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Bioethanol Dillema in Indonesia

Yesterday I had a really nice yet short conversation with one of my best friend about biofuel status in
Indonesia. Why did we talk about this subject? It is because I wanted to participate in one of biofuel
feasibility study tender. My friend I talked about has been working in this area for a quite long time.

I believe we need renewable energy in the future since fossil fuel production has decreased from
year to year. However until now, development of fuel grade bioethanol plant in Indonesia is not
quite satisfying.

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Ministry of Energy and Mineral Resources has published Permen No. 25/2013 about Utilization of
Biofuel. In the document, it is stated about staging of minimum utilization of bioethanol (E-100) as
blending component in fuel.

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Consumption of fuel grade ethanol in Indonesia has remained virtually zero since 2010 due to lack of
financial support to run the blending program. In 2006 until 2009, Pertamina was able to sell E2
gasoline on limited basis due to subsidies covering the price difference bioethanol and gasoline.
However, due to increasing production cost for fuel grade ethanol and limited state-budget for
subsidies, Pertamina receives limited supplies from ethanol producers.

In February 2018, Ministry of Energy and Mineral Resources announced a plan to implement
blending of E2 in several big cities, most likely in East Java due to proximity with ethanol producer
plants. This program may target high-octane gasoline where the price difference with ethanol is
narrower.

Challenges in Blending 2%-5% Ethanol to Fuel (E2 and E5)

[1] Price Competitiveness

Main reason why Indonesia’s ethanol blending program has not succeeded is price competitiveness.

Ministry of Energy and Mineral Resources formulates Bioethanol Market Index price based on
molasses price. The bioethanol price fell from IDR 11,049 per liter in January 2017 to IDR 10,210 in
June 2018.

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[2] Infrastructure and Capacity

Estimates consumption of ethanol in Jakarta and surrounding area in 2017 to implement E5 (5%
bioethanol) program will be 85,000 KL/year. This is more than double the current national capacity
of Indonesia. Other regulation also restrict commingling (mixing) of storage tanks. This will increase
the distribution challenge as additional separate storage need to be built.

[3] Feedstock Constraints

The shrinking size of Indonesia’s sugarcane crop is a primary constraints on the expansion of ethanol
production. Indonesian distillers would like to use less costly and widely available feedstock for
ethanol production. However, Indonesia’s import restrictions on cheaper, more widely available
feedstock such as corn continue to hinder the growth and viability of local ethanol producers.
References:

[1] Permen ESDM No. 25/2013

[2] Indonesia’s Ethanol Dilemma

[3] Indonesia Biofuels Annual Report 2017

[3] Indonesia Biofuels Annual Report 2018

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