As the largest palm oil producer in the world, Indonesia has the opportunity to develop biodiesel from excess palm oil production. The government is pushing forward the production of biodiesel by inviting private sectors to develop the biodiesel industry. However, the unattractive biodiesel market price causing a not promising trend. One idea to upswing the downtrend is to establish an integrated biodiesel industry covering the whole production chains, from palm plantation, crude palm oil (CPO) factory to biodiesel factory. The idea is based on premise that from an integrated chain, the biodiesel producer can benefit from considerably lower CPO production cost. To evaluate this idea, we need to measure objectively the attractiveness of biodiesel as an investment, by developing a detailed bottom up financial model. Based on our model, development of an integrated biodiesel industry is still not financially feasible with the current diesel market price, shown by two major financial indicators: the internal rate of return and net present value. To achieve the national target, government will have to provide support for the industry by developing a strategic plan taking into account the important factors shown by the model: land productivity, extraction rate and the dangerous delay effects.
|Number of pages||13|
|Journal||International Journal of Industrial and Systems Engineering|
|Publication status||Published - Jul 2012|
- Financial model
- Renewable energy