THE HIDDEN STORY BEHIND INDONESIA'S ETHANOL AND SUGARCANE SYSTEM
Author : AM Tris Hardyanto
1. The system was never designed for bioethanol;
it was designed for sugar.
What if the weakness of Indonesia's bioethanol sector is not technological at all
but structural, rooted in a system that was never intended to produce fuel in
the first place?
Indonesia's bioethanol production
paradigm reflects an agricultural and industrial landscape that has long emphasised
sugar above all else. The integration of bioethanol emerged later as an
auxiliary function rather than a core strategic objective. Land-use planning,
cane varietal selection, irrigation systems, labour organisation, and milling
technology were all optimised to maximise sugar yields. As a result, molasses,
the essential feedstock for ethanol fermentation, is treated as a secondary
commodity whose availability fluctuates depending on sugar production cycles.
When sugar supply tightens, molasses is readily diverted to food-grade uses or
exported, leaving ethanol production inconsistent and vulnerable (Lukum et al.,
2024; Kartika et al., 2024).
Structural
dependency reveals a more profound vulnerability. Ethanol plants operate at the
end of the sugar production chain, not as standalone energy assets, leading to
volatile, unreliable output levels (Kartika et al., 2024). In practice,
bioethanol is produced only when sugar surpluses exist, reinforcing its status
as an optional byproduct rather than a strategic renewable fuel. Consequently,
the viability of bioethanol as part of Indonesia's national energy security is weakened
because its supply hinges on dynamics within an entirely different commodity
system (Yuliani et al., 2023).
dynamic points to a larger hidden issue in
Indonesia's renewable energy landscape. Biorefinery models are currently
configured to optimise profit within the sugar sector rather than integrate
energy and agricultural objectives coherently. The system rewards sugar maximisation,
not energy resilience. Yet research consistently shows that sugarcane
processing waste, bagasse and filter cake in particular, could be developed as
sustainable bioethanol feedstocks, reducing reliance on molasses while also
improving environmental performance (Vučurović et al., 2022; Awodi et al.,
2022). The potential exists, but the strategic framing does not.
To move forward, Indonesia requires a
shift in how bioethanol is positioned within national policy and agricultural
economics. Bioethanol must be viewed not as a byproduct of sugar but as a
co-equal product with strategic value for energy diversification, economic
stability, and climate mitigation (Kaletnіk et al., 2021; Yusof et al., 2019). This means that aligning feedstock planning,
pricing policy, mill operations, and investment incentives is necessary to
jointly support sugar production and renewable fuel expansion without competing
with food resources.
If Indonesia wishes to build a resilient future in renewable energy, it must
redesign the system so that bioethanol is not something that happens only when
sugar is abundant but something that is deliberately made possible, planned
for, and protected. The real question is not whether Indonesia can produce
bioethanol, but whether it is ready to rethink the system that decides what is
produced at all.
2. Smallholders bear the burden but do not share
in the value.
The
most striking irony in Indonesia's sugar economy is that the people who grow
the crop shoulder the most significant risks but walk away with the smallest
share of the rewards.
In
the Indonesian sugarcane sector, smallholder farmers cultivate over 70 percent
of the cane, yet they receive only about 20–25 percent of the value generated
along the sugar value chain. The imbalance reveals a system that concentrates
labour, land, and livelihood at the bottom, while financial benefits accumulate
at the top. Smallholders are burdened with rising input costs, especially fertiliser
and hired labour, while their income remains dependent on mill-controlled
pricing and recovery reporting, processes in which transparency is consistently
limited (Suwandari et al., 2025). Payment delays, which can persist for months
after cane delivery, further strain farmers' liquidity, directly affecting
household stability and seasonal planning (Suwandari et al., 2025).
A more
profound inequity lies in how byproducts are treated. Molasses, central to
ethanol production, rarely benefits the farmer who cultivates the cane. Mills
generally retain the full economic value of molasses and other derivatives,
reinforcing a structure where smallholders contribute to system profitability
without being recognised as stakeholders in the energy or industrial outputs
that follow (Suwandari et al., 2025). Even well-intended initiatives such as
the "petani tebu rakyat" scheme, which claims to empower farmers,
have not substantially shifted the dynamic. In practice, smallholders subsidise
the larger sugar economy through low margins and high-risk exposures (Mjonono
et al., 2020).
Restricted
access to market information, price signals, and cost-of-production data
further reinforces smallholders' limited bargaining power. Without clear
visibility, farmers cannot negotiate effectively, plan investments, or evaluate
alternatives. Studies indicate that a lack of information leads to diminished
asset accumulation, making farmers more vulnerable to market fluctuations and
less able to move into value-added or premium market segments (Dlamini et al.,
2022). The result is a value chain in which decision-making authority remains
concentrated among mills, traders, and policymakers, while the producers who
sustain the system are structurally excluded from strategic discussions (Msemwa
et al., 2024).
Intermediaries intensify exclusion by shaping
access to credit, input supply, and market connections. Intermediaries often
gain leverage when information distribution is uneven, preventing smallholders
from securing fair pricing or timely payments (Suwandari et al., 2025). The
pattern is clear: smallholders are central to production but peripheral to
power and profit. They are essential, yet treated as replaceable. Their role is
foundational, yet undervalued.
Behind every sack of sugar and every liter of ethanol lies the labour of
farmers who rarely see the value they generate. The issue is not simply
economic; it is structural and deeply historical. The real question is how long
an industry can remain stable when its foundation is built on those
consistently excluded from its rewards.
3. Molasses is both waste and gold
The story of molasses shows that value is determined by the system that decides
what a material becomes.
Molasses,
often labelled merely as a byproduct of sugar milling, occupies a paradoxical
position in Indonesia's agricultural and energy landscape. On the one hand, it
is considered a byproduct of sugar crystallisation. On the other hand, it is an
essential feedstock for ethanol production, an ingredient in the animal feed
industry, and a high-value export commodity. Dual identity reveals that
molasses holds far greater potential than its traditional classification
suggests. Recent evidence shows that export prices for molasses frequently
exceed domestic prices, prompting mills to direct molasses towards
international markets rather than domestic ethanol production (Almunia et al.,
2021). The result is a resource that could support renewable fuel security but
is instead traded away for short-term revenue.
The absence of regulatory measures requiring
domestic allocations reinforces behaviour. Without quota obligations or
priority-use policies, mills logically pursue the highest market return,
choosing export markets when they offer greater profit margins (Klaver et al.,
2023). creates a structural disadvantage
for domestic ethanol producers, who must compete for feedstocks that the
national energy system itself does not prioritise. In this sense, the viability
of bioethanol is not determined by technology or processing capacity but by
market signals that privilege immediate export gains over long-term energy
resilience (Almunia et al., 2021).
Dynamic
illustrates a more profound issue: molasses sits at the intersection of
agriculture, industry, and national energy strategy, yet its allocation is
governed almost entirely by private profitability rather than by public
interest. When higher returns abroad outweigh the value of strengthening the domestic
energy supply, the nation's renewable energy goals become indirectly
undermined. A system that aspires to energy security cannot depend on a
feedstock whose distribution is determined by price speculation rather than
strategic planning.
Addressing imbalance requires policies that
acknowledge molasses as a strategic input rather than an incidental surplus.
Introducing domestic allocation quotas, or pricing mechanisms that ensure
ethanol producers consistent access to molasses, would stabilise supply chains
and reduce volatility in ethanol production. Such measures would also indirectly
support farmers, because a stable ethanol sector creates more predictable
demand for sugarcane, reinforcing the broader agricultural economy through a
circular system in which byproducts fuel new value creation.
Molasses teaches us that what appears to be residue can hold the key to
transformation. The question is not whether molasses is valuable, but who gets
to decide its value and for what future. If Indonesia recognises molasses as
more than just waste, it could become the quiet foundation of a more resilient,
self-sustaining energy landscape.
4. Ethanol pricing is formulaic but
disconnected from reality.
A pricing system can look rational on paper, yet still fail everyone who
depends on it. Indonesia's ethanol pricing framework is one such system.
Ethanol pricing in Indonesia is governed by the
Harga Indeks Pasar (HIP), which links the ethanol price to molasses costs plus
a fixed margin. In theory, a formula is intended to shield producers from
market volatility and ensure predictable returns. However, the practical
outcomes reveal a significant disconnect between the formula and the realities
of production and trade. Molasses price fluctuations directly influence HIP
calculations, yet the timing of refinery purchases and the patterns of offtake
often do not align with producer expectations. As a result, the stability
promised by the HIP mechanism exists more in policy documents than in daily
operations.
When molasses prices rise, the HIP increases
accordingly. On paper, it should increase ethanol producers' revenue. In
practice, refiners frequently delay purchasing ethanol during these periods in
anticipation of price readjustments, reducing the intended benefit of the price
increase. Conversely, when the HIP falls, producers lose incentive to maintain
or expand production, as narrowing margins undermine profitability. This leads
to a cycle of uncertainty on both sides of the market. The pricing formula
responds to price movement, but it does not provide the predictability needed
for producers to invest in capacity, technology upgrades, or long-term
operational planning.
The lack of guaranteed purchase volumes deepens
instability. Producers are given a price formula but not a guarantee that their
ethanol will be purchased. The result is a system that appears structured, yet
leaves producers vulnerable to shifts in feedstock availability, financing
pressures, and international commodity price movement. Instead of serving as a stabilising
mechanism, HIP often amplifies uncertainty and undermines producer confidence.
Markets need not only price frameworks but also predictable access and
purchasing commitments to function sustainably.
The lack
of coordinated policies that link molasses allocation to domestic ethanol needs
exacerbates the situation. Without dedicated feedstock assurance, the ethanol
sector is forced to compete with export-driven molasses markets that often
offer higher short-term returns. Establishing domestic allocation measures for
molasses would help anchor ethanol production within national energy policy
rather than exposing it to speculative global pricing.
The disconnect between the pricing formula and lived realities raises a more
profound question: Is Indonesia's ethanol sector being asked to build a stable
industry on unstable foundations? Without aligning pricing, supply allocation,
and guaranteed market access, ethanol remains a product of chance rather than
strategy. The future strength of the industry will depend not on new formulas,
but on the willingness to link prices to real conditions and real commitments.
5. Cassava: the untapped promise with political
landmines
A crop can be abundant,
adaptable, and scientifically promising, yet remain locked behind political
caution. Cassava is one such crop.
Cassava offers an appealing opportunity to
diversify Indonesia's ethanol feedstock portfolio, particularly given its
widespread cultivation and adaptability to diverse soil conditions. However,
its formal designation as a food-security crop complicates its role. Categorisation positions cassava within
national political discourse as a staple that must be protected, creating the
perception that using fresh cassava as biofuel directly competes with household
food consumption. As a result, any attempt to reallocate cassava from food to
energy is treated with political sensitivity, unless the feedstock source is
explicitly derived from agricultural waste streams, such as cassava pulp from
starch production (Nuwamanya et al., 2011; Zhu et al., 2013).
The politics surrounding cassava are further
intensified by the interests of the starch industry, which controls not only
fresh root processing but also the flow of byproducts. Cassava pulp, despite
being rich in residual starch and lignocellulosic matter, is not easily
accessible to external users because its allocation is tightly managed. Yet the
same cassava pulp presents a strong technical basis for ethanol production.
Studies consistently highlight its capacity to yield fermentable sugars and to
achieve efficient ethanol conversion when properly processed (Ezebuiro &
Ogugbue, 2015; Archibong et al., 2016). Here, cassava pulp occupies an intriguing
space: it supports biofuel development while reinforcing food security by
ensuring that ethanol production relies on waste streams rather than edible raw
materials.
Realising potential requires more than
acknowledging the possibility. It demands coordinated industrial partnerships,
investment in processing infrastructure, and technological adaptation tailored
to cassava pulp's material characteristics. The technology necessary for
effective pulp fermentation is already available, and several studies have
demonstrated high ethanol yields under optimal pretreatment and enzymatic
hydrolysis conditions (Ndubuisi et al., 2018; Krajang et al., 2021). The
challenge, therefore, is not technical feasibility but establishing
institutional trust and collaborative frameworks among farmers, processors,
technology providers, and government agencies.
Strategically prioritising cassava pulp also
offers a balanced pathway to expand renewable fuel production while maintaining
adherence to national food policy commitments. By using pulp rather than fresh
roots, Indonesia can reduce waste, increase industrial efficiency, and generate
a new revenue stream for agricultural producers without disrupting food supply
chains. The approach strengthens both energy resilience and farmer livelihoods
by creating multiple value nodes within the same crop system.
Cassava's promise does not lie in replacing food with fuel; it lies in
recognising value where it has long been overlooked. The real question is
whether Indonesia can navigate the political landscape with enough clarity to
transform cassava pulp from a byproduct into a cornerstone of sustainable
energy strategy.
6. Farmers face "input inflation"
without yield growth.
When costs rise but harvests
stay the same, something more profound than price is broken in the system.
Sugarcane farmers in Indonesia are experiencing a
sharp increase in production costs, particularly for fertilisers, labour, and
irrigation, which have risen by approximately 15–25 percent since 2021. However,
yields remain largely stagnant, typically ranging from 55 to 70 tonnes per
hectare, and often lower among independent smallholders. The widening gap between rising inputs and
unchanged outputs highlights an underlying structural challenge: farmers are
spending more without producing more. Such a pattern signals inefficiencies in
both farm management systems and broader agricultural support structures.
Several factors contribute to the stagnation.
Many farmers continue to cultivate ageing sugarcane varieties that are no
longer well-suited to changing environmental conditions or to emerging
processing technologies. These varieties may still grow, but they do not
perform at optimal productivity levels. Soil management practices further constrain
yields. Maintaining soil fertility requires technical understanding and
adaptive management, yet many farmers lack access to the agronomic knowledge
needed to replenish soil nutrients effectively. In addition, limited mechanisation
results in labour inefficiencies, especially in planting and harvesting.
Fragmented irrigation systems complicate water management, causing uneven or
insufficient distribution that directly suppresses yield potential.
To move beyond stagnation, changes must occur
both at the farm and institutional levels. Improving productivity requires
coordinated land management, where consolidation or cooperative land-use
arrangements enable economies of scale. Without such arrangements, farmers
struggle to adopt mechanisation and modern cultivation techniques that require
larger or shared operational units. While government subsidies can temporarily
reduce financial pressure, subsidies alone cannot solve systemic
inefficiencies. Lasting improvement calls for integrated strategies that
support innovation, technology transfer, and shared learning networks among
farmers.
Introducing modern agricultural technologies can
enhance efficiency, but robust support systems must accompany technology
adoption. To make informed decisions, farmers require access to tailored
extension services, credit mechanisms that align with productive investment,
and reliable market information. Studies consistently show that farms adopting
improved technologies achieve better technical and economic performance, yet
adoption is slow when farmers are left to absorb the risk alone. Cooperative
farming models offer a practical pathway, enabling resource pooling, cost
reduction, and shared experimentation with improved practices.
The challenge is not merely that inputs are rising. It is that farmers are
fighting alone, with outdated tools and fragmented support. The real
breakthrough will come when the system begins to reward knowledge,
collaboration, and soil stewardship as much as it currently rewards purchased
inputs. Until then, yield growth will remain elusive, no matter how much
farmers spend.
7. Land rent fell, but not because farming got
cheaper
When the price of renting land
drops, many assume that agriculture has become more efficient. However, in
Indonesia's recent case, the opposite is true.
The decrease in land rental prices observed
around 2024 to 2025 should not be interpreted as evidence of reduced farming
costs or improved agricultural performance. Instead, it reflects deepening
financial stress among farmers and landowners. The decline signals that farming
is becoming less profitable, forcing landowners to accept lower rental fees to
keep their land cultivated. In a healthy agricultural economy, rising
productivity and strong market prices would support stable or increasing rent
values. Here, lower rents reveal a sector moving under strain rather than
advancing through efficiency.
The trend
is intertwined with the declining profitability of key crops. As returns
decline, landowners shift from fixed cash rental arrangements toward
profit-sharing agreements. These sharecropping-style arrangements allow
landowners to cope with uncertain market conditions, yet they also indicate
shortages of liquid capital in farming communities. When cash flow is
uncertain, landowners hedge risk by tying their income directly to seasonal
yields rather than fixed rents. The adjustments reveal a system that
prioritises short-term survival over stable income generation.
At the same time, farmers respond to rising
production costs for fertiliser, labour, and irrigation by adjusting their
cropping strategies. Many turn to shorter-cycle or lower-input crops when
margins on traditional cash crops narrow. While these decisions help farmers
manage immediate financial pressures, they also disrupt established planting
patterns and reduce the land's long-term economic value. A system that
encourages farmers to choose crops for survival rather than strategic
development will naturally exert downward pressure on land rents, as the land
itself becomes less able to sustain profitability.
These changes reflect a broader, often-overlooked
reality: lower land rents are not always a sign of efficiency. They can instead
mark a retreat from investment, technological adoption, and long-term planning.
When farmers operate in a context of persistent uncertainty, they scale back,
simplify, and seek flexibility. The cumulative effect is declining land value,
not because the cost of farming has improved, but because it has become harder
to sustain.
The drop in land rent is not an economic relief; it is a warning. It signals a
silent erosion of confidence in the future of agriculture. The question now is
whether Indonesia will intervene with policies that rebuild profitability,
support knowledge-based farming, and restore land value, or allow the trend to
deepen into a cycle of decline where land becomes cheaper because farming itself
is no longer viable.
8. Technology exists, but trust does not
Innovation alone does not
change agriculture. People do. Moreover, when trust is missing, even the best
technology sits unused.
Although Indonesia has access to a wide range of
advanced agricultural technologies, including GPS-based field mapping,
mechanical harvesters, and digital soil measurement tools, adoption among
farmers remains relatively low—estimated at only 20 to 30 per cent. The
challenge is not primarily technical. It is social and economic. Farmers often
face high upfront investment costs, uncertain profitability, insufficient
training support, and deep scepticism about whether these technologies
genuinely serve their interests or mainly benefit larger agribusinesses
(Grabowski et al., 2019; Jayashankar et al., 2018). The environment underscores that trust and
perceived fairness shape adoption just as much as efficiency or productivity
gains.
The financial barrier is transparent. For many
smallholders operating on thin margins and irregular cash flow, the risk of
purchasing new machinery or digital tools is daunting. Rising production costs
already limit their ability to experiment. If they are not confident that
technology will improve yields or reduce labour, they naturally hesitate to
invest (Ryan, 2022). Maintenance expenses often deepen hesitation. Modern
equipment requires ongoing technical support that rural areas may not be
equipped to provide, reinforcing the fear that breakdowns could become
liabilities rather than assets (Raturi et al., 2022).
Training gaps further reinforce resistance. Many
farmers have limited exposure to structured, hands-on technical learning.
Without clear guidance, the promise of technology feels abstract and uncertain.
Where knowledge transfer is weak, the perception of risk becomes more
substantial than the hope of benefit (Hua-wei et al., 2022). Dynamic is not merely practical but
psychological. If farmers do not feel confident or respected in the learning
process, adoption becomes even more unlikely.
Trust shapes all of these decisions. If farmers
believe that technology primarily favours larger, wealthier producers, they may
conclude that adopting such innovations will only widen inequality (Alexander
et al., 2023; Zhou et al., 2023). Trust is not built through instruction
manuals or price subsidies. It is built through relationships, shared learning,
and credible local examples. When farmers see their neighbours succeed with new
practices under conditions similar to their own, technology begins to feel
relevant rather than imposed.
Partnership-based approaches offer a pathway
forward. Demonstration plots, cooperative equipment ownership models,
farmer-to-farmer learning networks, and community-led training programs can
reduce perceived risks and show practical outcomes (Ren et al., 2022). These
approaches also shift technology adoption from being an individual gamble to a
collective progression. When training includes not only how to operate
equipment but also how it affects long-term soil health, labour efficiency, and
income stability, technology becomes a tool that supports resilience rather
than uncertainty (Hua-wei et al., 2022).
The technology needed for more productive and sustainable agriculture is
already here. The missing belief is that it belongs to everyone, not just those
who are already privileged. The future of Indonesia's farming system will
depend not solely on machines and data, but on whether farmers feel included,
respected, and supported in the process of change.
9. Indonesia is caught between two ministries
Even with
the right resources, technology, and ambitions, a country can fail if its
institutions lack alignment. Indonesia's bioethanol story is a clear example of
how misaligned institutions can hinder progress.
Indonesia's bioethanol policy currently
operates within a divided governance structure. The Ministry of Energy and
Mineral Resources (ESDM) is responsible for shaping renewable fuel targets and
determining ethanol blending requirements. Meanwhile, the Ministry of Agriculture
(Kementan) regulates the feedstocks that make ethanol possible, including
sugarcane, molasses, and cassava. Each ministry holds authority over a critical
piece of the value chain, yet they work in parallel rather than in
coordination. Their data systems, program objectives, and budget allocations
remain largely independent. As a result, the policy environment becomes
fragmented, making it impossible to sustain the success of one ministry without
corresponding action from the others.
Separation
creates practical inefficiencies. ESDM may advance blending mandates to support
renewable energy goals, but if Kementan does not align farm-level production
incentives or feedstock supply planning, ethanol producers are left without the
raw materials needed to meet the target. Similarly, if energy-market
regulations fail to ensure stable demand, increases in agricultural output do
not automatically translate into expanded fuel production. Inertia or
constraints in one domain repeatedly neutralise progress in the other.
Effective bioethanol development requires
policies to be synchronised across the entire chain—from land planning and crop
support to milling efficiency, logistics, pricing frameworks, blending
mandates, and consumer fuel distribution. Around the world, successful
transitions to biofuel economies have relied on horizontal integration among
ministries and vertical integration linking national directives to provincial
and local implementation systems. Each sector advances its priorities when
governance remains siloed, ignoring the dependencies that define shared
outcomes.
Creating an integrated bioethanol authority
would provide a mechanism to unify these frameworks. Such an institution could harmonise
standards, coordinate feedstock allocations, facilitate shared data platforms,
align subsidies or investment incentives, and ensure that policy shifts in one
domain do not unintentionally destabilise another. With shared planning and
accountability, Indonesia could replace fragmented efforts with coherent
progress, reducing volatility for farmers, mills, and fuel producers.
Indonesia's challenge is not merely technical. It is institutional. The system
must learn to govern energy and agriculture as interdependent elements of the
same strategy; otherwise, bioethanol will remain a promising vision that never
fully materialises. The question is whether Indonesia can move from two
ministries working side by side to one coordinated effort working toward a
shared national future.
10. The public does not see ethanol as an energy
issue, only as sugar's cousin
It is possible for a renewable
fuel to be both visible and invisible. In Indonesia, ethanol has potential, but
not in narrative.
In Indonesia, ethanol is widely perceived as a
derivative of the sugar industry rather than as a strategic renewable fuel. Initiatives like the B35 programme have
successfully positioned biodiesel as a national achievement, in stark contrast
to the perception of ethanol. Biodiesel is recognised as an energy source.
Ethanol, however, remains seen as "sugar's cousin" a secondary output
rather than a primary contributor to energy security. Invisibility limits ethanol's political
influence, budget allocation, and relevance in public discussions about energy
transition.
Public perception matters because visibility
drives funding and policy priorities. Biodiesel has benefited from strong
government messaging, industry alignment, and a narrative that connects it to
national pride and economic independence. Ethanol never received the same
narrative infrastructure. Its identity is tied to sugarcane mills, molasses
markets, and agricultural pricing disputes rather than clean energy targets or
national decarbonisation efforts. As a result, ethanol struggles to gain the
political capital necessary to advance beyond pilot-scale and intermittent
production.
The
institutional divide between the Ministry of Energy and the Ministry of
Agriculture further reinforces perception. The Ministry of Energy focuses on
blending mandates and energy diversification, while the Ministry of Agriculture
manages feedstock policies and farmer livelihoods. When ethanol is framed as an
agricultural commodity rather than a fuel, its development remains overshadowed
by the more visible biodiesel sector, which benefits from palm oil's strong
domestic industry and lobbying power. Without linked goals, aligned data
systems, and coordinated investment strategies, ethanol remains trapped in a
supporting role.
The lack of a unified public narrative also
undermines investment confidence. When the public does not recognise ethanol as
part of the nation's energy future, the private sector sees a signal of
uncertainty. Research, infrastructure expansion, and conversion technologies
require long-term stability, but stability cannot form without shared belief in
ethanol's strategic relevance. Public trust, corporate commitment, and policy
momentum are intertwined.
Ethanol's greatest challenge is not chemistry or technology, but identity.
Until Indonesia chooses to tell a story in which ethanol is energy, not sugar's
byproduct, the fuel will remain underused and undervalued. The future of
ethanol depends not only on what the country can produce but also on what it
chooses to believe about it.
11. Academia and research are advanced but
disconnected from policy rollout
Innovation does not pose a
challenge. Indonesia has the science, the laboratories, and the prototypes.
What is missing is the bridge that carries ideas from research rooms into real
fields and factories.
Indonesia's bioethanol sector reveals a striking
gap between sophisticated academic research and its practical implementation in
agricultural and industrial systems. Institutions such as BPPT, LIPI, and P3GI
have developed technologies ranging from hydrolysis enzymes to improved
distillation systems and vinasse treatment methods. However, these
breakthroughs rarely progress beyond pilot facilities. Many pilot plants serve
as isolated demonstrations rather than as starting points for industrial
expansion, mainly because funding cycles are short and inconsistent, unable to
sustain the long-term processes required to translate laboratory success into
scalable production (Rivai, 2022; Sajida, 2022).
The core issue is not innovation capacity but the
absence of institutional continuity. Research programs frequently begin with
promising momentum only to lose support before they mature into commercially
viable applications. Lack of longevity in funding structures leads to
institutional memory fading and a failure to transfer lessons learnt into
ongoing industrial or policy planning. creates a cycle where Indonesia repeatedly rediscovers
solutions it has already invented, rather than implementing and scaling them
(Kusumawardani et al., 2021; Haryatie et al., 2023).
Policy fragmentation exacerbates these
challenges. Research that could inform feedstock strategies, refinery
upgrading, or energy diversification remains siloed because agricultural and
energy authorities operate under separate mandates. Without a common platform
that forces shared planning, promising innovations remain disconnected from
real market ecosystems. As a result, research outcomes do not meaningfully
influence the design of industrial policy, investment priorities, or
procurement standards (Nurhasan et al., 2021; Ardiansyah et al., 2024).
Disconnect
is not inevitable. Countries that have successfully integrated biofuel research
with industrial rollout such as Brazil have done so through stable funding
systems, cross-ministerial coordination, and strong public-private
partnerships. Indonesia could adopt similar approaches. Long-term funding
frameworks, multi-stakeholder research consortia, and shared evaluation metrics
would strengthen continuity. If research institutions built structured
partnerships with mills, smallholders, and technology developers, bioethanol
innovation could shift from isolated prototypes to interconnected value chains
(Sajida, 2022; Miryanti et al., 2023).
Indonesia's research capacity is not a barrier. The science is in place. The
question is whether the country will create a system that allows knowledge to
move steadily, deliberately from laboratories into landscapes. Indonesia's
ability to sustain, coordinate, and scale bioethanol production will determine
its future.
12. The ethanol dream keeps being recycled every
decade
Every ten years, a nation
repeats the same dream, recycling not only ambition but also the same
unresolved problems.
Indonesia's bioethanol development history
reveals a recurring cycle of enthusiasm, policy launches, and eventual
stagnation. The 2006 Biofuel Presidential Decree, the 2010 E3/E5 pilot programme,
the 2015 Bioenergy Grand Strategy, and the 2023 E5 Relaunch each emerged with
optimism and national rhetoric about energy independence. However, each
initiative encountered the same structural constraints: uncertain feedstock
availability, volatile pricing, and fragmented coordination between agriculture
and energy institutions. The pattern suggests not a failure of technological
innovation, but a deeper institutional inertia that continues to limit the
sector's progress.
Despite advances in bioethanol conversion
efficiency, such as improvements in hydrolysis enzymes, fermentation optimisations,
and distillation technologies, these innovations have not translated into
stable industrial production (Kusumawardhani et al., 2022). Instead, each new
policy cycle introduces revised slogans and technical strategies without
confronting the systemic issues that have persisted across decades. The result
is a repeated relaunching of bioethanol as if it were a new idea, rather than
an unfulfilled one.
Feedstock dependence is at the centre of repeated
stagnation. Reliance on sugarcane and molasses ties ethanol output to
agricultural fluctuation, price competition, and mill-level priorities, which
are themselves unstable (Agustian et al., 2021). When sugar supply tightens,
molasses disappears from domestic ethanol channels. When prices rise, mills prioritise
their exports. These recurring bottlenecks re-emerge with each policy cycle,
stalling momentum just as progress begins to form.
Institutional misalignment compounds the issue.
Energy policies are formulated independently from agricultural policies, and
the absence of a cross-sector authority allows each ministry to pursue its own
logic. Without integrated governance, the capabilities of one sector routinely
fail to support the goals of the other (Kusumawardhani et al., 2022). On paper,
efforts may progress, yet they stagnate in practice due to the implementation
system's lack of structural design for coordination.
Public perception further shapes the cycle.
Biodiesel has secured national narrative visibility through campaigns like B35,
whereas ethanol remains obscure in public discourse. With low recognition comes
low political investment. Without political investment, funding remains
limited. Moreover, without sustained funding, programmes fade from view—until
they are revived again a decade later (Tjahjono et al., 2021). The cycle
repeats because no single cycle builds lasting institutional memory.
Indonesia does not lack the science, the policy blueprints, or the ambition to
scale bioethanol. What it lacks is continuity, coordination, and narrative
ownership. The next generation of ethanol will not succeed by launching yet
another program. It will succeed only when the country decides to stop
returning to the same starting point and instead builds a system capable of
carrying momentum forward. The real question is whether Indonesia is ready to
break the cycle or repeat it once more in the next decade.
Rich Land, Unreached Hands
The story of ethanol in Indonesia is not simply a
matter of production capacity or technological readiness. It is a window into
deeper structural patterns that shape how agriculture, industry, and energy
policy interact or fail to interact.
The challenges faced by ethanol producers are not
rooted in a lack of appropriate technology. Boilers, fermentation agents, and
distillation systems are widely understood and available. The difficulty lies
in the ecosystem surrounding them. Farmers, mill operators, and policymakers
each operate within different incentive structures, time horizons, and risk
perceptions. These differences create misalignment, making it challenging to
coordinate a stable, long-term bioethanol strategy.
Indonesia's history with ethanol reflects a
pattern of misalignment. National initiatives have appeared repeatedly, roughly
once every decade: the 2006 Biofuel Presidential Decree, the 2010 E3/E5
Bioethanol Pilot Program, the 2015 Bioenergy Grand Strategy, and most recently,
the 2023 E5 Relaunch. Each policy cycle began with optimism but ended with
familiar obstacles. Feedstock uncertainties, volatile pricing, and fragmented
governance prevented sustained implementation. Repetition reveals a deeper issue: the
barriers are structural, not technical. Policies shifted, but the system
surrounding ethanol did not.
Smallholder farmers illustrate tension clearly.
Many operate with thin margins and limited cash flow, prioritising short-term
survival over long-term investment in feedstock systems aligned with energy
goals. Meanwhile, mills respond to global and domestic price signals rather
than national energy narratives. Policymakers, working within ministry-specific
mandates, set targets that do not always correspond to conditions on the
ground. These differing realities create a persistent gap between strategy and
practice.
Moving forward requires reframing sugarcane
agriculture, molasses allocation, and renewable energy planning as
interdependent rather than separate domains. A cohesive approach would align
incentives across the value chain, promoting cooperation rather than
competition. Establishing a cross-ministerial bioethanol authority could help harmonise
policies, coordinate budgets, and standardise data sharing. Strengthening
communication channels between farmers and mills would also help ensure that shared
goals rather than isolated interests guide feedstock decisions.
The future of Indonesia's ethanol sector will
depend on tackling structural fragmentation as seriously as technical
optimisation. Sustainable progress requires long-term policy continuity,
integrated governance, stable market commitments, and shared incentives that
link agricultural livelihoods with energy security.
Indonesia has never lacked the vision to pursue
bioethanol. What it has lacked is a system capable of carrying that vision
forward. If the country can finally integrate the pieces of the ecosystem farmers,
feedstocks, mills, and ministries then the ethanol dream will no longer need to
be recycled every decade. It can, instead, become reality.
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