Research in Clean and Renewable Energy

Technology policy areas is actual the macro level of the manufacturing and service operations which we enlarge the boundaries of the system with a higher helicopter view.

Selected Papers in Clean and Renewable Energy

Understanding the Challenges of Indonesian CPO-Based biodiesel Producers on Meeting Indonesia’s 2025 biodiesel Target through development of Business Models using Systems Dynamics Approach

Akhmad Hidayatno*, Teuku Yuri Zagloel, Widodo W. Purwanto

*akhmad@eng.ui.ac.id

Proceedings of International Symposium on Sustainable Energy and Environmental Protection (ISSEEP) 2009, Yogyakarta, Indonesia, 23-26 November 2009

ABSTRACT

Government of Indonesia has established an ambitious target of renewable energy mix by creating regulation that by 2025 to answer our current condition as net importer of oil. Indonesia established the National Biofuels Development Team which develops a detailed blueprint and roadmap for national Biofuels program, through Presidential Decree No.10 / 2006, as a follow-up of Presidential Instruction No. 1 Year 2006 about Biofuels provision and utilization. One of bio-fuel commodity that has leading potential to be developed in Indonesia is CPO-based biodiesel, because this commodity has relatively low production cost and has equal performance compared with diesel fuel properties. In addition, Palm oil as raw material of the biodiesel has been produce in the massive quantity at mature industrial scale.

Naturally, the government would count on the private sector to supply the required biodiesel production target to compliment the production capacity from the state-owned enterprises. In order to this, the private biodiesel producers must have the necessary business climate to operate reasonably which should be provided through structured government policy. Therefore, we need to have a business model as an objective tool of understanding the financial challenges that producers will face and how government policy would affect the attractiveness of producing biodiesel.

The business model was developed based on 3 stages of CPO-Based Biofuels productions: Palm Oil Plantation, CPO Production, and Biofuels Production. We create the production process map of each stage through secondary data and calculate cost originated from each proses. We also conduct a mental model mapping through discussion with CPO producers and analyzing other systems dynamics model of Biofuels challenges. For this model we develop 3 ownership types of the industry, differ on different vertical integration along the 3 supply stages, and analyze challenges for each type of ownership. The production process map is the basis to develop the causal loop diagram, and subsequently the stock and flow diagram to be developed in the system dynamic software. The model is verified by developing the same calculation in the spreadsheet applications to verify all the calculation in the original model.

Based on the constructed simulation model, sets of policy scenarios are constructed based on the characteristics of biodiesel industry in Indonesia. The characteristics includes blending percentage of biodiesel in BioSolar™, price subsidy in the transportation fuel, export tax for CPO and possibility of subsidy in the CPO price which is the highest cost component in biodiesel Production.

The result shows that generally the long term biodiesel utilization target couldn’t be accomplished without the support from the government in form of subsidy, and the best policy to apply is to decrease the subsidy for diesel fuel. The model also shows the best ownership type is complete vertical integration along the supply stages; however the government must also make sure that monopolistic condition does not occur in the industry.

Keywords: environmental impact analysis, life cycle assessment, palm oil biodiesel

Understanding the Environmental and Economic Relationship of Biodiesel Industry in Indonesia using System Dynamics Model

Akhmad Hidayatno*, Yuri M. Zagloel, Widodo W. Purwanto, Aziiz Sutrisno*

Proceedings of International Conference on Sustainable Technology Development (ICSTD), Denpasar, Bali, Indonesia September 2010

ABSTRACT: In order to promote energy security through diversification of energy sources, Indonesian government initiated a long-term 20 years national biofuel program in 2006. Biofuel sources are abundant in Indonesia and the strongest candidate is biodiesel from palm oil, based on its mature industrial scale. However, due to its perceived impact to the environment, the palm-based biodiesel has been criticized and debated at a point which makes other contributions is not matter. We know that development of biodiesel industry would also boost economic contribution, but how it is related and how much is the predicted contribution, remains a big question. We developed a multi-scale system dynamics model of the biodiesel industry to give an insight of the complex interaction between the environment and the economic aspects of the biodiesel industry. The biodiesel model simulates both scale of the industry: the interaction of the production chain of biodiesel as micro model, and an energy-economics model as macro model. The model shows that in the micro level, selection of land type would affect the economic feasibility of the biodiesel company, and at the same time also affecting the environmental aspects, where a less fertile land type resulting a better outcome on environmental effect yet resulting less income and in vice versa. At the macro level, development of biodiesel Industry would give two sided effect on environmental aspect: on one hand, it reduce total emission per kg over USD production, on the other hand, could reduce forest area, which would also reduce absorption of carbon emission, production of oxygen and reduction of biodiversity. However, in the economic contributions of biodiesel is visible in the production sector, with significant boost of Gross Domestic Product over the increasing of the agricultural output and its underlying factors.

Keywords: biofuel, system dynamics, model, environment, economy