Prospects for wood-based electricity for the Indonesian National Energy Policy

To achieve the target of 23% renewable energy by 2020, Indonesia has been actively exploring options to loosen its dependence on fossil fuels. While biofuels have been developing fast and remain a priority for the government, wood-based energy also holds great potential. This report is a first attempt to assess its state of development and feasibility.

Wood-based energy could be based on the high-profile large-scale industrial tree plantation program in Indonesia. This is one of the largest in the world with millions of hectares planted, but it has failed to achieve all of its public objectives. The government envisions its revival, with bioenergy as an alternative to the mature pulp and paper market. To do so, a flagship feed-in tariff policy has been put in place as an incentive for power plants to using biomass (or biogas material).

Our research – based on intensive interactions with stakeholders at all levels, secondary data and three case studies – leads to one straightforward message that this source of energy is not going to represent a significant share of the energy mix for a long time. Major obstacles include the difficulty in establishing and managing large-scale tree plantations dedicated to energy production with recurrent claims and conflicts on the ground, the inability of the feed-in tariff policy to compensate investors for the risks of shifting to a new type of energy, the absence of subsidies provided to the state-owned electricity company that sees little interest in buying relatively expensive power, and the lack of proof of concept that lowers the probability of significant investments in this field.

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