White paper

Techno-economic analysis of cellulosic ethanol in Indonesia using palm residues

(Versi bahasa Indonesia di sini.)

Cellulosic ethanol is a sustainable, second-generation biofuel that utilizes waste cellulosic biomass for energy. Indonesia’s palm industry produces enormous volumes of palm biomass residues, including palm trunks, palm empty fruit bunches, and press fiber, and these are typically not utilized and instead left on the field to rot. Given that Indonesia has ambitious goals for replacing petroleum with biofuels, the cellulosic ethanol industry could take advantage of this abundant resource. 

To our knowledge, this is the first study to assess the costs and potential ramp up of cellulosic ethanol production specifically in Indonesia. The study estimates the levelized production cost of cellulosic ethanol using a discounted cash flow model that accounts for the various costs of building and operating a new cellulosic ethanol plant, including equipment, construction, land, feedstock, maintenance, and labor. It also explores a roadmap in which a new cellulosic ethanol industry could be developed and ramped up over the next two decades. The results show that an annual government subsidy of IDR 4.7–6 trillion (US$335–430 million) would be needed to support the ramp up of a first wave of 10 moderately large facilities, each with a production capacity of 70 million liters, depending on the use of different types of feedstock. The figure below shows the timing of when those subsidy amounts would need to be paid based on the ramp-up rate of the industry (left axis). 

Additionally, the authors find that if Indonesia were to build a total of 30 commercial facilities over the next 10 years, the country could produce 2 billion liters of cellulosic ethanol annually, replacing a conservative estimate of 4% of its gasoline consumption at a relatively low cost compared to other countries. Developing a domestic cellulosic industry could bring multiple benefits to Indonesia including reduced oil imports, new jobs, additional revenue for the palm industries/smallholders, and greater greenhouse gas savings than first-generation biofuels. 



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