Vung Ang and Suralaya: So Far Yet So Close in Experience

Paddy fields dry out, fish die and banana trees don’t bear fruit in Vung Ang, a coastal town in Vietnam overlooking the South China Sea. Meanwhile, residents in Suralaya, in Indonesia’s West Java, report their water is undrinkable and their mango trees are bare.

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 color after coming home from 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 in. 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 five years ago. It’s very dirty, the pond is polluted. Over the past two to three years, trees and plants can’t grow anymore. It probably has to do with the coal 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 in this story.

South Korean investment: What sustains overseas coal plants

Vung Ang-2 is not just a Vietnamese concern, though, 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-2; Japan’s Mitsubishi holds another 40%. Meanwhile, South Korea’s major coal plant engineering company, Doosan Heavy Samsung C&T, operates an engineering and procurement contract (EPC) on Vung Ang-2 worth US$1.44 billion. Doosan Heavy is one of South Korea’s leading coal power developers, with the sector accounting for up to 80% of its projects.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, as well as another project with substantial Korean investment, Jawa 9 & 10 coal power plant in Indonesia, 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's, 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 sectors, such as in EPC, have joined together to demonstrate a high level of national interest through public-private business cooperation. 

“[Vung Ang] is expected to create a synergy export effect of about US$770 million (54% of the EPC amount) [along] with domestic companies. More than 340 domestic small- and medium-sized enterprises (SMEs) can cooperate in equipment, design, and construction to promote exports. By this way, it is also expected to produce 640 billion won (US$54 million) in exports and ripple effects for SMEs,” 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 are 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 cold 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, on the northwest corner of Java Island, is the largest of its kind in Southeast Asia. The complex's Jawa 9 & 10 units have a capacity of 2,000 MW and are the latest addition to the coal plant landscape—Suralaya already hosts eight coal-fired steam plants in operation. 

“There were once many 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 down 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 for two years while a beach reclamation project was taking place prior to their construction.

Just as in the case of Vun Ang, South Korea’s KEPCO and Doosan Heavy show up in Jawa 9 & 10's project profile. KEPCO holds a 15% share in its 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.

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 holes in their lungs visible in their X-ray results. My sister had a chronic lung disease and passed away when she was in her 20s. But since the [Jawa] units came in, there are no more jobs or money available to receive medical treatment,” explained Masitah.

To calm local residents’ concerns about the environmental and health impacts of Jawa 9 & 10, Indonesia’s national power developer stressed the advanced technology utilized by the South Korean industry.

“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 equipment 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 story unlikely to end soon

Last year, 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 on 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 U-turn in its domestic energy mix, away from coal and toward renewables, under President Moon Jae-in.

South Korea’s “Eighth 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% to 33.6% in that same span.

In October 2021, South Korea announced its intention to increase the country’s previous 2030 emissions targets agreed to in December 2020. This has not been without criticism.

“[The targets are] 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 recent country report on South Korea. 

Even before their COP26 commitments, Indonesia and Vietnam, for their part, have also prioritized renewables as part of an urgent energy policy redirection.

In February 2021, Vietnam's Ministry of Industry and Trade released a draft proposal of the national Power Development Plan for the period of 2021-2030. According to a 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 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 energy.

“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 added 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’ just energy transition, ultimately benefiting both the economy and public health in the respective 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. Starting in 2017, renewable energy generation costs began to decline relative to coal power generation in Indonesia. The same looks to be true for Vietnam beginning in 2028. 

South Korean coal investment: Against the tide?

So why does South Korea invest against the tide of global coal divestment and a just energy transition? Activists in South Korea and Vietnam argue there are some definable 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 a COVID-19 pandemic emergency bailout in early 2020. 

Local NGOs in Seoul criticized the 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 appears ill-prepared to adjust to the global energy transition trend because of the country's carbon emissions-intense, industrial nature. South Korea’s major industries such as steel production, automobiles and semiconductors all heavily rely 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 path. 

“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 also 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. Therein arises the issue of a 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 foreign investment in renewables—only an instant tariff support program.

“The government should have had a master plan 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 rate for renewables and companies jumped in. The government policy should be in reverse,” said Tran Dinh Sinh, the deputy director of the 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 [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 for coal-fired power plants in 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 a cumulative 11,500 MW of electricity.

Based on South Korean lawmaker Lee So-young’s 2020 report, the 11 coal-fired power plants financed and built via South Korean public funds, and therefore its taxpayers, are estimated to discharge almost 1,416 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 CO₂ in 2030, roughly a third of what those plants produce. The country plans to achieve part of its 2030 target through the purchase of international credits, as well as increasing its land use, land-use change and forestry sinks. The government 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, among many nations, committed to phase out coal power and cease construction or investment in new coal power plants for the first time. However, South Korea’s final exit from the coal regime has a target year of 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, a UK-based climate and energy think tank.

Aftermath

All the same, South Korea’s construction of new coal plants Jawa 9 & 10 in Suralaya and Vung Ang-2 are not bound by the above commitments. This leaves a big question mark on how a just transition can take place for communities surrounding these facilities.

“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.

Banner image: Dusk in Vung Ang, Vietnam / Credit: Yen Duong.