Indonesia sets new market price index for biofuels

Indonesia’s Ministry of Energy and Natural Resources is close to finalising the new market price index for biodiesel and bioethanol, and will implement the new pricing on 1 March 2015. According to Dadan Kusdiana, Director of bioenergy at the Energy Ministry, the change will not be retroactive.

The biodiesel market price will be calculated using the price of crude palm oil (CPO) export benchmark each month with conversion cost plus decent margins. This is a departure from the current formula, which is based on diesel’s Mean of Platts Singapore.

Indonesia’s House of Representatives also recently approved biofuel subsidies, with biodiesel subsidised by IRD4,000 (USD0.31) per litre and bioethanol by IDR3,000 (USD0.23) per litre.

Suryadharma, Deputy Chairperson of the Indonesian Renewable Energy Society, said that when the government established fixed pricing for biofuels in 2014, many biofuel producers incurred losses. He said it was necessary to subsidize biofuels to compete with petroleum-based products. Additionally, he said the subsidy goes to local producers and the society, “since palm oil is mostly national and people’s private business.”

The government will also continue with its mandatory blending requirement of 10% biodiesel.