Bioethanol Dillema in Indonesia

Yesterday I had a really nice yet short conversation with one of my best friend about biofuel status in Indonesia. Why did we talk about this subject? It is because I wanted to participate in one of biofuel feasibility study tender. My friend I talked about has been working in this area for a quite long time. So, I wanted to know her opinion about this subject.

I believe we need renewable energy in the future, such as bioethanol, since fossil fuel production has decreased from year to year. However until now, development of fuel grade bioethanol plant in Indonesia is not quite satisfying.

Ministry of Energy and Mineral Resources has published Permen No. 25/2013 about Utilization of Biofuel. In the document, it is stated about staging of minimum utilization of bioethanol (E-100) as blending component in fuel.

Consumption of fuel grade ethanol in Indonesia has remained virtually zero since 2010 due to lack of financial support to run the blending program. In 2006 until 2009, Pertamina was able to sell E2 gasoline on limited basis due to subsidies covering the price difference bioethanol and gasoline. However, due to increasing production cost for fuel grade ethanol and limited state-budget for subsidies, Pertamina receives limited supplies from ethanol producers.

In February 2018, Ministry of Energy and Mineral Resources announced a plan to implement blending of E2 in several big cities, most likely in East Java due to proximity with ethanol producer plants. This program may target high-octane gasoline where the price difference with ethanol is narrower.

Challenges in Blending 2%-5% Ethanol to Fuel (E2 and E5)

[1] Price Competitiveness

Main reason why Indonesia’s ethanol blending program has not succeeded is price competitiveness.

Ministry of Energy and Mineral Resources formulates Bioethanol Market Index price based on molasses price. The bioethanol price fell from IDR 11,049 per liter in January 2017 to IDR 10,210 in June 2018.

[2] Infrastructure and Capacity

Estimates consumption of ethanol in Jakarta and surrounding area in 2017 to implement E5 (5% bioethanol) program will be 85,000 KL/year. This is more than double the current national capacity of Indonesia. Other regulation also restrict commingling (mixing) of storage tanks. This will increase the distribution challenge as additional separate storage need to be built.

[3] Feedstock Constraints

The shrinking size of Indonesia’s sugarcane crop is a primary constraints on the expansion of ethanol production. Indonesian distillers would like to use less costly and widely available feedstock for ethanol production. However, Indonesia’s import restrictions on cheaper, more widely available feedstock such as corn continue to hinder the growth and viability of local ethanol producers.

References:

[1] Permen ESDM No. 25/2013

[2] Indonesia’s Ethanol Dilemma

[3] Indonesia Biofuels Annual Report 2017

[3] Indonesia Biofuels Annual Report 2018