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Indonesia JETP promotes renewable energy privatisation opposed by unions and civil society


SUMMARY


  • Indonesia’s Just Energy Transition Partnership promotes a trajectory toward private ownership of renewable energy.

  • Unions and civil society are resisting Bank and major shareholders' push for energy privatisation.

In 2022, Indonesia began implementing its Just Energy Transition Partnership (JETP), aiming to mobilise $20 billion over three-to-five years. Half of the funding is expected to come from the International Partners Group, co-led by the US and Japan, and the other half as contributions from international financial institutions. In return, Indonesia committed to accelerate the retirement of coal plants and advance renewable energy sources to achieve net-zero by 2050.


The World Bank is involved in the JETP, with the UK offering a sovereign guarantee to enable the Bank to provide an additional US$1 billion in financing to Indonesia. Even in the absence of direct financing for the JETP, the influence of the World Bank is apparent in the conditions tied to a 2021 loan. These conditions mandated that Indonesia’s state-owned energy company, Perusahaan Listrik Negara (PLN), divest ownership of renewable energy-generating facilities upon the expiration of relevant power purchase agreements. This influence is also reflected in the 2023 Country Climate and Development Report, which envisages the World Bank’s private sector-led approach in the power sector since the 1990s, aiming to unbundle existing state-owned power monopolies to increase private sector involvement. This follows a similar case in South Africa, where the policy reforms undertaken as a part of the JETP led to the ‘unbundling’ of Eskom, South Africa’s state-owned energy utility, to create a more privatised, market-based electricity sector (see Observer Winter 2022).


In the case of Indonesia, the JETP is designed to accelerate the growth of for-profit independent power producers (IPPs), with PLN primarily becoming a buyer of electricity from privately-owned generators. As the Trade Unions for Energy Democracy argue, “electricity will no longer be seen as a public good generated for human development and nation-building; rather, electricity will become a commodity that PLN is legally obligated to purchase from private companies.”


This privatised model raises concerns regarding both achieving Indonesia’s green transformation and ensuring a just transition for workers (see Observer Summer 2023). In effect, this model relies on using limited public financing to attract private investment for the transition, with the Bank and other multilateral development banks playing a supporting role in these initiatives. However, this model has been falling short: Private capital has not materialised in Indonesia and South Africa. And this is only the tip of the iceberg: There is substantial evidence to show that citizens themselves are bearing the costs associated with guaranteeing private sector returns (see Observer Summer 2023).


The JETP’s investment plan also revealed that only $1.3 billion out of an estimated $95.9 billion projected for 2023-2030 is allocated for early coal retirement and phaseout, as private investors prioritise more profitable ventures. Moreover, the plan fails to address the closure of captive coal power plants, creating emissions loopholes (see Observer Winter 2023).


The failings of the Bank’s private sector model, combined with the urgency of the climate crisis, have led civil society, academics, and trade unions to advocate for alternative models. As Andri Prasetiyo, Senior Researcher on Climate Policy and Finance of Senik Centre Asia argues, “The push for privatisation, influenced by international financial institutions such as the World Bank, must be swiftly reversed, as it will only perpetuate a system that puts profit before people, jeopardising not only equitable development but also environmental sustainability and social justice.”

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