Tenny Kristiana – Indonesia's biofuel program was supposed to be a boon for small farmers. But although the country's biodiesel production has skyrocketed, many farmers complain that the program hasn't benefited them. Farmers are still struggling to become part of the biodiesel supply chain, which is dominated by large palm oil firms.
How can the situation be addressed? Cellulosic ethanol could be the answer.
Cellulosic ethanol is derived from plant fibers, which are generally composed of cellulose. Indonesia's palm oil industry, the world's largest, produces huge volumes of leftover plant residues such as palm trunks, empty palm fruit bunches and palm press fiber. With advanced technology, these raw materials can be turned into ethanol that can be blended with gasoline.
Last year, President Joko Widodo announced plans to expand Indonesia's sugar cultivation area to 700,000 hectares (1.7 million acres), part of a bid to boost development of renewable sugar-based ethanol and wean the country of excessive petroleum consumption. But with vacant land often hard to come by in a nation of some 280 million people, my organization, the International Council on Clean Transportation, believes cellulosic ethanol could serve as an alternative.
Our recent study on cellulosic ethanol found Indonesia has high potential to develop the industry, capable of producing up to 2 million kiloliters (528 million gallons) per year from palm residues alone. Currently, Indonesia exports these residues to countries like Japan, which imports palm kernel shells for biomass power generation to meet its renewable energy targets.
Exporting palm waste to foreign markets can be tempting, and it's not wrong in the short term. In the long term, however, by only focusing on exports, Indonesia would lose out on the opportunity to develop a domestic processing industry, especially as "downstreaming" has been a consistent theme of the Widodo administration's economic strategy.
Developing a domestic cellulosic ethanol industry could increase the income of small farmers, who could sell empty fruit bunches and palm fibers to cellulosic ethanol producers under long-term contracts. Many in the industry remain unaware of the potential economic benefits of palm oil waste, so the government should provide training and information.
As for palm trunks, they could be included as a condition of the government's national replanting program, so that state-owned enterprises such as Pertamina, the national oil company, could obtain them for free and use them as raw materials in cellulosic ethanol production. This could reduce production costs and reduce the need for government fuel price subsidies, a major drain on the national budget.
Developing this industry would also create jobs in factory, transportation and plantation work. Since the cellulosic ethanol business is new to Indonesia, it will be easier for farmers to enter the supply chain from the early stages of its development. Unlike the biodiesel industry, which is already well established, this could be a great opportunity to encourage farmers to contribute to the national biofuel program. This is the right time for Indonesia, rich in raw materials, to become a world leader in cellulosic ethanol production.
After the industry gets off the ground, inputs could be diversified to other residues such as rice straw, corn stalks, sugarcane bagasse, cassava stems and waste wood from demolition, expanding the benefits beyond farmers of all kinds of crops.
The success of cellulosic ethanol development can make the government proud to say, "Cellulosic ethanol, from farmers for the Indonesian people!"
[Tenny Kristiana is an associate researcher at International Council on Clean Transportation.]