Indonesia’s electricity plans are dominated by dirty coal-fired power plants, which not only create environmental problems, but also create significant financial risks for the Government of Indonesia and for Indonesian electricity consumers. Guarantees and similar policies that benefit coal power plants in Indonesia could result in losses to the Government of Indonesia that reach tens trillions of rupiah – billions of U.S dollars. These financial risks arise from a combination of risk insurance (guarantees) and credit enhancement programs for dirty coal electricity projects.
The new briefing — entitled “Private Gain, Public Risk: Guarantees and Credit Enhancement for Coal-Fired Power Plants in Indonesia” — was released today in Jakarta by Oil Change International in partnership with Indonesian NGO Auriga.
The analysis finds that loan guarantees for coal projects through 2017 alone could end up costing between $2.1 billion and $4 billion, and could rise as loan guarantees expand beyond 2017. Billions of dollars in additional risk is being created through business variability guarantees and by state-owned enterprises assuming currency risk in new coal power plant contracts, the study finds.
“Our analysis shows that the Government of Indonesia is placing a dangerous bet on coal-fired power plants. Not only do these plants present threats to the health of Indonesians, but they present potentially massive financial risks to the Indonesian government and to Indonesian electricity consumers,” said Alex Doukas, report author and Senior Campaigner with Oil Change International. “Indonesia needs to stop subsidizing dirty and risky energy like coal, and support energy solutions that actually provide net public benefit to its citizens.”
“Some claim that shifting to use more domestic coal will improve Indonesia’s energy sovereignty, but nothing could be further from the truth. By supporting the coal industry in so many different ways, Indonesia is bowing to pressure from other countries pushing their outdated coal technology while transferring risk to the Indonesian people,” said Hendrik Siregar of Auriga Nusantara.
The briefing shows that there are multiple scenarios in which the Government of Indonesia could be on the hook for covering massive dollar amounts in guarantees at once, putting Indonesia’s finances in under immense stress. Lack of access to water, new air pollution policies, increased climate action all put coal-fired power plants at risk, and the guarantees supplied by Indonesia potentially in play.