A HYBRID FRAMEWORK TO DESIGN BIODIESEL- PETROLEUM DIESEL BLENDS SUPPLY CHAIN POLICY IN INDONESIA

• Main Author: Tupa R. Silalahi, Fitriani
• Format: Dissertations
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/80475
• Institution: Institut Teknologi Bandung

Along with the issue of using renewable energy around the world, Indonesia also supports the use of biofuels by implementing the mandate of blending biodiesel with raw materials from palm oil with 20% diesel fuel (B20) in all sectors in 2018, followed by B30 in 2020 and B40 by the year of 2022. However, achieving the mandate requires enough funding to support the policy implementation and a sufficient amount of biodiesel plant capacity. The financial support is important for biodiesel program because biodiesel prices tend not to compete with diesel prices. Hence, a special agency called Badan Pengelola Dana Perkebunan Kelapa Sawit or Palm Oil Plantation Fund Management Agency (BPDPKS) takes the responsibility to support the project’s funding. The BPDPKS finance used to support the project’s financial needs comes from the levies imposed on each exported palm oil product. However, the implementation of the domestic mandate which causes a significant increase in domestic consumption of palm oil, hence, a decrease in exports of palm oil, makes the availability of funding for the project in the recent year lower than the previous years when no such phenomenon occurs. Moreover, the increase in mandate also means greater consumption of biodiesel which leads to the agency spending more on the price difference. Another significant issue is in terms of the mandate being imposed by the government that consequently causes the capacity of the biodiesel industry to be added. To meet the B20 policy by 2020, the biodiesel industry's used capacity has reached 80% of the installed capacity. This requires an additional capacity to meet the additional mandate of B40 by 2022 and the demand for biodiesel from abroad. Given the significant issues and advantages of renewable energy, this research supports the utilization of biodiesel in Indonesia. Therefore, this dissertation aims to explore suitable designs to support the biodiesel program both in terms of policy design and supply chain design to minimize the costs in accordance with the challenges faced today. To achieve the goal of this research study, four research questions were formulated. The first research question explores the benefits, challenges, and opportunities for biodiesel development. The question was addressed by conducting literature studies and interviewing experts. The second research question focuses on exploring policies regarding the support for biodiesel funding in order to continue the biodiesel policy. The system dynamics method is used to simulate policy scenarios to support the biodiesel program's sustainability. The third and fourth research questions focus on the optimization of the biodiesel supply chain. The resulting model will not maximize profits in one region but minimize the overall cost of the biodiesel supply chain for regional welfare. A model development also analyzes the critical parameters that affect the final costs. The problem discussed is expressed by mixed-integer linear programming (MILP) with the optimization process using the CPLEX solver. This study finds that Indonesia has been promoting biodiesel commercialization using national strategy by make government regulation mandatory blending and providing financial incentives. The status of palm oil-based biodiesel policies together with their associated challenges and opportunities have been analyzed. Simulation result shows that increasing palm oil production capacity is insufficient in order to ensure the success of the government program. Simulations indicate that the biodiesel program will operate optimally if two prerequisites are satisfied; first, that the levy policy adopted is not dependent upon crude palm oil (CPO) prices and, second, that the provision of incentives is limited solely to those required by the prevailing Public Service Obligation (PSO). From the optimization results, it was found that to meet domestic biodiesel needs with minimum supply chain costs, the capacity of the biodiesel industry can be developed in the areas of Central Kalimantan, West Kalimantan, South Kalimantan, East Kalimantan, and North Sulawesi. The optimal blending location is at 23 scattered TBBM points.