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BiomassasanopportunitytosolveIndonesia'senergychallenge

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Module - Principles of Sustainability

Biomass as an opportunity

to solve Indonesia’s energy challenge

Thomas FUNGENZI MSc Land Reclamation and Restoration, Environment Department, Cranfield University, Cranfield, MK43 0AL, United Kingdom

A B S T R A C T

Indonesia is facing an energy challenge where energy security, energy poverty and climate change issues are competing with others. To address these issues, last decades have been characterized by a growing interest for biomass energy. This document gives an overview of the actual situation, focusing on the energy and biomass profile of the country, as well as its potentials and threats. Indonesia is heavily dependent on fossil fuel, especially oil. Despite large natural resources of fossil energy, the supply kept not pace with the growing demand for energy. Important amount of biomass could be used to produce different form of energy and at the same time solving energy security and poverty issues, as well as contributing to climate change mitigation. In addition, bioenergy could address socio-economic and environmental issues. However, if the wrong direction is taken, its development could lead to a grey picture.

Keywords: Indonesia, Biomass, Energy, Renewable energy, Biofuel.

1. Introduction

Many seek to anticipate an important energy transition. As time goes along, demand for

energy keep growing while non-renewable energy resources are depleting. On the other

hand, waste management is a struggle because it does not generate significant or simply no

profit at all. In a circular economy framework, wastes can become a source of energy and that

is why biomass energy has drawn the attention of businesses and authorities. This briefing

document aims at giving an insight into energy issues of a moderately developed country,

Indonesia. More specifically, attention is focused on biomass energy as a way to address

energy issues. This paper will give an overview of current challenges and opportunities of this

sector to potential investors or entrepreneurs already engaged in biomass energy production.

First of all, Indonesia and its characteristics in terms of energy use and production are

introduced. Secondly, this report explores current approaches to convert biomass into energy

in Indonesia. Ultimately, last section indentifies opportunities and as well as potential future

issues.

2. Energy profile of Indonesia

With almost 254 million inhabitants, Indonesia (map presented in annex A) is the 5th most

populated country in the world, right after the United States. Its land surface area is

approximately 1,810,000 square kilometres, placing this country in 15th position worldwide

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(CIA, 2014). With approximately 17,000 islands, Indonesia is the world largest archipelago,

which constrains the energy distribution across the country (Measey, 2010). The land is

covered by: 52% of forests; 13% of arable land; 12% of permanent crops; 6% of permanent

meadows and pastures; 17% of other land (FAOSTAT, 2011).

Indonesia holds vast energy resources and is a strategic actor on the global energy arena.

To date, it is the world largest exporter of thermal coal (75% of its production which reach

approximately 260Mt; BP Statistics, 2014). It was also a member of the OPEC organization,

but in 2004, Indonesia became net importer of oil and left the organization in 2009. A high

domestic demand and a decline in the production of oil forced the nation to redirect its

production to meet its needs. Indonesia is also a significant natural gas holder (i.e., 13th

largest reserve of the world and 4th largest exporter of liquefied natural gas; EIA, 2014). In

2012, crude oil and natural gas resources were expected to be exhausted in 23 and 52 years

respectively (MEMR, 2010; Hasan et al., 2012).

Indonesia total primary energy consumption is dominated by non-renewable source of

energy (73% of the total, figure a. can be found in annex B). Between 1980 and 2009, energy

production has multiplied by 2.8 and energy consumption by 5. Comparative developments of

the production and consumption of non-renewable energy (i.e., natural gas, coal and oil) can

be found in annex C (figure a). The electricity installed capacity relies heavily on coal (i.e.,

48%, full distribution available on figure b. in annex B; EIA, 2014). In 2026, the projected

demand for power will be approximately four times higher than the one of 2006 (as shown on

figure c. in annex B; Carbon Trust, 2014). Economic development and population growth have

led to a rapid increase of Indonesia total primary energy consumption (i.e., 44% rise between

2002 and 2012). However, energy supply did not keep pace with demand. Due to different

constraints (e.g., geographical fragmentation; MOE, 2011), many areas remain isolated from

the electric grid which explains the significant use of biomass and waste, especially for

cooking purposes (Carbon Trust, 2014; EIA, 2014). And even in grid-connected area, this

situation led to power-shortages, because energy needs sometimes exceed installed capacity

(Carbon Trust, 2014; EIA, 2014).

Gunningham (2013) argues that Indonesia now faces a real energy challenge, defined as

an ‘energy trilemma’. For him, “the central challenge for energy governance is how to manage

a complex energy trilemma involving the sometimes competing demands of energy security,

climate change mitigation and (particularly in developing countries) energy poverty”. Energy

security is undermined because: (1) key energy sources are depleted, (2) electricity network

has been developed when oil was cheap and abundant, (3) oil fuel is predominant in these

plants, (4) oil price rises, (5) of geopolitical factors, and for some other reasons (Faizal, 2011;

Gunningham, 2013). Indonesia is suffering from energy poverty because, despite large gas

and coal resources. Even if 72.9% of the population has access to electricity in 2011 (World

Bank, 2014), in 2004, it has been estimated that 95% of rural residents and 45% of urban

residents relied on biomass as a primary fuel for cooking, which represent 72% of the

population (OECD-IEA, 2006). National Geographic reports that, in 2011, 131 million people

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rely on wood and biomass cookstoves (2013). Finally, climate change may seriously affect

agriculture and food security in Indonesia. Projected increased reliance on fossil fuel might

logically lead to higher greenhouse gas emissions. Besides the obligations imposed by the

United Nations Framework Convention on Climate Change (UNFCCC), Indonesia have much to

gain by developing renewable energy and energy efficiency (Gunningham, 2013).

For all these reasons, Indonesia must diversify its energy sources and focus more on

renewable energy. In spite of important potential sources (e.g., geothermal, biomass,

hydroelectric), actual participation in power generation is only 3.25% (ESDM, 2011; Hasan et

al., 2012), hence the current growing interest for biomass energy.

3. Biomass to Energy

The potential of biomass energy in Indonesia is estimated at around 50GWe (ESDM,

2011), whereas the installed capacity (using biomass energy) is approximately 1,600MW

(Faizal, 2011). To fully appreciate this huge potential, it must be said that total installed

electricity generation capacity is estimated to be 44GWe in 2012 (Singh & Setiawan, 2013).

This means that theoretically, a total and efficient use of the biomass could almost double

current capacity.

First, it is important to explain on which type of biomass this potential is built. As it is

highlighted by the Carbon Trust (2014), Indonesia faces not only an energy challenge but also

a real challenge in terms of waste management. Broadly speaking, organic waste can

potentially suitable for bioenergy and can be distinguished between municipal and industrial

waste. The former refers to solid waste produced by domestic activities while the latter

includes agricultural waste, wood residues for forestry activities and even outputs produced

by agro-industries such as palm oil and sugar mills. However, it is important to stress that the

bioenergy potential previously presented correspond to energy made with waste. The

broader issue related to bioenergy crops deserves to be further discussed but first, this report

will first look at the Waste-to-Energy situation.

As presented in annex D (figure a), about 64Mt of municipal solid waste (MSW) are

produced each year. It is composed by 40% of organic and paper/card material, coming from

households (40% of the total; annex D figure b) and is potentially suitable for bioenergy. A

large part (more than two-thirds) is disposed in landfill sites. Poorly controlled (because of

insufficient funding), these sites form a real informal industry. The Jakarta post claimed in

2009 that 1.2 million waste-pickers recycle half of Indonesia’s plastic waste under unsafe and

unhealthy conditions, and appeal for better working conditions. These cheap open dumps

also have negative environmental externalities and contribute to pollute the ground and the

air (Carbon Trust, 2014).

Several commodities offer an opportunity for bioenergy within the agro-

industrial/forestry sector. The most significant are, in order of importance are palm oil, rice

paddy, sugarcane, corn, rubber and cassava. As calculated by Conrad & Prasetnyaning (2014),

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the first three together could theoretically generate 46 GWe annually. Nevertheless, two

important criteria have to be taken into account to narrow-down from theoretical to technical

potential: (1) the regional biomass concentration and (2) the PLN transmission grid (PLN is the

state-owned electricity company).

The same reasoning applies in the case of MSW and in both cases and generally two

other criteria must be considered to assess the real potential for electricity generation: (1) the

chosen technology and (2) the nature of the feedstock(s). The NL Agency (2012) identified

bioenergy projects on the basis of its ‘maturity level’ and its ‘level of commercialisation’,

reflecting that a there is currently a wide range of conversion technologies in place. The

Carbon Trust (2014) clearly states that the Waste-to-Energy (WtE) industry is at an early stage

of development, consisting of:

2 large scale land fill gas project;

Several scattered anaerobic-digester plants;

1 commercial scale incinerator under construction;

A series of potential projects in preparation phases.

Globally, to develop a strategy for biomass energy in Indonesia, it is possible to categorise

the projects depending on their specific orientation. Hence, strategies can be divided in: (1)

‘biomass for household energy’, (2) ‘biomass for power’ and (3) ‘biofuel for transport’.

Current programs to support household energy remain small in scale while larger ‘biomass for

power’ projects have been implemented (i.e., biomass gasification and combustion).

Compared to other strategies, biofuel for transport received greater emphasis. Indeed,

biomass can be used to produce biofuels like biodiesel which can substitute fossil fuel in

diesel power plants located in remote areas without access to the electricity grid (Singh &

Setiawan, 2013).

Indeed, bioenergy has many several positives outcomes to offer, but the future picture is

not all bright.

4. A mixed picture

Besides being an alternative source of energy, biomass energy also contribute to

eliminate waste. Moreover, additional potential benefits include “contribution to national or

regional economic growth through business expansion and employment generation, reduction

in import fossil fuel resources, security of energy supply and reduction of greenhouse gases”

(Carlos & Khang, 2008). As explained previously, biodiesel mixed with diesel oil can substitute

a part of fossil fuel and be applied to diesel engine without any technical modification.

Furthermore, biodiesel does not emit black exhaust smoke and could be considered as ‘less

bad’ for health than current diesel, and is biodegradable and environmental friendly (Hasan et

al, 2012). For Rosillo-Calle & Hall (1992) biomass has not only a positive impact on the

atmosphere (avoidance of SO2 and NOx emissions) but it is also a widely and easily available

fuel source. Concerning policy, Indonesia has a positive setting, even this can be argued. For

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instance, the Presidenial Regulation No.05 set out targets for a higher biomass energy

contribution in the future power-mix by 2025 (i.e., 5% of biofuel and 5% ‘other renewable’,

including biomass; see annex B figure d.) and feed-in tariffs for renewable energy for small &

medium scale plant have been introduced by Ministerial Regulation No.04 in 2012 (Singh &

Setiawan, 2013; Carbon Trust, 2014). Because a large amount of palm oil mill are privately

own, the development of on-site waste-to-energy project should be facilitated (Conrad &

Prasetyaning, 2014). On the other hand, contrary to the situation in Brazil, private sector only

has license to manage the land and does not own it. That should facilitate the implementation

of new policy by the government (The Jakarta Globe, 2013).

However, even if biomass energy has a green reputation and is considered as a

sustainable option, it is only in a very limited extent. Abbasi & Abbasi (2010) emphases that

biomass may be carbon neutral but is not nutrient neutral since the biomass is exported from

it has been cultivated. In addition, biomass exploitation as any modern intensive farming can

cause environmental degradation and ecological disruptions. Moreover, the “quantity of fossil

fuel saved in the course of the production and the utilization of biofuels is not always greater

than the quantity of fossil fuels used” (Abbasi, 2010). Indeed, biomass production requires

fossil fuel inputs. Furthermore, its production can be a driver of deforestation and drainage of

peatlands, which is attributable to palm oil development and causes important emissions of

greenhouse gases (Sagar & Kartha, 2007). Looking at the issue of land use, food security and

water supply potential “food versus fuel” and implicit “water for food versus water for fuel”

tradeoffs have to be seriously considered (Rosegrant et al., 2008). Bioenergy can be

developed by shifting land, labour and capital resources away from poor rural inhabitants,

landless farmers, underemployed labourers like waste pickers and more (Sagar & Kartha,

2007).

5. Conclusion

Indonesia has been lucky to own a wealth of resources, but unfortunately, they are not

inexhaustible. Oil reserves are depleting. Demand for energy is rising and supply does not

keep pace. Still, this country disposes of a renewable form of energy which can find its place

in circular economy system. Farming, forestry and agro-industries wastes become other

facilities’ inputs. Biomass energy offers a great opportunity to solve not only energy problems

but also offers a chance for a sustainable development, improving socio-economic and

environmental situation of this country. Technical solutions and policy exist to support its

development, but further efforts are required. However there are environmental concerns,

which if managed incorrectly, could mean that biomass for energy could create as many

problems as it solves. These issues have a universal nature and should therefore be addressed

by involving as far as possible, all the key stakeholders. By taking a holistic approach it could

be possible to find the most appropriate solutions. Today it is clear that Indonesia will rely on

coal to support its economy and energy supply. Will Indonesia becomes an example of Jevon’s

paradox? Developing the right policies and programs are one part of the answer but as Jimmy

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Carter said about energy, “(…) By acting now we can control our future instead of letting the

future control us.”

References

Abbasi, T., & Abbasi, S. A. (2010). Biomass energy and the environmental impacts associated with its production and utilization. Renewable and Sustainable Energy Reviews, 14(3), 919-937.

BP Statistics (2014). BP Statistical Review of World Energy,2014. Accessed online October 24, 2014 at http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf>

Carbon Trust (2014). Waste to energy in Indonesia. Accessed online October 24, 2014 at < http://www.carbontrust.com/news/2014/06/waste-to-energy-in-indonesia>

Carlos, R. M., & Ba Khang, D. (2008). Characterization of biomass energy projects in Southeast Asia. Biomass and Bioenergy, 32(6), 525-532.

Conrad, L., & Prasetyaning, I. (2014). Overview of the Waste-to-Energy Potential for Grid-connected Electricity Generation (Solid Biomass and Biogas) in Indonesia. Accessed online October 24, 2014 at < https://mail.energypedia.info/images/archive/7/7d/20140516114837!GIZ_2014,Biogas_in_Ghana_Sector_Analysis_of_Potential_and_Framework_Conditions.pdf>

CIA (2014). The World Factbook. Last updated June 22, 2014. Accessed online October 24, 2014 at <https://www.cia.gov/library/publications/the-world-factbook/geos/id.html>

EIA (2014). Indonesia – Overview. Last updated March 5, 2014. Accessed online October 24, 2014 at <http://www.eia.gov/countries/analysisbriefs/Indonesia/indonesia.pdf>

ESDM (2011). Bioenergy potential in Indonesia reached 49.810 MW. Last update May 24, 2011. Accessed online October 24, 2014 at <http://www.esdm.go.id/index-en/83-energy/4536-bioenergy-potential-in-indonesia-reached-49810-mw.html>

Faizal (2011). Biomass potential and utilization in Indonesia. Presented at “The 8th Biomass Asia Workshop”. Accessed online October 24, 2014 at <http://www.biomass-asia-workshop.jp/biomassws/08workshop/files/5Biomass%20Potential...%20in%20Indonesia.pdf>

FAOSTAT (2011). Indonesia. Last update May 29, 2013. Accessed online October 24, 2014 at <http://faostat3.fao.org/browse/area/101/E>

Gunningham, N. (2013). Managing the energy trilemma: The case of Indonesia.Energy Policy, 54, 184-193.

Hasan, M. H., Mahlia, T. M. I., & Nur, H. (2012). A review on energy scenario and sustainable energy in Indonesia. Renewable and Sustainable Energy Reviews, 16(4), 2316-2328.

Measey, M. (2010). Indonesia: A Vulnerable Country in the Face of Climate Change. Global Majority E-Journal, 1(1), 31-45.

MEMR (2010). Handbook of Energy and Economic Statistic of Indonesia. Center for Data and Information on Energy and Mineral Resources. Ministry Energy and Mineral Resources, Jakarta.

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Mujiyanto, S., & Tiess, G. (2013). Secure energy supply in 2025: Indonesia's need for an energy policy

strategy. Energy Policy, 61, 31-41.

National geographic (2013). Five Surprising Facts About Energy Poverty. Last update May 29, 2013.

Accessed online October 24, 2014 at

<http://news.nationalgeographic.com/news/energy/2013/05/130529-surprising-facts-about-

energy-poverty/>

NL Angency (2012). Indonesia – Market opportunities for bioenergy. Ministry of Foreign Affairs. Accessed online October 24, 2014 at <http://english.rvo.nl/sites/default/files/2013/12/Factsheet%20Indonesia%20-%20Market%20opportunities%20for%20bioenergy.pdf>

MOE (2011). Market Observatory for Energy – Country file – Indonesia. Accessed online October 24, 2014 at <http://ec.europa.eu/energy/observatory/doc/country/2011_07_indonesia.pdf>

OECD-IEA (2006). World Energy outlook. Energy for cooking in developing countries. Accessed online October 24, 2014 at <https://www.iea.org/publications/freepublications/publication/cooking.pdf>

Rosegrant, M. W., Zhu, T., Msangi, S., & Sulser, T. (2008). Global scenarios for biofuels: impacts and implications. Applied Economic Perspectives and Policy, 30(3), 495-505.

Sagar, A. D., & Kartha, S. (2007). Bioenergy and sustainable development?.Annu. Rev. Environ. Resour., 32, 131-167.

Singh, R., & Setiawan, A. D. (2013). Biomass energy policies and strategies: Harvesting potential in India and Indonesia. Renewable and Sustainable Energy Reviews, 22, 332-345.

The Jakarta Globe (2013). Indonesia can develop biomass energy. Last update November 20, 2013. Accessed online October 24, 2014 at < http://thejakartaglobe.beritasatu.com/news/indonesia-can-develop-biomass-energy/>

The Jakarta Post (2009). The journey of a plastic cup. Last update September 15, 2009. Accessed online October 24, 2014 at <http://www.thejakartapost.com/news/2009/09/15/the-journey-a-plastic-cup.html>

World Bank (2014). Accessed online October 24, 2014 at <http://data.worldbank.org/>

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Annex A

- Map of Indonesia (CIA, 2014)

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Annex B

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Annex C

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Annex D

Figure a: Indonesia’s agricultural wood and waste generation per source (Carbon

Trust, 2014)

Figure b: Indonesia’s Municipal Solid Waste composition, source and handling

statistics (Carbon Trust, 2014)