Opportunities to Optimize the Palm Oil Supply Chain in Sumatra, Indonesia

Fumi Harahap, Sylvain Leduc, Sennai Mesfun, Dilip Khatiwada, Florian Kraxner and Semida Silveira
Additional contact information
Fumi Harahap: Energy and Climate Studies Unit, Department of Energy Technology, KTH Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Sylvain Leduc: International Institute for Applied Systems Analysis (IIASA), A-2361 Laxenburg, Austria
Sennai Mesfun: International Institute for Applied Systems Analysis (IIASA), A-2361 Laxenburg, Austria
Dilip Khatiwada: Energy and Climate Studies Unit, Department of Energy Technology, KTH Royal Institute of Technology, SE-100 44 Stockholm, Sweden
Florian Kraxner: International Institute for Applied Systems Analysis (IIASA), A-2361 Laxenburg, Austria
Semida Silveira: Energy and Climate Studies Unit, Department of Energy Technology, KTH Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Energies, 2019, vol. 12, issue 3, 1-24

Abstract: Significant amounts of biomass residues were generated in Indonesia. While untreated, residues emit greenhouse gases during the decomposition process. On the other hand, if efficiently utilized, these residues could be used to produce value-added products. This study investigates opportunities for harnessing the full potential of palm oil residues (i.e., empty fruit bunches, kernel shells, fiber, and mill effluent). As far as we are aware, the study is the first attempt to model the palm oil supply chain in a geographically explicit way while considering regional infrastructures in Sumatra Island, Indonesia. The BeWhere model, a mixed integer linear programming model for energy system optimization, was used to assess the costs and benefits of optimizing the regional palm oil supply chain. Different scenarios were investigated, considering current policies and new practices leading to improved yields in small-scale plantations and power grid connectivity. The study shows that a more efficient palm oil supply chain can pave the way for the country to meet up to 50% of its national bioenergy targets by 2025, and emission reductions of up to 40 MtCO 2 eq/year. As much as 50% of the electricity demand in Sumatra could be met if residues are efficiently used and grid connections are available. We recommend that system improvements be done in stages. In the short to medium term, improving the smallholder plantation yield is the most optimal way to maximize regional economic gains from the palm oil industry. In the medium to long term, improving electricity grid connection to palm oil mills could bring higher economic value as excess electricity is commercialized.

Keywords: oil palm; palm oil mills; palm oil residues; value-added products; supply chains optimization; spatial analysis; techno-economic analysis (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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