OPPORTUNITIES AND CHALLENGES IN BIOGAS DEVELOPMENT IN INDONESIA. Paul Butarbutar South Pole Carbon Asset Management Ltd

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OPPORTUNITIES AND CHALLENGES IN BIOGAS DEVELOPMENT IN INDONESIA Paul Butarbutar South Pole Carbon Asset Management Ltd

Overview Introduction South Pole Carbon Biogas potentials in Indonesia Existing regulation Key challenges and related opportunities Summary 2

South Pole Carbon developing solutions worldwide California Mexico City Medellin Head office Satellite office Local presence Zurich Beijing Taipei New Delhi Hanoi Kampala Bangkok Jakarta 2006: Incorporation in Zurich / Switzerland 2012: present on all continents 2011 and 2012: Best Project Developer** Swiss Social Entrepreneur of the Year 2011*** 80 carbon professionals from 22 countries Projects in over twenty countries Specialized in highquality Gold Standard Johannesburg Sydney* as of May 2012 *Majority stake in Climate Friendly ** Environmental Finance s Voluntary Carbon Market Survey 2011, and again 2012; *** Schwab Foundation/WEF 3

Largest premium projects portfolio 200 contracted projects in over 20 countries Total volume: 60 million tco 2 e until 2012 50% market share of Gold Standard projects Projects in advanced development: 30 million tco 2 e until 2012 from a broad project pipeline and from the most important project types Renewable Energy (Biomass, Hydro, Wind, Geothermal) Waste Treatment (liquid and solid) Energy Efficiency Reduction of Waste Gas (Oil, Gas and Chemical Industries) Forestry Programmatic Approach (PoAs) 4

Carbon projects & sustainable development Generation of co-benefits for the local communities qualify projects for the Gold Standard whose credits fetch a premium in the carbon markets. First ever Gold Standard carbon credits Biomass Malavalli / India Leadership Position on Gold Standard Registry 45 projects listed. Positive social impact on hundreds of mostly rural communities improving the lives of many thousands of people 5

South Pole Carbon Carbon Credits Emission Reduction Projects Climate Friendly Solutions New Carbon Markets Carbon Credits: From extensive pipeline of projects to help clients reduce their carbon emissions and meet sustainability targets. Emission Reduction Projects: Development and management of projects in collaboration with technology providers and project developers. Climate Friendly Solutions: Concrete solutions to help enhance the sustainability profile of organizations such as Insetting (i.e. development of own projects) and GoldPower (i.e. a worldwide renewable energy label). New Carbon Markets: expertise and advisory services using its knowledge of EU-ETS, CDM and voluntary carbon markets. 6

Overview Introduction South Pole Carbon Biogas potentials in Indonesia Existing regulation Key challenges and related opportunities Summary 7

Oil palm plantation in Indonesia 8

Biogas potentials utilizing POME 25 POPL 980 ton 26 POPL 1645 ton 92 POPL 3815 ton 140 POPL 6660 ton FFB/Ho ur 42 POPL 2245 ton 1 POPL 40 ton 65 POPL 5475 ton 29 POPL 1545 ton 6 POPL 260 ton FFB/Hou r 7 POPL 590 ton 4 POPL 360 ton 3 POMs 140 TPH 19 POPL 990 ton 16 POPL 1235 ton 58 FFB/Ho POPL ur 3555 ton FFB/Ho ur 3 POPL 260 ton 10 POPL 375 ton 1 POPL 60 ton 1 POPL 30 ton 43 POPL 3100 ton FFB/Hou r 15 POPL 770 ton 2 POPL 150 ton Sumber: BPS dan Kementerian Pertanian Tahun 2009

Palm oil mills in Indonesia Sumatra: Mills : 429 Capacity t/h : 21,540 10

Energy potentials of POME Potentially reduce GHG emission of about 10,8 mio tones of CO2/year from POME component and about 4.2 mio tones of Cos/year from electricity component 11

Overview Introduction South Pole Carbon Biogas potentials in Indonesia Existing regulation Key challenges and related opportunities Summary 12

Pres. Regulation No. 5/2006 on National Energy Policy The Main Target : Energy Elasticity less than 1 at 2025 Optimizing Primary Energy Sources Gas 30% Energy Mix (2025) Coal 33% Oil 20% NRE,17% Biofuel 5% Geothermal 5% Biomass, Nuclear, Hydro Power, Solar, Wind Power 5% Liquefaction Coal 2%

Indonesian Sustainable Pam Oil - ISPO Agriculture Minister Regulation No. 19/Permentan/OT.140/3/2011 Oil palm plantation/palm oil mill have to be ISPO certified latest 31 December 2014 Conditions of ISPO-certified plantation: 3.6. GHG emission mitigation, includes: Technical Guidelines/SOP for GHG mitigation available; GHG emission inventory conducted; Records on the process of land-use trajectory available; Records on GHG emission reduction activity available; POME utilization to generate biogas could be part GHG emission mitigation 14

MEMR Regulation No. 4/2012 on FIT No. Medium Voltage Energy Installed Capacity Tariff 1. Biomassa Up to 10 MW Rp. 975,- / kwh X F 2. Biogas Up to 10 MW Rp. 975,- / kwh X F Non MSW Remark 3. Municipality Solid Waste Up to 10 MW Rp. 1050,- / kwh Zero waste *) 4. Municipality Solid Waste Up to MW Rp. 850,- / kwh Landfill *) Low Voltage 1 Biomassa s.d 10 MW Rp. 1.325,- / kwh X F 2 Biogas s.d 10 MW Rp. 1.325,- / kwh X F Non sampah kota 3 Municipality Solid Waste s.d 10 MW Rp. 1.398,- / kwh Zero waste *) 4 Municipality Solid Waste s.d 10 MW Rp. 1.198,- / kwh Landfill *) F factor is based on the project location: Jawa, Bali, Sumatera : F = 1 Kalimantan, Sulawesi, NTB dan NTT : F = 1,2 Maluku dan Papua : F = 1,3 Notes : *) in accordance with the Law No. 18/2008 on waste management

Overview Introduction South Pole Carbon Biogas potentials in Indonesia Existing regulation Key challenges and related opportunities Summary 16

Challenges Most of palm oil mills are located in the remote area, so that it would be too costly to build transmission line to the nearest grid Palm oil mills are energy self-sufficient; only if you want to build other facility (e.g. KCP) then you might build biogas plant to provide additional electricity Performance of biogas projects in Indonesia are not so encouraging to invest in (based on benchmark study conducted in collaboration with GIZ 17

Biogas CDM projects in Indonesia 18

Performance of CDM biogas projects Out of 10 issued biogas project, in term of CER issuance: 3 project performed its CERs expected values in PDD 2 projects performed between 75% - 100% of PDD values 3 projects performed more than 50% - 75% of PDD values 2 projects performed less than 50% of PDD values 19

Opportunities ISPO and FIT provide sufficient potentials for development of biogas projects Some investors are ready to invest money and bring technology Carbon market still a potential to get additional revenue South Pole has registered POA on biogas to electricity in Indonesia This POA can be expanded to Malaysia and other region (South Pole has already expanded 2 POAs to Malaysia: Co-composting and Renewable Energy 20

POA in nutshell Activitites coordinated voluntarily by private sector or government: Coordination and implementation of policy/standard or certain objectives that wants to be achieved; Activitites aimed at GHG emission reduction or increase carbon sequestration by forest; Activities, which is additional and would not happen without PoA; Registering CDM project activities (CPAs) without limitation 2

Remark: 1. White: responsibility of project owner and partner 2. Green: responsibility of DNA 3. Blue: responsibility of coordinating entity 4. Pink: responsibility of DOE 5. Yellow: responsibility of EB POA cycle Project Idea Note (PIN) Approval 1. PoA Project Design Document (PoA PDD) 2. CPA DD Validation: PoADD-CPADD Monitoring report Inclusion-DOE consistency checking Registration: PoADD-CPADD Verification Issuance of CERs

Summary Treatment of waste in to biogas can present a good business opportunity that not only generate financial profit, but also bring environmental benefit FIT is already established in Indonesia, which guarantee sufficient tariff for connection with the electricity grid Need to use technology that can improve the efficiency of waste treatment 23

Terima kasih atas perhatian anda! Look forward to helping your company materialize its carbon assets www.southpolecarbon.com Graha Iskandarsyah Lt. 2 Jl. Iskandarsyah 66C Jakarta 12160 Phone +62 21 7207 567 Fax +62 21 7206 039 Mobile +62 811 99 303 99 p.butarbutar@southpolecarbon.com 24