Indonesia’s ambitious biodiesel plan faces complex challenges

A key element of Indonesia’s energy transition, the mandate for a 50% palm oil-based biodiesel blend (B50), is under threat from fundamental challenges, according to new energy and carbon markets platform Reccessary.

Senior officials at the Ministry of Energy and Mineral Resources (ESDM) have confirmed ongoing concerns about the adequacy of the feedstock base and the necessary production capacity, casting doubt on the 2026 launch of the program.

ESDM Director General for New and Renewable Energy Enya Listiani Dewi has identified several critical bottlenecks in the implementation of the plan going forward. First and foremost is the capacity shortage: B50 requires five large-scale plants to produce fatty acid methyl ester (FAME), a key component of biodiesel. Only three are currently under construction. Logistics and distribution are also a major issue, especially in the eastern regions of the country, making it difficult to implement the mandate at the national level.

There are also questions about the uncertainty of raw materials. The government continues to calculate the exact needs for palm oil to produce the planned 19.7 million kiloliters of biodiesel annually. Earlier it became known that the B50 biofuel mandate could additionally increase palm oil demand by 3 million tons. The potential demand growth will amount to an additional 6.2% of the projected production volume of 48.2 million tons. The B50 initiative is a logical continuation of the course on a gradual increase in the share of the biocomponent (B35 → B40 → B50), designed to reduce the country’s dependence on diesel imports and reduce carbon emissions. However, it overlaps with the alarming dynamics in the raw materials sector. The forecast for 2024/25 (48.26 million tons) indicates a decrease of 1.81 million tons compared to 2023/24. The yield remains highly dependent on the vagaries of the climate (drought/over-wetting).

The Indonesian Palm Oil Association (GAPKI) is concerned that with production stagnating and domestic demand growing, resources could be diverted from critical reforestation programs and increasing yields on existing plantations. This calls into question the environmental feasibility of the B50 and could undermine Indonesia’s long-term goals to decarbonize the economy, the agency notes.

Tags: Indonesia, palm oil, biofuel