Biofuel development in Indonesia: progress and challenges

2nd Annual World Congress of Bioenergy

Xi’an, China, 27 April 2012

Biofuel Development in Indonesia:

Progress and Challenges

Heru Komarudin, Krystof Obidzinski and Agus Andrianto Forests and Governance Programme

Center for International Forestry Research (CIFOR)

THINKING beyond the canopy

Outline

• Background

• Research

• Findings: Biofuel

development

progress

• Challenges

• Suggested points


Background

• Concerns over energy security, volatile fuel prices and

rising greenhouse gas emissions encourage many

countries to develop biofuels

• Since 2005, biofuels have increasingly attracted the

Indonesian government’s attention

– National Energy Policy (2006)

– Instruction on procurement and use of biofuels (2006)

– National biofuels taskforce (2006)

• Other motivations: employment generation and poverty

reduction

Primary energy mix: target by 2025 Presidential Regulation No. 5/2006

Coal,

> 33% (26.4%)

Gas,

>30% (22%)

Oil,

< 20% (47%)

Biofuel, 5%

Geothermal, 5%

Other renewable

energy, 5%

Coal liquefaction, 2%

Renewable

energy,

> 17% (4.8%)

Vision 25/25: Oil (23%), Renewable energy (25%), Gas (20%) and Coal (32%)

5

Indonesia’s Biofuel Development Roadmap

Biodiesel

Bioetanol

10% of diesel fuel

consumption

2.41 million kL

15% of diesel fuel

consumption

4.52 million kL

2005-2010 2011-2015 2016-2025

20% of diesel fuel

consumption

10.22 million kL

5% of gasoline

consumption

1.48 million kL

10% of gasoline

consumption

2.78 million kL

15% of gasoline

consumption

6.28 million kL

Bio-oil

Biofuel

Biokerosin utilization

1 million kL Biokerosin utilization

1.8 million kL

Biokerosin utilization

4.07 million kl

Biofuel 2% energi mix

5.29 million kL


9.84 million kL


22.26 million kL

Pure plant. oil utilization

0.4 million kL Pure plant. oil utilization

0.74 million kL

Pure plant. oil utilization

1.69 million kl


• Different biofuel feedstocks: oil palm, jatropha (biodiesel) and

corn, sugarcane, cassava (bioethanol)

Why palm oil?

4 Major Vegetable Oil Crops 2010

Indonesia=5.73 Mio ha*

Malaysia= 4.07 Mio ha*

170 Mio ha

Source: Oil World 2010/Sinar Mas Tbk * Harvested area/matured plant

Land use

Indonesia=22.03 Mio ton

Malaysia=17.88 Mio ton

120 Mio ton

Yield comparison

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Palm Rapeseed Soya Sunflower

ton

oil/

ha

/yr

Production

Higher production

with much less land

•Effective for poverty alleviation

•Minimize land use change

Oil palm

(+immature ~ 10%)

Oil palm produces the highest yield of oil per hectare (3.68 tonnes/ha/year)

compared to rapeseed (0.59), sunflower seed (0.42) and soybean (0.36)

(Corley and Tinker, 2003)


• Why palm oil?

– Indonesia’s: the largest producer of crude palm oil

• Production: 22 million tons (43.6% of global

market, 2010)

• Oil palm plantation area covers 7.8 million ha

– Multipurpose: edible oil, cosmetics, energy

– Palm biofuel targets could have significant land use

implications.


2009 2015 2020

Production 19.1 30 40

Export 9.6 11.3 12

Domestic use 9.5 18.7 28

- cooking oil 8.7 11 12

- biodiesel 0.3 5.7 12

- oleochemicals 0.5 2.0 4.0

Indonesia’s utilization of crude palm oil (million tons)

Min. of Industry (2011)

Source: Basiron & Kheong, 2009;

OECD, 2008; Legge, 2008

Biofuel development is targeted to create jobs, increase on-farm and off-farm

workers’ income,

GoI also plan to establish 1000 energy self-sufficiency villlages and 12 biofuel

zones

How these target have been achieved?

• Bioenergy, sustainability and

trade-offs: can we avoid

deforestation while promoting

bioenergy? (2009-2011)

Research

• Analyze policy and institutional frameworks for biofuel

development:

o evaluate the performance of policies and how policies

(sectoral and extra-sectoral) have been implemented

o what are the likely consequences?


• Govt made every efforts to develop biofuels (land

procurement, subsidy, research, investment incentive,

employment etc.)

– By June 2008, the biofuel industry employed 1040 people in

processing and distribution (Min of Energy and Mineral Resources,

2008)

– During 2005-2009 annual new employment from the estate crop

sector, primarily oil palm plantations, was about 430 000 (The

Ministry of Agriculture, 2011)

Findings: biofuel development progress


Biofuel industries

No Company (Biodiesel) Installed

capacity

1 PT. Energi Alternatif 8,046 KL/yr

2 PT. Indo Biofuels Energi 68,966 KL/yr

3 PT. Anugrah Inti Gemanusa 45,977 KL/yr

4 PT. Eterindo Nusa Graha 45,977 KL/yr

5 PT. Eternal Buana Chemical

Industries

45,977 KL/yr

6 PT. Wilmar Bio Energi

Indonesia

1,206,897 KL/yr

7 PT. Sumi Asih Oleo-Chemical 114,943 KL/yr

8 PT. Darmex Biofuels 172,414 KL/yr

9 PT. Pelita Agung Agrindustri 229,885 KL/yr

10 PT. Prima Nusa Palma Energi 24,000 KL/yr

11 PT. Sintong Abadi 35,000 KL/yr

12 PT. Musim Mas 482,759 KL/yr

13 PT. Multi Kimia Inti Pelangi 14,000 KL/yr

14 PT Cemerlang Energi Perkasa 459,770 KL/yr

15 PT Petro Andalan Nusantara 150,000 KL/yr

16 PT. Bioenergi Pratama Jaya 75,429 KL/yr

No Nama Perusahaan

(Bioethanol)

Kapasitas

1 PT. Anugrah Kurnia Abadi 3,165 KL/yr

2 PT. Indolampung Distillery 63,291 KL/yr

3 PT. EN3 Green Energy 180,000 KL/yr

Installed capacity of Bioethanol

plants: 246,456 KL/yr

Installed capacity of Biodiesel

plants: 3,163,571 KL/yr

Source:The Ministry of Energy and Mineral

Resources (2009)


• Despite the ambitious plan and the biofuel industry boom (2006-

2007), development of biofuel has been slow.

• Indonesia has missed the 2010 target for fuel blending and

predicted to continue to be behind on the 2015 and 2025 targets

Mandatory use of biodiesel

2009 2010

2011

Target 775,941 1,076,051 1,297,000

Realization 119,348 223,041 358,812

Use percentage 15.38% 20.73% 27.66 %

Source: Directorate of Bioenergy, Min. of Energy and Mineral Resources (2012)

• One reason: failure to significantly reduce fossil fuel

subsidies, which distort the energy market and make biofuels

uncompetitive

• High CPO price discourages biofuel production and lure

producers to export

We also found:

• It is not clear how the planned area of feedstock plantation

have been realized (incl. oil palm). No dedicated plantations

for biofuels

• Some concerns among biodiesel industries about limited raw

materials and need for subsidy

• Oil palm plantation expand considerably, but only a small

fraction of it has gone into meeting the targets


• Price of biodiesel to make it competitive

• Limited lands for biofuels: land allocation policies,

property rights

• Lack of coordination and concerted policies among

ministries and heads of sub national governments

• Competition from other commodities and programs

(e.g. mining, infrastructure)

• Fuel versus food (increased price of cooking oil, 5-12%,

Susila & Munadi, 2008)

Challenges


– The expansion plans have become the subject of much

political and environmental debate

– Palm oil biodiesel- environmental friendly? That is not

the case if they are established at the expense of forest

and peatlands (deforestation)

Other challenges: Environmental concern


Site Start date

Concession area (ha)

Area developed

(ha)

Area deforested

(ha)

Forest type % expansion displacing

forest

West Kalimantan, Indonesia

1994 13 605 5266 (by 2009)

4949 (by 2009)

Secondary peat swamp forest

94%

Boven Digoel, Papua, Indonesia

1998 34 000 17 000 (by 2010)

11 300 (by 2008)

Humid tropical

66%

Source: Obidzinski et al (2012)


• Sustainability standard/schemes:


RSPO – Quick facts,

March 2012

Indonesia:

CSPO annual

production: 2.3 mt

(19 mt)

Production area:

460,000 ha (7.8 m

ha)

Growers/mills: 17 +

50


• Other sustainability standard/schemes:

– ISPO: Indonesian Sustainable Palm Oil

(mandatory, reputation)

– EU-RED: to have a minimum life-cycle carbon

emission savings of 35% compared to fossil fuels

and not coming from lands of high biodiversity or

carbon stocks

– EPA-USA: Renewable fuel standard (EPA): the

minimum 20% lifecycle GHG reduction

23

Sustainable Palm Oil Industry- Sinar Mas

With long life span, With long life span, oil palm business oil palm business must maintain must maintain •• Soil fertility to Soil fertility to

ensure high ensure high productivityproductivity

•• Good relationship Good relationship with surrounding with surrounding communities as communities as source of labor, source of labor, vendors and vendors and business partnersbusiness partners

•• Avoid emitting GHG Avoid emitting GHG to ensure favorable to ensure favorable climateclimate

Regulation: Regulation: ((SupplyerSupplyer driven)driven)

ISPO, Pres. DecreeISPO, Pres. Decree

Business demand: Business demand: (customer driven)(customer driven)

RSPO, ISCCRSPO, ISCC

CropCrop’’s Nature:s Nature:Profit, community, climateProfit, community, climate

Social Progress“people”

Resource efficiency High Yield achievementWaste utilization

Job creationLand ownership

Business partnership

Safety & healthCommunity

Environment awarenessDisaster management

(fire & flood)

Profit improvementLocal, Regional and National economic

developmentSupporting industry growth

Soci

o-e

con

om

ic

Eco-efficiency

Socio-environmental

Poverty alleviationCommunity outreachEducation developmentHigher standard of living

Economic Growth“profit”

Environment Stewardship“planet”

Emission reductionNo pollution to water body

Zero wasteMaintaining land fertility

Maintain the biodiversity and HCVSustainable palm

oil industry

Social Progress“people”

Resource efficiency High Yield achievementWaste utilization

Job creationLand ownership

Business partnership

Safety & healthCommunity

Environment awarenessDisaster management

(fire & flood)

Profit improvementLocal, Regional and National economic

developmentSupporting industry growth

Soci

o-e

con

om

ic

Eco-efficiency

Socio-environmental

Poverty alleviationCommunity outreachEducation developmentHigher standard of living

Economic Growth“profit”

Environment Stewardship“planet”

Emission reductionNo pollution to water body

Zero wasteMaintaining land fertility

Maintain the biodiversity and HCVSustainable palm

oil industry

– SMART Forest Conservation Policy (FCP) - Sustainable industry


• Provide appropriate subsidy and incentives for biofuel

development. Need to reduce fossil fuel subsidy

• Need to strengthen coordination and establish more effective

collaboration across administrative structures

• Need to be sensitive to greenhouse gas emissions and put

appropriate policy safeguards in place to regulate land use

changes

• Target palm oil investments on degraded land and enforce

environmental protection and land regulations

Suggested points to consider


Project website http://www.cifor.org/bioenergy/

Thank you

http://www.cifor.org/bioenergy/

Biofuel development in Indonesia: progress and challenges

Education

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