Construction is pushing ahead on a series of Chinese-backed dams that are set to form Southeast Asia’s largest hydroelectric project, and which will power Indonesia’s new capital city, Nusantara.
But as work proceeds on the Kayan Cascade project – located in the North Kalimantan province of Borneo Island – controversies remain over permits and potential displacement of nearby communities.
In 2019, Indonesian President Joko “Jokowi” Widodo officially announced the location for the new capital, in Borneo’s East Kalimantan province. Work has since begun on building Nusantara, a task seen as urgent by his administration, given the issues that beset the current capital.
Jakarta is located on the western island of Java and is home to over 10 million people. It has frequently been ranked among the world’s most congested cities, is regularly struck by flooding, and faces increasing threats from sea level rise and subsidence.
President Jokowi has said the new capital will also begin to address the economic gap between Java and the other islands in Indonesia. Java accounts for 56 per cent of the country’s population and 58 per cent of its GDP. In contrast, the Kalimantan region is home to only 6 per cent of the population and contributes 9.2 per cent of GDP.
Nusantara is set to be inaugurated as the new capital in summer 2024, to coincide with Indonesian Independence Day on 17 August. The target is for the move to start after the country’s elections in February, with government offices and institutions continuing to relocate throughout the year.
For the environment, the threat is clear due to disruption of the hydrological function of the Kayan River and its tributaries, both in terms of ecosystems, biodiversity, loss of forest wetlands, agriculture, and fisheries both upstream and downstream of the river that cannot be restored.
Yohana Tiko, East Kalimantan chapter director, Indonesian Forum for the Environment
But the planned city and accompanying infrastructure have not been free of controversy. In a statement in October 2022, Jokowi claimed that 80 per cent of Nusantara’s energy will come from renewable sources – including solar, wind, and hydropower from the Kayan Cascade.
Amid this ambitious target, civil society groups and local communities are still seeking clarity and assurances over the environmental impacts and displacements that the Kayan project could cause.
The Kayan Cascade and power push
The Indonesian government is under increasing pressure to meet its climate pledges and mitigate the environmental issues that have regularly accompanied its development initiatives. These have included clearing of forests for settlements and roads, and pollution caused by their construction. As plans for Nusantara take shape, it has sought to answer these concerns with reforestation programmes and the 80 per cent renewable energy supply target.
In its 2021–2030 Electricity Supply Business Plan, Indonesia’s state electricity company PLN says it will begin supplying electricity to the new capital in 2024. Across the nation as a whole, it says it will then almost triple supply in the following three years, from a projected 382 gigawatt hours (GWh) in 2024 to 1,017 GWh in 2027.
The plan also includes the building of underground distribution networks and plans to prioritise new and renewable energy sources, targeting 20.9 GW of additional renewable capacity by 2030, which would bring its share of total capacity to 51.6 per cent.
The Kayan hydropower plant is included in the plan. Developed by Kayan Hydro Energy (KHE), a company affiliated to Chinese state-owned enterprise PowerChina, the US$17 billion project is designed to consist of five dams with a total capacity of 9 gigawatts. On completion, it could become the largest hydroelectric power plant in Southeast Asia.
PowerChina signed an agreement with KHE in 2018 to develop the project, which is located in the Peso district of North Kalimantan. The Chinese company had reportedly begun to study the Kayan River as far back as 2008, and completed the planning, feasibility study and preliminary design of Kayan River I Hydro Power Plant in 2013. Upon agreement, it was launched under the banner of the Belt and Road Initiative, China’s global infrastructure development strategy.
The Kayan Cascade plant will supply electricity to the provinces of South, Central, East, and North Kalimantan, including the city of Nusantara, some 400 km south of the facility. Khaerony, director of operations for KHE, said it will also distribute to industrial zones such as the planned Kalimantan Green Industrial Park in North Kalimantan. Another mega-project launched under the Jokowi administration, the park is set to host a range of industries, including an electric vehicle battery plant, petrochemicals, iron and steel.
The construction of the first Kayan dam will begin this year with work on a diversion canal, Khaerony told China Dialogue, and is expected to be completed in 2027. A 12 km access road to the planned dam is also currently under construction.
The director said that the Kayan hydro plant will make a sizeable contribution to the region in terms of electricity supply and income. However, its development and reception in the region has thus far been rocky. The dam’s construction has been hampered by delays and a slow permitting process, while it has generated disputes with Indigenous people in surrounding Peso district over compensation for displacement due to the project.
Potential impacts on Indigenous people and the environment
The Kayan project will directly affect at least two villages in Peso, a remote rural area through which the Kayan River flows. Initially, promises had been made by KHE to residents of Long Lejuh, a village of 414 people, and Long Pelban, home to 261. The villagers, who are Dayak Kenyah Indigenous peoples, were told they would be relocated and that a new residential area would be built like a small town. However, they say there has been no further discussion.
Santoso, the head of Long Pelban, said that KHE promised to relocate the two villages to these areas, each with an area of 600 hectares and in a predetermined location. He explained that these were to include residential areas, as well as agricultural land and community plantations. “But, so far all of that is like a dream,” Santoso said, adding that the plan has been discussed since 2012.
“It’s been 11 years, until now the price [that the company will pay for their lands] has not been discussed. Like it or not, we have to move. We are also confused about how to continue, because it has not been clear how KHE will proceed,” Santoso said.
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