Agrofuels in Indonesia

palm oil container

DTE 88, April 2011

As a country rich in natural resources, Indonesia has many sources of renewable energy. According to government policy, these include geothermal energy, agrofuels, hydro, solar and wind energy, biomass, biogas, tidal energy and energy from differences in sea temperatures.

New and renewable energy will play an important role as part of the efforts to optimise energy management set out in Indonesia’s Energy Blueprint for 2006–2025. From 6.2% of overall energy consumption in 2005, new and renewable energy is expected to increase to 17% by 2025. Agrofuels and geothermal energy will each contribute five per cent by that year.[1]

Types of agrofuel to be developed further include biodiesel, bioethanol and biooil (biokerosene or Pure Plant Oil/PPO for electricity generation). The target for agrofuels use is 22.26 million KL by 2025.[2]

To support increased agrofuel production, the Indonesian government has issued regulations, tax incentives, subsidies and has introduced a phased obligation on the minimum utilisation of agrofuels. The regulation which phases in agrofuels use, starting January 2009, foresees a mandatory minimum usage of agrofuels in the transport, industry and commercial sectors, as well as in the power generation sector by 2025 (see box).[3]For example, the proportion of biodiesel to be used in transport fuel is due to increase from 1% in 2009 to 20% by 2025.

In addition to the existing provision of land for palm and sugar cane plantations, the government has allocated a further area of 10,250,000 ha for the development of jatropha and cassava, as well as more land for oil palm and sugar cane plantations​​ (see table).

Planned provision of land for agrofuels

Note: Available land = land already allocation for palm oil (or planted with oil palm) for agrofuels. Land to be developed = land still requiring allocation (from forests, or other land).

Source: Rencana Pengembangan Bahan Bakar Nabati, 2006

However, the programme for the use of agrofuels is not going according to plan. Of the 22 existing biofuel producers, only five companies are still operational: PT Indo Biofuels, PT Eterindo Wahanatama Tbk, PT Multikimia Intipelangi, Wilmar Vegetable, and PT Darmex Biofuels.[4]High prices for feedstock and a low uptake of agrofuels locally  mean that targets for agrofuel usage cannot be reached.

Phasing of minimum biofuel utilisation obligations

BIODIESEL (B100)

BIOETHANOL (E100)

BIOOIL (O100)

Source: Energy and Mineral Resources Ministerial Regulation No. 32/2008 on the Supply, Utilization and Marketing of Biofuel as an Alternative Energy.

* PSO: Public Service Obligation

** Note: Specifications are adjustedto global specifications and domestic interests.