Indonesia-UAE ties need to go beyond the dam

The United Arab Emirates (UAE) wants to invest in a large dam in Indonesia. The dam, called Bulango Ulu, sits in Bone Bolango, in Gorontalo province, on the northern arm of Sulawesi island, north of Bali. The UAE’s ambassador visited the site last month and said UAE companies, including state-owned clean energy firm Masdar, are in talks to add value to the project, most likely by supplying and operating the equipment needed to turn some of the dam’s water flow into electricity. Officials have said the dam should eventually supply water to 880,000 people and irrigate 5,000 hectares of rice fields; some reports have also cited an electricity figure as high as 80 megawatts, though public project documents point to a far more modest hydropower component, in the single digits of megawatts, sized more like a village-scale plant than a utility-scale one. Construction itself, led by Indonesian state contractor Brantas Abipraya, is already more than 85 percent complete.

That timing matters. Bulango Ulu is not a dam Indonesia is deciding whether to build; it is a dam Indonesia has almost finished building, on its own financing, as a national infrastructure project. What the UAE and Masdar are weighing is something narrower and more commercial: whether to invest in the generation equipment that could sit inside or beside it, as a bankable clean-energy asset with a return, not as aid to be redirected elsewhere. That is a sensible, low-risk way for the relationship to begin. The more interesting question is what kind of template this sets for everything the two countries build together after it.

Indonesia’s recent history with large dams is a useful caution for that next stage, even if it arrives too late to reshape Bulango Ulu itself. Look at the Bener Dam, another large dam Indonesia is building, on Java island. To build it, the government needed huge amounts of hard rock for the dam’s walls, and picked a nearby village called Wadas to dig it up. Villagers who did not want their land dug up worried it would dry up their drinking and farming springs. The disagreement turned into years of protest, arrests, and anger. Greenpeace Indonesia has documented the dispute. The dam may still get built, but trust between the state and the community has been badly damaged.

Or look at the Kayan River, on the Indonesian part of Borneo. A company plans to build five large dams there, one after another. Researchers and environmental groups warn that blocking such a large river will change how water flows to the sea, killing fish, destroying wetlands, and damaging farming and fishing that whole communities depend on. Reporting from the Business and Human Rights Resource Centre quotes local leaders warning the damage may never be undone. Neither project is directly comparable to Bulango Ulu, whose generation component is far smaller in scale, but both illustrate what tends to happen when “clean energy investment” quietly becomes shorthand for the next big dam.

That comparison cuts an unexpected way here. If the hydropower piece Masdar is actually being offered at Bulango Ulu is closer to a few megawatts than to eighty, then what is on the table is not a scaled-down version of Kayan or Bener at all, it is much closer in size and character to the small, decentralized generation that Indonesia already does reasonably well, and that a foreign partner could plausibly help finance and professionalize. Rather than treating this modest deal as a stepping stone toward bigger single dams, the UAE and Indonesia could treat it as the model, and look for more commercial opportunities that look like it rather than fewer.

Indonesia already has many older dams producing less electricity than they could. Retrofitting them, swapping old, worn-out turbines and control systems for newer ones, is a straightforward commercial proposition: it raises a dam’s power output without flooding new land, moving anyone off their land, or digging up a new mountain of rock, and it is cheaper and faster to finance than a greenfield project. Equipment suppliers and project developers with the right balance sheet, which Masdar has, are well placed to bid for exactly this kind of contract.

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Small, village-run power plants are a second commercial niche worth a look. These are tiny hydro plants that use the natural flow of a river or stream, with no dam wall and no reservoir needed. In Indonesia, a non-profit group called IBEKA has spent decades helping villagers build and run these plants themselves. Its work with local communities shows this brings electricity, income, and a real stake to remote areas, at a much lower environmental cost than a large dam. A financing or equipment-supply partnership between IBEKA-style operators and a deep-pocketed backer like Masdar could scale this model to more of Gorontalo’s rivers and streams, and to other provinces, on ordinary commercial terms.

Pumped storage is a third, and Masdar is not new to it. Elsewhere, Masdar has signed agreements to explore pumped-storage hydro in Uzbekistan and, through its acquisition of Greece’s Terna Energy, is developing the 680-megawatt Amfilochia project, one of Europe’s largest. The logic is straightforward: solar and wind farms often make more electricity than people need at midday, and instead of wasting it, that extra power can pump water uphill into a reservoir, then release it downhill through a turbine when demand rises later, in effect a giant water battery. If Indonesian officials and Masdar assessed which of Gorontalo’s existing dams have the head and storage to support this, on the same feasibility-study basis Masdar has used in Central Asia and the Balkans, it would be a concrete next investment rather than a general lesson in how hydropower storage works.

None of this means small is always enough. Gorontalo’s electricity demand is likely to keep growing, and retrofits, micro-hydro, and pumped storage would need to add up alongside larger generation sources, not replace them outright; the honest pitch to Jakarta and Abu Dhabi is that a portfolio of smaller, faster, more distributed projects complements a project like Bulango Ulu, rather than substitutes for the province’s need for bulk power.

Even if Gorontalo makes more clean electricity, it is useless if it cannot reach homes and factories reliably. Gorontalo has suffered large blackouts when its power lines failed, and Indonesia’s state electricity company, PLN, is still building and repairing power lines across the province to keep up with demand. A joint venture or financing arrangement with PLN on stronger power lines and modern grid-control systems is a less glamorous pitch than a dam, but it is the kind of unsexy, high-return infrastructure work that turns scattered generation projects into electricity people can actually use.

None of this means the UAE’s prospective investment in Bulango Ulu’s generation equipment is unwelcome, or that it should be recast as charity. It looks like a straightforward commercial deal, and a modest, well-scoped one at that. But if Jakarta and Abu Dhabi want the relationship to grow beyond a single asset, the smart move is to keep striking deals shaped like this one, small, specific, and revenue-generating, across retrofits, micro-hydro, storage, and grid infrastructure, rather than letting the next headline project default to another giant dam. A portfolio like that would be harder to capture in one photo op, but it would put UAE capital to work in more places, expose it to less of the conflict that has dogged Indonesia’s biggest dams, and give both governments more to point to than the fate of one reservoir in Bone Bolango.

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