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Economic Analysis of Diesel-Fuel Replacement by Crude Palm Oil in Indonesian Power Plants

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  • Petr Procházka

    (Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences Prague, Kamýcká 129, 169 21 Prague 6, Czech Republic)

  • Vladimír Hönig

    (Department of Strategy, Faculty of Business Administration, University of Economics, Prague, W. Churchill Sq. 1938/4, 130 67 Prague 3, Czech Republic)

Abstract

Indonesia needs to find an alternative fuel to substitute diesel in their power plants in order to reduce the use of nonrenewable energy sources. The Indonesian government has a target to reduce oil fuel consumption while improving the efficiency of energy utilization. Crude palm oil is proposed to be used for this substitution. In this paper, the authors conduct an economic analysis of the replacement of diesel by crude palm oil. To predict future prices, a time series analysis is conducted using AutoRegressive Integrated Moving-Average method. A financial analysis of a specific project (0.75-MW power plant) is conducted using static financial indicators (payback period, return on investment). Results show that replacing diesel with crude palm oil may be profitable. This is especially true for the proposed prospects of diesel price evolution. Analysis shows that the price of crude oil, which is the main factor in the pricing of diesel, may go up. Also, recently Indonesian currency depreciated against the US dollar, which also implies a higher cost of diesel.

Suggested Citation

  • Petr Procházka & Vladimír Hönig, 2018. "Economic Analysis of Diesel-Fuel Replacement by Crude Palm Oil in Indonesian Power Plants," Energies, MDPI, vol. 11(3), pages 1-12, February.
    • Handle: RePEc:gam:jeners:v:11:y:2018:i:3:p:504-:d:133680
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    References listed on IDEAS

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    1. Gheorghe Lazaroiu & Lucian Mihaescu & Gabriel Negreanu & Constantin Pana & Ionel Pisa & Alexandru Cernat & Dana-Alexandra Ciupageanu, 2018. "Experimental Investigations of Innovative Biomass Energy Harnessing Solutions," Energies, MDPI, vol. 11(12), pages 1-18, December.

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