Alternative energy is big business, so it’s no surprise that it attracts controversy, scandals and scams.
It seems just about anyone can be taken in by a hoax, especially when it has an environmental theme. Former president Susilo Bambang Yudhoyono was fooled in 2007 by a man who claimed to have discovered how to turn seawater into fuel.
Djoko Suprapto, a resident of the East Java village of Ngadiboyo, said he could separate hydrogen from oxygen in water by a process of “cracking through reverse electro-dialysis”, thereby creating cheap unlimited fuel.
He secured a meeting with the president, who was convinced and dubbed the innovation “Blue Energy”. With skyrocketing oil prices and Indonesia facing international criticism for its poor environmental record, the new fuel seemed like a winner.
But the previous year, Yogyakarta’s prestigious Gadjah Mada University had rejected Suprapto’s request for endorsement and dismissed him as a charlatan, as his claims were not substantiated by scientific peer review.
Unperturbed, Yudhoyono set up a Blue Energy research centre near his private residence in Cikeas, east of Jakarta, and allocated more than US$1 million in state funds to the project. He even staged a display of Blue Energy for delegates at a United Nations climate change conference in Bali. Also, a small convoy of vehicles – two Ford Rangers, one Mazda6 sports car, one bus and one truck – all supposedly fuelled by Blue Energy, made a much-hyped drive from Cikeas to Bali.
Subsequent tests revealed the miracle fuel was actually diesel from state oil company Pertamina. After that, Suprapto disappeared in early 2008. Yudhoyono feared he might have been kidnapped by jealous oil tycoons and ordered a police search. Suprapto later turned up in a hospital in Madiun, East Java.
By now, people were demanding answers, including officials from Yogyakarta’s Muhammadiyah University, which had invested Rp.1.3 billion (approximately US$100,000) in Suprapto’s plans for a Blue Energy power plant before declaring it a hoax. A local businessman who had provided Rp.500 million (US$38,000) as initial capital for a related power project saw his money disappear.
Suprapto tried to defend himself with a final demonstration, claiming his fuel was actually a mix of 70 percent water and 30 percent diesel. But this time, no one was fooled. In 2009, he was convicted of fraud and sentenced to three years and six months in jail. He was released in August 2010.
The president’s office never issued an official explanation of the scam. You might think that such a humiliating experience would have prompted greater teaching of science, so that people could see through scams, but Yudhoyono went on to declare that he believed in black magic. Not the best example to set to children if you want a clever country. Science should always trump superstition.
Money Grows on Shrubs?
Investing in renewable energy schemes described as ethical, green and sustainable remains a risky business. In 2006, a toxic shrub called jatropha curcas was cited as the “next big thing” in biodiesel production. The plant’s green fruit pods contain seeds that can be crushed to make oil suitable for blending with diesel. Proponents claimed it grows just about anywhere and yields up to 10 tonnes of fruit per hectare.
As investments poured in, jatropha was planted on about 1 million hectares of land across Africa and Asia. Unfortunately, it failed to reach anticipated yields, as the shrub does not produce many seeds unless in well-watered fertile soil. Many biofuels startups went bust. Some were targeted in court for making false claims about expected yields and profits. Hardest hit were small farmers, who had been encouraged to stop planting food and instead took out loans to plant jatropha.
In Indonesia, tens of thousands of farmers had been advised to grow jatropha and were promised big profits.
Instead, they were rewarded with misery, as there was no market for the fruit they harvested. Many were unable to repay loans for the initial seedlings and fertilizers, and they had stopped growing food crops. Most of Indonesia’s jatropha has since been uprooted.
Hybrid forms of jatropha are now being developed and promoted, but it remains to be seen whether they will provide great yields for small farmers. If you are thinking of investing in jatropha as a cash crop, wait until you see it traded like other commodities, such as cotton, wheat and soybeans. Otherwise, avoid the investment spiels touting “extraordinary value” and “high investment returns”.
When it comes to such green fads, simple due diligence and common sense should show when it’s unsafe to jump on a bandwagon. The US Financial Industry Regulatory Authority back in 2009 warned of green energy investment scams “that dangle the promise of large gains from investing in companies purportedly involved in developing or producing alternative, renewable or waste energy products”. It advised investors to be wary of unsolicited communication, seminars involving aggressive sales tactics to liquidate your savings and go “all in” on a new investment, and claims that they’re the next big thing.
Another way to spot risky investments is when promotional materials contain bad grammar and spelling errors. One investment firm declares, “Jatropha can thrive in the driest of desserts or the most humid tropical environments.” We all make spelling errors, but seeing them left unfixed for years online does not inspire confidence in the competence of financial advisors.
Another investment firm, based in Jakarta, describes jatropha as “the biodiesel miracle tree” that can help to meet energy needs “without destroying forests and depriving people of food”. It also states that “returns from an investment can begin after as little as two years”. Alas, Indonesia’s farmers saw scant few returns from all the investment hype.
Any genuine effort to reduce pollution and destruction of the environment should be lauded, but tested scientific research and careful planning should be at the forefront of any policy making, investments and development. Otherwise, green is not gold. It’s just blind greed.
|Rectification & Apology
In last week’s issue, Indonesia Expat published an article containing various opinions and allegations against Imperium Capital and one of its consultants Mike Mott.
This article went to print without contacting Mike Mott or anyone else from Imperium Capital, and without giving Mott or the company an opportunity to provide information related to said opinions and allegations.
Since publication, Imperium Capital has reached out to Indonesia Expat, shown various documents and email correspondences in confidence, and asked that we issue a statement clearing the company of alleged wrongdoings.
For all intents and purposes, Indonesia Expat apologizes to Imperium Capital and Mike Mott for any distress and inconvenience caused.