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Cost competitiveness of palm oil biodiesel production in Indonesia

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  • Harahap, Fumi
  • Silveira, Semida
  • Khatiwada, Dilip

Abstract

This study investigates opportunities to improve the cost competitiveness of the palm oil biodiesel industry in Indonesia. It compares costs and revenues of standalone conventional palm oil and biodiesel production with an integrated system that includes utilisation of biomass residues. Economic metrics, viz. net income, NPV, IRR, payback period and biodiesel breakeven price are evaluated. Sensitivity analyses are carried out to verify how parameter changes affect net income. The results show that the integrated concept with upgraded CPO and biodiesel processing plant (Biorefinery), which simultaneously produces biodiesel, electricity, heat and biofertiliser, can obtain an additional income of 14 USD/t-FFB compared to the Conventional System. The biorefinery system helps to reduce dependency on government subsidy for biodiesel production, and lowers the industry vulnerability to fluctuation of fossil diesel prices. The shift to modern facilities with value chain integration provides a pathway to enhance the share of renewable energy in Indonesia through increased biodiesel production and electricity generation from palm biomass residues. It may also promote resource efficiency and climate change mitigation through reduced emissions from untreated residues and fossil energy carriers. The analysis enhances understanding about potential gains and consequences of more stringent policy implementation in the country.

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  • Harahap, Fumi & Silveira, Semida & Khatiwada, Dilip, 2019. "Cost competitiveness of palm oil biodiesel production in Indonesia," Energy, Elsevier, vol. 170(C), pages 62-72.
    • Handle: RePEc:eee:energy:v:170:y:2019:i:c:p:62-72
    DOI: 10.1016/j.energy.2018.12.115
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    6. Sharvini, S.R. & Noor, Z.Z. & Stringer, L.C. & Afionis, S. & Chong, C.S., 2022. "Energy generation from palm oil mill effluent: A life cycle cost-benefit analysis and policy insights," Renewable and Sustainable Energy Reviews, Elsevier, vol. 156(C).
    7. Mohd Idris, Muhammad Nurariffudin & Hashim, Haslenda & Leduc, Sylvain & Yowargana, Ping & Kraxner, Florian & Woon, Kok Sin, 2021. "Deploying bioenergy for decarbonizing Malaysian energy sectors and alleviating renewable energy poverty," Energy, Elsevier, vol. 232(C).
    8. Mohd Idris, Muhammad Nurariffudin & Leduc, Sylvain & Yowargana, Ping & Hashim, Haslenda & Kraxner, Florian, 2021. "Spatio-temporal assessment of the impact of intensive palm oil-based bioenergy deployment on cross-sectoral energy decarbonization," Applied Energy, Elsevier, vol. 285(C).
    9. Fitriyanti Mayasari & Rinaldy Dalimi & Widodo Wahyu Purwanto, 2019. "Projection of Biodiesel Production in Indonesia to Achieve National Mandatory Blending in 2025 using System Dynamics Modeling," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 421-429.
    10. Gabriel Talero & Camilo Bayona-Roa & Giovanny Muñoz & Miguel Galindo & Vladimir Silva & Juan Pava & Mauricio Lopez, 2019. "Experimental Methodology and Facility for the J69-Engine Performance and Emissions Evaluation Using Jet A1 and Biodiesel Blends," Energies, MDPI, vol. 12(23), pages 1-10, November.
    11. Jung, Sungyup & Jung, Jong-Min & Tsang, Yiu Fai & Bhatnagar, Amit & Chen, Wei-Hsin & Lin, Kun-Yi Andrew & Kwon, Eilhann E., 2022. "Biodiesel production from black soldier fly larvae derived from food waste by non-catalytic transesterification," Energy, Elsevier, vol. 238(PA).
    12. Kwon, Gihoon & Tsang, Daniel C.W. & Oh, Jeong-Ik & Kwon, Eilhann E. & Song, Hocheol, 2019. "Pyrolysis of aquatic carbohydrates using CO2 as reactive gas medium: A case study of chitin," Energy, Elsevier, vol. 177(C), pages 136-143.
    13. Ng, Wei Zhe & Obon, Aaron Anthony & Lee, Chin Loong & Ong, Yi Hui & Gourich, Wail & Maran, Kireshwen & Tang, Dennis Boon Yong & Song, Cher Pin & Chan, Eng-Seng, 2022. "Techno-economic analysis of enzymatic biodiesel co-produced in palm oil mills from sludge palm oil for improving renewable energy access in rural areas," Energy, Elsevier, vol. 243(C).
    14. Fumi Harahap & Sylvain Leduc & Sennai Mesfun & Dilip Khatiwada & Florian Kraxner & Semida Silveira, 2019. "Opportunities to Optimize the Palm Oil Supply Chain in Sumatra, Indonesia," Energies, MDPI, vol. 12(3), pages 1-24, January.
    15. Rajesh, K. & Natarajan, M.P. & Devan, P.K. & Ponnuvel, S., 2021. "Coconut fatty acid distillate as novel feedstock for biodiesel production and its characterization as a fuel for diesel engine," Renewable Energy, Elsevier, vol. 164(C), pages 1424-1435.
    16. Montoya, Jorge & Valdés, Carlos & Chaquea, Hernando & Pecha, M. Brennan & Chejne, Farid, 2020. "Surplus electricity production and LCOE estimation in Colombian palm oil mills using empty fresh bunches (EFB) as fuel," Energy, Elsevier, vol. 202(C).

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