Indonesian delegation visits Austria to learn about modern bioenergy

The Austrian Federal Economic Chamber (Aussen- wirtschaft Österreich) invited a delegation of Indonesian media people to Austria last month to gain an insight into that country's experiences in developing its bioenergy sector -- an area that the Indonesian government is giving priority to in an effort to reduce the country's reliance on fossil fuels. Amongst them was The Jakarta Post's Urip Hudiono who report on his trip. The tour included visits to a number of bioenergy-related projects in the Austrian capital, Vienna, and in the provinces. In an accompanying piece, Hudiono looks at which technologies Indonesia could borrow from Europe in order to leapfrog towards a modern bioenergy future.

In the late 1980s, the town of Gssing was literally a forsaken outpost at the edge of Western Europe. Bordering the Cold War's "Iron Curtain" with Hungary, the wooded area in the southern part of Austria's easternmost Burgenland state was a cul-de-sac, making it difficult for the local economy to develop. Many residents chose to move to Vienna and other cities to seek better lives.

Fortunately, all this changed when - apart from the end of the Cold War - the local community came up with the idea of building a thermal energy plant for processing waste wood from the local timber industry into heat and electricity for the district, which has a population of 27,000. The idea struck a chord with the Austrian federal government, which - having learned its lesson from the 1970s oil crisis - has consistently encouraged the use of alternative energy.

So, in 1991 the plant was built, with the federal government providing 40 percent of the €11 million (US$13.2 million) cost. Together with the European Union, it also set up the European Center for Renewable Energy (Europäisches Zentrum für Erneuerbare Energie) to manage the project and develop other sustainable energy resources. In 2001, another plant was built - this time a biogas one - of which 60 percent of the €20.3 million construction cost was subsidized by the federal government.

The two plants can produce a total 4.5 megawatts (MW) of electricity for the heating of homes in the district, and supply 2MW to Austria's national grid at a competitive price of 16 eurocents per kilowatt-hour (kWh). Pilot projects in state-of-the-art photovoltaic and fuel-cell power generation technology, as well as biomass-to-liquid (BTL) fuel, have also commenced recently.

"The community's cooperation in the bioenergy project has brought tremendous added-value to the region. Apart from now being self-sufficient in energy, the local economy has also developed agroindustry and ecotourism sectors," project coordinator Alexandra Kopitar said. In concrete terms, Gssing has seen 50 new companies established, 1,000 jobs created, and 13 million euros in annual turnover produced by the project.

Just some 50 kilometers to the southwest, at Mureck on the Austrian-Slovenian border in the state of Styria, a similar bioenergy success story has unfolded:
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Pinched by rising fuel prices, local farmers there resorted to using their rapeseed crops -- the oil from which was formerly used primarily for animal feed and vegetable oil production -- to produce biodiesel to fuel their tractors and to serve as heating oil. An 8.4-million-euro biodiesel plant was built in 1989, with half of the cost being paid for by the federal government.

The Steierisch Energie und Eiweiáerzegung Genossenschaft (SEEG) plant now produces up to seven million liters of biodiesel per year, after an upgrade in 1993 enabled it to process used cooking oil collected from households in the district. This is more than enough to supply the needs of the local public transportation bus fleet. Its sister 6MW Nahw„rme biogas plant and the 1MW ™kostrom power plant -- built in 1998 and 2003, respectively -- further expanded the SEEG into a bioenergy industrial complex of its accord, providing most of the district's heating and electricity needs.

Putting it in figures, Mureck saves nearly 1 million euros in fuel costs each year, and prevents the addition of another 13 million kilograms of carbon dioxide to the global warming problem, thanks to its bioenergy plants.

Gssing and Mureck are only two examples of Austria's thriving bioenergy sector, with many other rural areas in the nine-state country running either biogas or biodiesel plants of their own. The result? Austria's 83,000 biomass installations and 13 biodiesel plants come just behind its hydro and wind-power sectors in contributing to the country's energy mix.

So what tips can Indonesia -- which recently unveiled an ambitious plan to develop its bioenergy sector -- learn from Austria, which, like many other European countries, has resorted to biomass and biofuels to diversify its energy sources, while simultaneously helping clean up the environment?

The Indonesian government wants to see 17 percent of the nation's energy mix come from renewable resources -- including bioenergy -- by 2025, thus reducing the country's costly dependence on oil. It is hoped that this will be achieved through the use of 6 million hectares of land across the archipelago for cultivating biofuel crops -- particularly oil palm, jatropha and sugar cane -- and the construction of 11 biodiesel and a number of biomass plants by 2010.

As additional benefits, the government sees increased investment, export revenues and some 3.5 million additional jobs being produced by the bioenergy projects.

Energy and Mineral Resources Minister Purnomo Yusgiantoro discussed Indonesia's plans with Austrian bioenergy industry players during a recent visit to Europe, seeking to drum up investment in the sector.

Indeed, investment and financial support are crucial if one looks at the examples of Gssing and Mureck. Austrian industry players pointed out, however, that the cost of such investments in Austria was much higher due to Europe's higher raw material, labor and construction costs, adding that such costs would be significantly lower in Indonesia.

The Indonesian government is planning to offer a number of bioenergy development projects as public-private partnership schemes. These are expected to require some Rp 100 trillion (US$10.8 billion) in investment. The government will also set aside some Rp 13 trillion to subsidize the repayment of interest on loans for biofuel-related ventures.

The government could also combine Indonesia's program for the building of biomass and biodiesel plants with its recently launched National Empowerment Program, which provides funding for locally initiated infrastructure development projects in rural areas.

A firm commitment to all this, and an integrated strategy mapping out how the bioenergy sector will be developed are essential to the success of the government's program, along with clear pricing mechanisms and fiscal incentives for investors.

In Austria, a combination of technology and econometrics is applied to every bioenergy project to ensure its efficiency and feasibility, with the federal government providing supporting policies to ensure sustainability.

Excess power produced from biogas plants, for example, is fed into Austria's national grid at prices that are competitive yet realistic in allowing projects to break even within a maximum of 10 years.

Austria's federal government leaves biofuel prices to the market, but encourages the existence of a sustainable market for rapeseed oil to serve as a buffer against instances when crude prices decline, thus making biodiesel less competitive. The federal government also provides tax incentives of up to 35 percent for firms conducting research and development work into more efficient bioenergy technologies.

Meanwhile, regarding strategies for the development of biodiesel plants, Werner K”rbitz from the Austrian Biofuels Institute pointed out how important it was for Indonesia to build flexible multifeed plants that produced high-quality biodiesel so as to achieve cost efficiencies over the long run.

"It's always better to invest a bit more for such plants. A 10 percent additional investment for plant construction only affects less than 5 percent of profit, as compared to price swings of the feedstock or biodiesel product," he said, thus highlighting the importance of Indonesia adopting appropriate supply and pricing strategies.

The need for secure feedstock supply was also stressed by Nurhan Ergn from biofuel research firm Energea.

"Biofuel has become an industry now, and the challenges ahead will lie in ensuring feedstock supply, rather than the processing technology," he said.

Ergn added that should Indonesia wish to export its oil-palm and jatropha-based biodiesel, the most prospective markets would be Japan and the Asian region, rather than Europe, which had already almost achieved self-sufficiency with its rapeseed-based biodiesel.

Oil palm-based biodiesel also presented problems when used in cold climates, although Ergn acknowledged the potential of jatropha, which is a non-edible crop that can be grown on non-arable land, therefore avoiding a conflict of interest with the basic human need for food.

There is growing concern in Europe, however, that Indonesia's biofuel ambitions could lead to the destruction of its remaining rain forests in order to provide land for plantations. Should this happen, then Indonesia's development of its bioenergy sector could miss its intended goals, and produce more problems than it solves.