Government levels up use of biofuel in power generation

8 January 2019

The government is working to further increase the domestic use of biofuel as part of the policy to reduce oil imports. After requiring the use of biofuel for transportation, railways and heavy machinery at mining sites, the government will boost the use of biofuel in power generation.
For this purpose, the government will ask state electricity company PLN to soon convert its diesel-fueled power plants into biodiesel-fueled power plants.
The government will also issue a regulation allowing private biodiesel-fueled power producers to sell power to PLN.
The Energy and Mineral Resources Ministry’s director general for renewable energy, Rida Mulyana, said increasing the utilization of bioenergy is one of the ministry’s priorities this year.
“We will intensify the use of [bioenergy] this year. That is not only from the [implementation of] the B20 policy,” he said, referring to the policy to blend 20 percent biofuel with diesel to reduce oil imports.
The ministry’s bioenergy director, Andriah Feby Misna, meanwhile, said transforming PLN’s diesel-fueled plants into 100 percent palm oil-based power plants could take two years.
“[PLN] has the roadmap [on biofuel power plants], the target is within two years. Yet, it is likely that only some of the diesel-fueled power plants will be altered [to use biofuel],” she said recently.
At present, Feby said some of PLN’s power plants use biofuel by blending it with diesel or biodiesel.
Previously, Energy and Mineral Resources Minister Ignasius Jonan said PLN had around 2,000 megawatts diesel-fueled power plants and he had urged PLN to convert them to biofuelbased plants in order to decrease the dependency on oil.
As of November 2017, the power plants that use fossil fuel — diesel and coal — accounted for 10 percent of installed capacity at 54.5 gigawatts.
In the future, diesel-fueled power plants would only be allowed in border regions and remote areas that could not be served by PLN’s main electricity networks, according to PLN.
PLN believes the measure would significantly reduce production costs because the distribution of oil to remote areas such as some regions in Papua is very expensive.
PLN used around 3 million kiloliters of oil last year, while in 2022 it is projected to be 500,000 kl.
Meanwhile, for the biodiesel policy, the government has set a target to deliver 6.2 million kl of biofuel this year, a 58.5 percent increase from 2018. The amount is allocated mainly for the transportation sector.
Feby further said PLN, in collaboration with the Agency for the Assessment and Application of Technology, had conducted a study on coal-fired power plant’s adaptability to use biodiesel. “PLN has utilized biodiesel of up to a 30 percent blend for dieselfueled power plants,” she said.
Regarding the private sector, the government issued last December Energy and Mineral Resources Ministerial Regulation No. 53/2018 on renewable energy that includes independent biofuel power plants as another type of renewable energy sector that could generate power for PLN.
The regulation, which was a revision to Regulation No. 50/2017 of the same title, defines biofuel power plants as electricity generators that are fueled with liquid vegetable oil.
Before it could make electricity sales and obtain purchase contracts with PLN, a power producer needs to ensure that it has secured the stock of biofuels until the contract’s end.
“The requirement is to lower the transportation cost [of biofuel to the power plant] or basically a mine-mouth power plant,” Feby said.
Energy watchdog Institute for Essential Services Reform executive director Fabby Tumiwa believes the regulation could become problematic for investors because of the build-own-operate-transfer (BOOT) policy.
“Though it was meant to increase the use of biofuel in electricity generation, we need to wait to see investors’ reaction over the problematic BOOT policy,” he told The Jakarta Post.
The BOOT policy obliges investors to transfer renewable projects to PLN at the end of the power purchase agreement.
However, Fabby acknowledged the positive side of one of the articles in the contract’s mechanism, which is under the business-to-business (B2B) scheme that is more flexible for investors.
“Electricity rates from biofuel power plants is set under a B2B scheme, which isn’t [like other type of renewable energies] based on electricity supply cost,” he said.
The price cap on renewable energy-based electricity excluding biofuel is set at a maximum 85 percent of electricity supply costs in each region.
The Indonesian Biofuel Producers Association (APROBI) is upbeat that it can fulfill biofuel demand for power plants because of similarities with the mechanism in the B20 policy.
“The supply for power plants is similar with the material for the B20 policy, which can use fatty acid methyl ester,” APROBI chairman Paulus Tjakrawan said.

Source: Jakarta Post, 8 January 2019