Talking about Biogas and the Palm Oil Industry in Indonesia

This picture was taken around June 2019. Are you familiar with the round shaped object that I was observing? 

It is called a lagoon, covering thousands cubic of methane from the anaerobic process of POME (Palm Oil Mill Effluent) – wastewater from the palm fruit processing. After some time on the lagoon, the mixture of the waste and bacteria digestion produces methane, carbon dioxide, and hydrogen sulfide through an absence of oxygen chemical reaction. It is one of the waste-to-energy concepts, with an objective to reduce harmful substance of waste from the industrial process by changing it into less environmental damaging and producing energy. 

Less than 10%1 of around 800 palm oil mills in Indonesia utilized this waste to energy technology. It means this waste-to-energy is not a popular one, for now. The hype on coal power alternative in Indonesia was still dominated by the natural gas power, hydro, and even wind. Aiming on the equal island development, this technology might be worth of full deployment in the island of Sumatera, Kalimantan, and Sulawesi. On the island of palm oil, this technology could solve:

  1. Waste problem from the biggest “exported commodity product” of Indonesia.
  2. Scarce of electricity in remote area, whereby transmission and distribution infrastructure are still absent.
  3. Increase the awareness of palm oil industry to move forward on more responsible palm oil business.
  4. Create more jobs on the power generation sectors.

Giving you a bit of contextualization, some palm oil mill can have up to 2 x 1 MW of biogas engine. It produces on around 80% load, capable of powering the whole mill operation. Only challenge is the fluctuated load during the day because unlike coal power plant, palm oil mill does not operate 24 hours.

One of the challenges is the high production cost producing electricity. Data from2 mentioned on the high operation cost, engine maintenance takes 39% of overall operation cost surpassing the labor and digester maintenance itself. The maintenance in biogas is a bit more complicated than the natural gas power plant. Biogas contain unwanted H2S which gives the high acidity; hence it is called the sour gas. Sour gas is highly oxidative and corrosive which make the technology needs specific characteristic of engine. On the maintenance point of view, a lubricant that has superior oxidative and corrosive resistance is vital to ensure the engine reliability. That is why biogas engine needs specific lubricant.

How can policy affect?

Starting from the current condition and wish on the vast and rapid deployment, what support are needed? Incentive. This is what keep investor interested and willing to invest.

  1. Carbon credit

The certificate of right to produce certain amount of carbon emission for their activity, which is gained from other party through a trading mechanism. Example:

The concept of Clean Development Mechanism, one of the mechanisms under Kyoto Protocol. It is ensuring the Annex country which had an emission target to purchase carbon credit from non-Annex countries (Indonesia is on the list as developing country). The form of CDM is any project results on the emission reduction: biomass, energy efficiency, renewable power generation, waste-to-energy, and transportation. The purpose of the concept was effective to boost the acceleration of lower emission technology deployment, some of the case in Indonesia: Sarulla geothermal power plant (330 MW), Kalimantan peat land carbon storage and sequestration, and of it is the palm oil waste to energy projects.

Example case:

Australia as one of the Annex I country had a binding emission targets of 1,000 tonnes of carbon emission. However, they can emit 1,500 tonnes of carbon, by purchasing 500 tonnes worth of credit from Indonesia. Indonesia itself, generate this credit by conserving peatland and tropical forest in Kalimantan which prevented 500 tonnes of carbon released into the atmosphere, which can happen due to the illegal land use and fire. Then, Indonesia get currency as the return which can be used for funding the conservation project and incentivize other green technology.

It is interesting on the carbon emission trading market and how we are expecting a 2024 ready market, maybe I will write a specific topic on the carbon market.

  1. PPA (Power Purchase Agreement)

The PPA is vital in the case of bigger investment decision, where the installed capacity exceed the demand from in-situ electricity demand. The excess, if possible then fed into the PLN grid. Investor needs to secure an acceptable price within some period of project, to ensure their project is giving desired return on investment. This PPA has been long discussion between PLN and Biogas power investor, as reaching mutual interest acceptability seemed difficult.


*ESDM Regulation 12/2017 Article 5 sentence 3 declares the maximum tariff of bought price for alternative energy power plant. For biogas powered gas engine, it is 85% from the regional cost of electricity production.

*ESDM Regulation 50/2017 about the production cost of electricity.

There is soon a presidential decree to regulate the feed in tariff based on the generation. This would give a bright light to the deployment of alternative and clean energy investment in Indonesia, with the aim to put specific effort and tariff to value the investment and incentive based on the technology, and the area. It is understood that investing in Papua is riskier than Java in term of infrastructure and cost. It is interesting to see how the biogas generation technology and deployment could speed up in the next 5 years.