Biofuel euphoria ends in vain

Biofuel euphoria ends in vain

5 February 2009

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Indonesia — A grave lack of leadership and a deepening global economic meltdown have resulted in the development of biofuels being put on the back burner.

In a two-day seminar that kicked off on Wednesday, experts voiced concern over the government’s failure in turning the “euphoria” of the potential of biofuel development into concrete and fruitful action.

“For some reason, the euphoria surrounding biofuel development unfortunately did not materialize into bold and real activities that responded to the government’s intentions,” Hilmi Panigoro, chairman of the Indonesian Renewable Energy Society (IRES/METI), said.

“Instead, we now have a controversial situation, which has further confused and discouraged investors,” said Hilmi, whose family founded the Medco Group which is involved in the oil and gas business.

In 2006, the government issued strategic policies on the development of biofuels to reduce dependency on fossil fuels while at the same time strengthen national energy security.

On the back of skyrocketing global oil prices in early 2008, the development of renewable energy had spurred “euphoria” among the public as well as the private sector about the bright prospects of the biofuel industry in Indonesia.

However, according to Hilmi, there were problems with the clarity of the government’s direction and ability to effectively provide leadership, to ensure and drive all the related stakeholders to take action.

“There was not a clear and consistent strategic plan, which should have been followed up with real action,” he said. The now-defunct National Team for Biofuel Development, for example, had no authority to enforce policy other than merely coordinate between the related ministries.

Coordination in biofuel development is now under the Office of the Coordinating Minister for the Economy, which is also toothless in forcing the related ministries to get serious about supporting the policy.

“Biofuel development is just floating around without leadership. The current global economic crisis has even forced the related ministries away from the program,” Unggul Priyanto, director of energy resources development at the Agency of Assessment and Application of Technology (BPPT), said.

The Energy and Mineral Resources Ministry, Agriculture Ministry, Forestry Ministry, Industry Ministry and Finance Ministry are critical to the success of biofuel development.

“They are now busy cushioning the impact of the crisis. Biofuel development has been put at the bottom of their list of priorities,” Unggul said.  He also said uncertainty about the biofuel pricing policy versus subsidized fossil fuels had also discouraged businesses to enter the sector.

Declining global crude oil prices has made the development of biofuels less attractive, given the high cost involved in producing biofuel. The government mandated that by 2025, biofuel consumption must contribute at least 5 percent to the national energy portfolio, from less than 1 percent currently.

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