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Policy Impact on Economic Viability of Biomass Gasification Systems in Indonesia

Original scientific paper

Journal of Sustainable Development of Energy, Water and Environment Systems
Volume 4, Issue 1, March 2016, pp 56-68
DOI: https://doi.org/10.13044/j.sdewes.2016.04.0006
Pranpreya Sriwannawit1,2 , Prashanti A. Anisa3, Ashack M. Rony1
1 KTH Royal Institute of Technology, Department of Industrial Economics and Management, Lindstedtsvägen 30, Stockholm, 10044, Sweden
2 National Science Technology and Innovation Policy Office, 31 Chamchuri
3 Indonesia Investment Coordinating Board, Directorate of Investment Licenses, Jl. Gatot Subroto Kav.44, Jakarta, 12910, Indonesia


Indonesia is facing challenges on the lack of electricity access in rural areas and the management of agricultural waste. The utilization of waste-to-energy technology can help in mitigating these issues. The aim of this paper is to assess the economic viability of a biomass gasification system for rural electrification by investigating its competitiveness in relation to various government supports. Financial modelling is applied to calculate Net Present Value (NPV), Internal Rate of Return (IRR), and Levelized Cost of Electricity (LCOE). NPV and IRR results indicate that biomass gasification is an economically viable option when appropriate financial government supports exist. LCOE result indicates that biomass gasification system is already more economically competitive compared to diesel generator even without additional support but it is less competitive compared to the national electricity grid tariff. In conclusion, the biomass gasification system is an economically viable option for rural electrification in Indonesian context.

Keywords: Renewable energy, Waste management, Waste-to-energy, Gasification, Feasibility, Incentive, Subsidy.

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