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Diffusion of biomass gasification for rural electrification: theimpact of government incentives and subsidies in attracting private investor in Indonesia
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Entrepreneurship and innovation.
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Entrepreneurship and innovation.
2014 (English)Independent thesis Advanced level (degree of Master (Two Years)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The recent challenges in Indonesia include energy crisis and waste management which rapidly increases call for effective energy governance. The lack of energy access especially electricity is pressing. The electrification ratio is only 76.5% and 14.7 million households still lack of electricity. Currently the issue of waste management has also become crucial in Indonesia as it is an agricultural country. Agricultural products and livestock are primary commodities leaving large amount of biomass residues. In this situation, biomass gasification technology can be considered as a viable solution to resolve this energy and waste problems. Biomass power plants utilize agricultural waste and convert it to renewable electricity. Hence, this thesis mainly discuss about biomass gasification as a means for rural electrification in Indonesia.

The estimated potential for using biomass to generate electricity is 49,810 MW, but the actual installed capacity is only 3.2 %, which emphasizes the large potential to increase the share of electricity generated from biomass. To this end, good collaboration between private investor and government is needed and the government's role is crucial to attract private investor to invest in rural electrification based on biomass gasification. Thus, we analyze government incentives and subsidies related to biomass gasification. Quantitative research will be used to investigate the effect of government subsidies and incentives in biomass gasification using financial modeling. We select only the incentives and subsidies that are relevant for analyzing the competitiveness of biomass gasification used for rural electrification, for instance import duty free, VAT free, and implementation of investment tax credit. The implementation of Clean Development Mechanism (CDM) and reallocating of fuel and electricity subsidies is analyzed. Moreover, the barriers for the diffusion of biomass gasification technology are also identified.

Our aim is to determine the economics of biomass gasification technology and to investigate government incentives and subsidies that help improving its competitiveness while fostering its diffusion. The results depict the fact that various incentives and subsidies from the government, especially the reallocation of fuel subsidy and electricity subsidy allow improving the competitiveness and fostering the diffusion of biomass gasification technology for rural electrification in Indonesia.

Place, publisher, year, edition, pages
2014. , 51 p.
Keyword [en]
incentives, subsidies, government, policy, biomass
National Category
Economics and Business
URN: urn:nbn:se:kth:diva-147683OAI: diva2:731658
Available from: 2014-07-02 Created: 2014-07-02 Last updated: 2014-07-02Bibliographically approved

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