IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v11y2018i3p504-d133680.html
   My bibliography  Save this article

Economic Analysis of Diesel-Fuel Replacement by Crude Palm Oil in Indonesian Power Plants

Author

Listed:
  • Petr Procházka

    (Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences Prague, Kamýcká 129, 169 21 Prague 6, Czech Republic)

  • Vladimír Hönig

    (Department of Strategy, Faculty of Business Administration, University of Economics, Prague, W. Churchill Sq. 1938/4, 130 67 Prague 3, Czech Republic)

Abstract

Indonesia needs to find an alternative fuel to substitute diesel in their power plants in order to reduce the use of nonrenewable energy sources. The Indonesian government has a target to reduce oil fuel consumption while improving the efficiency of energy utilization. Crude palm oil is proposed to be used for this substitution. In this paper, the authors conduct an economic analysis of the replacement of diesel by crude palm oil. To predict future prices, a time series analysis is conducted using AutoRegressive Integrated Moving-Average method. A financial analysis of a specific project (0.75-MW power plant) is conducted using static financial indicators (payback period, return on investment). Results show that replacing diesel with crude palm oil may be profitable. This is especially true for the proposed prospects of diesel price evolution. Analysis shows that the price of crude oil, which is the main factor in the pricing of diesel, may go up. Also, recently Indonesian currency depreciated against the US dollar, which also implies a higher cost of diesel.

Suggested Citation

  • Petr Procházka & Vladimír Hönig, 2018. "Economic Analysis of Diesel-Fuel Replacement by Crude Palm Oil in Indonesian Power Plants," Energies, MDPI, vol. 11(3), pages 1-12, February.
    • Handle: RePEc:gam:jeners:v:11:y:2018:i:3:p:504-:d:133680
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/11/3/504/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/11/3/504/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter Warr, 2008. "The transmission of import prices to domestic prices: an application to Indonesia," Applied Economics Letters, Taylor & Francis Journals, vol. 15(7), pages 499-503.
    2. Nasrin Aghamohammadi & Stacy Simai Reginald & Ahmad Shamiri & Ali Akbar Zinatizadeh & Li Ping Wong & Nik Meriam Binti Nik Sulaiman, 2016. "An Investigation of Sustainable Power Generation from Oil Palm Biomass: A Case Study in Sarawak," Sustainability, MDPI, vol. 8(5), pages 1-19, April.
    3. A. K. Azad, 2017. "Biodiesel from Mandarin Seed Oil: A Surprising Source of Alternative Fuel," Energies, MDPI, vol. 10(11), pages 1-22, October.
    4. Yin Song & Varun Penmatsa & Chunlei Wang, 2014. "Modeling and Simulation of Enzymatic Biofuel Cells with Three-Dimensional Microelectrodes," Energies, MDPI, vol. 7(7), pages 1-16, July.
    5. Barnwal, B.K. & Sharma, M.P., 2005. "Prospects of biodiesel production from vegetable oils in India," Renewable and Sustainable Energy Reviews, Elsevier, vol. 9(4), pages 363-378, August.
    6. Demirbas, Ayhan, 2007. "Importance of biodiesel as transportation fuel," Energy Policy, Elsevier, vol. 35(9), pages 4661-4670, September.
    7. Azad, A.K. & Rasul, M.G. & Khan, M.M.K. & Sharma, Subhash C. & Hazrat, M.A., 2015. "Prospect of biofuels as an alternative transport fuel in Australia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 331-351.
    8. Ian W. H. Parry & Margaret Walls & Winston Harrington, 2007. "Automobile Externalities and Policies," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 373-399, June.
    9. Murphy, Fionnuala & McDonnell, Kevin, 2017. "Investigation of the potential impact of the Paris Agreement on national mitigation policies and the risk of carbon leakage; an analysis of the Irish bioenergy industry," Energy Policy, Elsevier, vol. 104(C), pages 80-88.
    10. Bhuiya, M.M.K. & Rasul, M.G. & Khan, M.M.K. & Ashwath, N. & Azad, A.K., 2016. "Prospects of 2nd generation biodiesel as a sustainable fuel—Part: 1 selection of feedstocks, oil extraction techniques and conversion technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1109-1128.
    11. Bazmi, Aqeel Ahmed & Zahedi, Gholamreza & Hashim, Haslenda, 2011. "Progress and challenges in utilization of palm oil biomass as fuel for decentralized electricity generation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(1), pages 574-583, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gheorghe Lazaroiu & Lucian Mihaescu & Gabriel Negreanu & Constantin Pana & Ionel Pisa & Alexandru Cernat & Dana-Alexandra Ciupageanu, 2018. "Experimental Investigations of Innovative Biomass Energy Harnessing Solutions," Energies, MDPI, vol. 11(12), pages 1-18, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abul Kalam Azad & Julian Adhikari & Pobitra Halder & Mohammad G. Rasul & Nur M. S. Hassan & Mohammad M. K. Khan & Salman Raza Naqvi & Karthickeyan Viswanathan, 2020. "Performance, Emission and Combustion Characteristics of a Diesel Engine Powered by Macadamia and Grapeseed Biodiesels," Energies, MDPI, vol. 13(11), pages 1-19, May.
    2. A. K. Azad, 2017. "Biodiesel from Mandarin Seed Oil: A Surprising Source of Alternative Fuel," Energies, MDPI, vol. 10(11), pages 1-22, October.
    3. Azad, A.K. & Rasul, M.G. & Khan, M.M.K. & Sharma, Subhash C. & Mofijur, M. & Bhuiya, M.M.K., 2016. "Prospects, feedstocks and challenges of biodiesel production from beauty leaf oil and castor oil: A nonedible oil sources in Australia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 302-318.
    4. Doppalapudi, A.T. & Azad, A.K. & Khan, M.M.K., 2021. "Combustion chamber modifications to improve diesel engine performance and reduce emissions: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 152(C).
    5. Silitonga, A.S. & Atabani, A.E. & Mahlia, T.M.I. & Masjuki, H.H. & Badruddin, Irfan Anjum & Mekhilef, S., 2011. "A review on prospect of Jatropha curcas for biodiesel in Indonesia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(8), pages 3733-3756.
    6. Andres Quintero, Julian & Ruth Felix, Erika & Eduardo Rincón, Luis & Crisspín, Marianella & Fernandez Baca, Jaime & Khwaja, Yasmeen & Cardona, Carlos Ariel, 2012. "Social and techno-economical analysis of biodiesel production in Peru," Energy Policy, Elsevier, vol. 43(C), pages 427-435.
    7. Bhuiya, M.M.K. & Rasul, M.G. & Khan, M.M.K. & Ashwath, N. & Azad, A.K., 2016. "Prospects of 2nd generation biodiesel as a sustainable fuel—Part: 1 selection of feedstocks, oil extraction techniques and conversion technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1109-1128.
    8. Shameer, P. Mohamed & Ramesh, K., 2018. "Assessment on the consequences of injection timing and injection pressure on combustion characteristics of sustainable biodiesel fuelled engine," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 45-61.
    9. Rozina, & Asif, Saira & Ahmad, Mushtaq & Zafar, Muhammad & Ali, Nsir, 2017. "Prospects and potential of fatty acid methyl esters of some non-edible seed oils for use as biodiesel in Pakistan," Renewable and Sustainable Energy Reviews, Elsevier, vol. 74(C), pages 687-702.
    10. Zhang, Long & Bai, Wuliyasu, 2021. "Sustainability of crop–based biodiesel for transportation in China: Barrier analysis and life cycle ecological footprint calculations," Technological Forecasting and Social Change, Elsevier, vol. 164(C).
    11. Balaji, G. & Cheralathan, M., 2015. "Experimental investigation of antioxidant effect on oxidation stability and emissions in a methyl ester of neem oil fueled DI diesel engine," Renewable Energy, Elsevier, vol. 74(C), pages 910-916.
    12. Bhuiya, M.M.K. & Rasul, M.G. & Khan, M.M.K. & Ashwath, N. & Azad, A.K. & Hazrat, M.A., 2016. "Prospects of 2nd generation biodiesel as a sustainable fuel – Part 2: Properties, performance and emission characteristics," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1129-1146.
    13. Abul Kalam Azad & Mohammad Golam Rasul & Subhash Chandra Sharma & Mohammad Masud Kamal Khan, 2017. "The Lubricity of Ternary Fuel Mixture Blends as a Way to Assess Diesel Engine Durability," Energies, MDPI, vol. 11(1), pages 1-15, December.
    14. Motasemi, F. & Ani, F.N., 2012. "A review on microwave-assisted production of biodiesel," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 4719-4733.
    15. Mofijur, M. & Masjuki, H.H. & Kalam, M.A. & Hazrat, M.A. & Liaquat, A.M. & Shahabuddin, M. & Varman, M., 2012. "Prospects of biodiesel from Jatropha in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 5007-5020.
    16. Azad, A.K. & Rasul, M.G. & Khan, M.M.K. & Sharma, Subhash C. & Hazrat, M.A., 2015. "Prospect of biofuels as an alternative transport fuel in Australia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 331-351.
    17. Ravanipour, Masoumeh & Hamidi, Ali & Mahvi, Amir Hossein, 2021. "Microalgae biodiesel: A systematic review in Iran," Renewable and Sustainable Energy Reviews, Elsevier, vol. 150(C).
    18. Sudalai, S & Rupesh, K J & Devanesan, M.G & Arumugam, A, 2023. "A critical review of Madhuca indica as an efficient biodiesel producer: Towards sustainability," Renewable and Sustainable Energy Reviews, Elsevier, vol. 188(C).
    19. Bukkarapu, Kiran Raj & Krishnasamy, Anand, 2022. "A critical review on available models to predict engine fuel properties of biodiesel," Renewable and Sustainable Energy Reviews, Elsevier, vol. 155(C).
    20. Shahid, Ejaz M. & Jamal, Younis, 2011. "Production of biodiesel: A technical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(9), pages 4732-4745.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:11:y:2018:i:3:p:504-:d:133680. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.