newly designed city may benefit from new mobility technologies which have arisen in the last few years — though it is unclear whether benefits would be mostly from increased access and user convenience, or also in terms of lower capital costs. Water and sanitation will probably be more expensive than earlier investments, as both coastal and inland cities are likely to need flood management investments from more intense rainfall events. But even without numbers, or more precision, one can tell that moving a capital is going to be an expensive proposition.

Adaptation to climate change will have very large implications for infrastructure. Many more coastal cities will be faced with the kind of decision Jakarta has made. If they “stay,” there will be significant new infrastructure to protect themselves against sea level rise, and spending to protect (or in some cases “move”) existing infrastructure. And as seas continue to rise, the decision points and spending needs will keep recurring. If they “move,” then like “new Jakarta,” there will be massive spending for infrastructure in their new location. Some cities may, of course, do nothing. In which case, future refugee movements may well dwarf those which are already stirring politics in so many countries.

Asia’s Energy Transformation: Indonesia

On April 17, voters in Indonesia went to the polls and apparently re-elected President Joko Widodo (“Jokowi”) to a second term. Final results are due May 22. This election, and President Jokowi’s second term, if early results are confirmed, will have momentous consequences for infrastructure, energy and global climate.

This is the third in an Infrastructure Ideas series on the state of Asia’s Energy Transformation, following earlier reviews of the energy situation in Pakistan and in Bangladesh. Indonesia shares many commonalities with the other two countries: one of the ten most populated countries in the world (with over a quarter of a million people, Indonesia has the 4th largest population), facing energy high demand growth while running out of domestic fuel sources on which it has relied, and strongly considering a large-scale expansion in its coal-burning capacity to meet its energy needs. The energy choices Indonesia makes in the next few years will have major effects on the availability and cost of energy for Indonesians, and on global climate.

President Jokowi’s initial election, in 2014, was widely greeted as great news for infrastructure in Indonesia. His electoral platform stressed implementing reform programs needed to address Indonesia’s widespread and longstanding infrastructure problems, including beginning to bring in private capital and reduce reliance on Indonesia’s state-owned monopolies. His first term did not live up to expectations on this score: government bureaucracies and vested interests have been largely successful in limiting change. Yet needs continue to grow, and the same problems and choices will now face a second Jokowi administration.

Energy is the most critical battleground between the Indonesian old guard, clearly proponents of both maintaining state control and relying on Indonesia’s coal resources to meet energy needs, and reformers. Indonesia’s current electricity consumption and production are very low for a country of its size, with production capacity of about 60 Gigawatts (GW), slightly over half of which is coal based. The country’s “Electricity Supply Business Plan” (Known as RUPTL) calls for a near-doubling of capacity, to 115 GW by 2025, including from 25 to 35 GW of new coal-fired capacity. This places Indonesia among the five countries with the largest plans for new coal-fired power.

Indonesia’s coal resources are large, and unlike Pakistan and Bangladesh, the country has been developing and exploiting these at a large scale for decades. Indonesia ranks as the fifth largest coal producer globally (After China, the US, Australia and India), and is the world’s second biggest exporter of coal, after Australia. Those resources, however, are not unlimited: Price Waterhouse Coopers forecast that at planned utilization levels, the country’s coal resources would be exhausted by 2033.

Indonesia’s domestic energy resources are not at all limited to coal. The country was an oil exporter, until falling oil production turned into an importer. It has widespread hydropower potential, albeit complicated by land ownership and biodiversity considerations, and among the best geothermal energy potential of any country. About 9 GW of total electricity capacity today is renewable energy, mostly hydropower. The latest RUPTL projected a 300% increase in renewable energy capacity by 2025, to about 35 GW: 6 new GW of geothermal, 12 GW of large-scale Hydropower, and 8 GW of wind and solar (mostly wind). However, development of renewable energy has been largely stalled, due to a combination of land/biodiversity issues affecting hydro and geothermal projects, and of inability to get wind and solar-based power production off the ground. As a result, unlike many countries which are rapidly ramping up the share of energy use based on renewables – largely because these have become the cheapest alternatives, Indonesia has been stuck: not moving forward, and trying to do so mostly with coal-fired megaprojects. President Jokowi’s legacy in Indonesia will be largely determined whether in his second term he succeeds in getting the power sector unstuck, and in moving the country into exploiting low-cost wind and solar electricity, or whether he remains mired in Indonesia’s bureaucracy and vested interests.

Part of the roadblocks to Indonesia’s development of renewable resources is complicated: the land and biodiversity issues which are involved in many potential large-scale hydropower or geothermal projects will not easily be solved. But another part is simpler: country after country is taking advantage of the combination of free-falling technology costs in wind and solar and of auction mechanisms which force competition among the world’s still-growing number of producing companies. IRENA has stated that Indonesia has 47 GW of solar power potential. At least, better said, technically simple. And economically simple. The officially estimated cost of greenfield coal-fired generation may be lower in Indonesia than anywhere else ($0.05/ kilowatt hour), but those estimates like in many other places underestimate both coal transport costs and the impact of current disruptions in the coal market, without pricing in likely medium-term scarcity costs. Wind and solar prices are already on a par with the low-end of coal-based generation prices, and continue to fall.

Where large-scale development of wind and solar electricity in Indonesia is not simple is in the politics. The state-run power utility, PLN, combines a monopoly of transmission and distribution with being the by far largest producer of power. It is an artefact in a world where most countries have separated power generation from T&D responsibilities, and where most have increasingly turned to private capital for financing new generation capacity. And as both a competitor and the eventual buyer of wind and solar power from potential new producers, its enthusiasm for the wind and solar auctions which have triggered rapid growth in renewable capacity in many countries has been superficial. PLN would far rather build power plants itself – which means thermal or possibly hydropower power – than have others build them. Its reasons are a mix of classic bureaucratic inertia and self-interest, and of links to political interests and corruption. The reasons are not economic: the government has pumped between $3 and $4 billion annually into PLN in recent years to cover losses, and letting others finance power which will come at a lower cost to PLN would reduce those losses. A recent documentary released in Indonesia, which the government has tried hard to suppress, is named “Sexy Killers,” and highlights the links between the country’s coal industry, PLN and politicians. And as noted in a recent column by Bill McKibben, the potential for bribes in small-scale, decentralized wind and solar development is far smaller than it is where single mega-projects such as coal plants involved.

The past few months have seen somewhat of a stalemate. A few renewable projects have inched forward, as have a handful of natural gas-fired projects. But large-scale auctions for wind and solar have made no progress. The 2019 RUPTL, released in March, gave more verbal support to wind and hydropower, though without indicating it would take practical steps to bringing this closer to reality. A number of coal-fired plants planned in Java were reportedly suspended or cancelled, yet have re-appeared in the new policy document, and plans for solar are minimal. As noted in its review of the RUPTL, IEEFA called the statements about incorporating more renewables “a cut-and-paste planning exercise that does little to address fundamental problems with Indonesia’s over-reliance on coal-fired generation,” and stated that “Indonesia appears to have embraced what can best be described as a contrarian understanding of power trends with the decision to add less than 1 GW of solar over the next decade.”

On April 23, the arrest was announced of PLN’s CEO, Sofyan Basir, on charges of corruption related to a $900m coal-fired power plant. Unlike in the case of competitive public auctions in wind and solar, this coal project – Riau I – was awarded directly by a PLN subsidiary to a Singaporean company (arrests include one of the Singaporean company’s Board members). A sign of the tide turning? Indonesia’s energy and economic future hangs on the decisions that will be made by President Jokowi in his second term. As does a lot of carbon.