biogas financing using causal loop diagram

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Biogas has been developed in Indonesia for years, especially in rural area. Th ere are plenty of biogas project implemented to smallholders in many rural area in Indonesia by government, private sector, and Non Governmental Organization (NGO) even though many of the biogas project failed. Some references argued that the development (adopting and diff using) of technology in renewable energy such as biogas, particularly in rural area depend on various factors, such as social, technical, economic, and institutional factors, but not many consider financing as an important factor in determining the success level of biogas project. Th e development of biogas project in rural area can be accelerated by providing appropriate financial incentives, subsidies and strengthening supporting infrastructures to ensure reliability, quality and efficiency of biogas project. However, financing issue in biogas project in Indonesia rural area is not been widely explored. Th is paper aims to analyze some options for biogas financing in Indonesia rural area and review its advantage and disadvantage, especially in Lembang, West Java using causal loop diagram (CLD). Causal loop diagram is a useful tool to capture the complex structure of biogas project, in order to better understand the role of financing for biogas project. Data and information in this research are gathered through fi eld observation and a set of interviews tofarmers who use biogas energy in Lembang area, West Java, and the local government, a cooperative, and NGO who involved in the biogas project.

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  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Analysis of Biogas Financing Using Causal Loop Diagram in Lembang Area, West Java, Indonesia

    Purnama Alamsyah

    Kusnandar

    12th Conference of Science Council of Asia (SCA)

    And International Symposium

    10-12 July, 2012

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    2

    Content

    1. Introduction

    2. Literature Review

    3. Methodology

    4. Result and Discussion

    5. Conclusion

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Introduction

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Introduction

    There are many biogas projects dedicated forsmallholders in rural Indonesia

    The development of renewable energy such asbiogas in Indonesias rural area has met variousconstraints social, economy, and institutional

    But not many who consider financing factor as animportant factor in the success of biogas project.

    The main problem that farmers and ranchers inrural areas have to face is in the inability to fullypay biogas plant they need financing assistancein order to easily adopt the biogas technology

    4

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Introduction (2)

    Financing factor of renewable energy such asbiogas is an open problem to be improved.

    This paper aims to analyze the financing of biogasproject in Indonesias rural areas especially inLembang, West Java by using Causal Loop Diagram(CLD).

    5

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Literature Review

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Literature Review

    7

    Benefits of biogas

    Drivers and barrier of biogas implementation

    Financing of domestics biogas plant (Financingenvironment, Financing channels, Financinginstruments, financial scheme)

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Methodology

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Methodology

    9

    Literature Review literature review and information about biogasdevelopment, renewable energy development, biogas financing, renewableenergy financing were collected. Data source of constructed biogas are basedon recorded data by Dinas Peternakan Provinsi Jawa Barat, KPSBU, and BIRU

    Individual interview individual interview were conducted to thedairy farmers in Lembang, Dairy Farmers Group in Lembang, management ofKPSBU, Dinas Peternakan Provinsi Jawa Barat, Dinas Pertambangan dan EnergiProvinsi Jawa Barat, BIRU, ITB, construction companies of biogas digester, andappliance biogas companies.

    On-site survey respondents of on-site survey were chosen throughthe consideration of the scale farming, the amount of cows owned, and socialstatus of the farmers.

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Methodology (2)

    10

    The research was conducted in Lembang sub-district,West Bandung, state of West Java, Indonesia. Here,biogas program had been intensively implemented.The potential physical areas are horticulture farming,dairy farming, and tourism

    Using Causal Loop Diagram (CLD). CLD is a tool forsystematically identifying, analyzing andcommunicating feedback loop structures

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    11

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Result and Discussion

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    General Model

    13

    Cost of Biogas Investment

    Ratio of Income and Expenditure

    Income +

    Biogas Output

    Expenditure for Living

    -

    -

    Biogas Digester Investment

    +

    Positive Image for Biogas Digester

    +

    Rate of Adoption

    +

    + +

    Biogas Waste Output

    +

    Cost of Biogas

    +

    - Business capital usage

    Investment cash

    usage

    +

    Cash -

    + +

    -

    +

    -

    -

    Business capital

    desire +

    Cattle business

    +

    +

    Pollution -

    +

    R1 B1

    B2

    Negative feedback. biogasresidues or bio-slurry. If it is nottaken care properly, it wouldpollute the environment. Eventhough is not as smelly as before,it would still pollute the river andother waterways as disposal sites.

    Negative feedback. investment cost wouldsurely disrupt the financial cash of the farmersthat mostly are intended for their businesscapital. The disruption of the cash would bringimpact to the reduction of their business capitaland in turn would lessen their income as well.The lessen income would then decrease theincome ratio to expenditures, would alsodecrease the positive image

    Positive feedback. Thebigger the biogas outputmeans the higher usage ofbiogas as energy source. Theimpact would increase thepositive image of biogastechnology so that it wouldincrease the level of farmersadopting the technology

    Subsystem of waste

    Subsystem of Cost

    Subsystem of biogas output

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Grants Model

    Cost of Biogas Investment

    Ratio of Income and Expenditure

    Income +

    Biogas Output

    Expenditure for Living

    -

    -

    Biogas Digester Investment

    +

    Positive Image for Biogas Digester

    +

    Rate of Adoption

    +

    +

    +

    Biogas Waste Output

    +

    Cost of Biogas

    +

    - Business capital

    usage

    Investment cash

    usage

    +

    Cash -

    + +

    -

    +

    -

    -

    Business capital

    desire +

    Cattle business

    + +

    Pollution -

    +

    Grant from Government

    Availability of Grant

    -

    + -

    B

    By the government grants, then the problem of highinvestment cost in biogas digester shall be solved.However, as explored further, the grants programstill has a budget limit. This condition resulted in onlythe minority of the farmers would get it. The subsystem still negative feedback

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Credit Model

    Cost of Biogas Investment

    Ratio of Income and Expenditure

    Income +

    Biogas Output

    Expenditure for Living

    -

    -

    Biogas Digester Investment

    +

    Positive Image for Biogas Digester

    +

    Rate of Adoption

    +

    + +

    Biogas Waste Output +

    Technology

    Quality of Digester

    +

    +

    Price of Digester + +

    Cost of Biogas +

    - Business capital usage

    Credit for Digester

    Investment

    cash usage +

    Kas -

    + +

    -

    -

    +

    -

    -

    Raw material

    potential of organic

    fertilizer

    Production desire

    Of organic fertilizer

    +

    organic fertilizer production

    +

    +

    organic fertilizer +

    farming cost -

    Organic

    fertilizer

    selling

    +

    +

    Business capital

    desire + +

    Cattle business

    + +

    Technique of

    organic fertilizer

    +

    market for organic fertilizer

    +

    +

    Assistance and training

    program

    Supply chain system for organic fertilizer

    organic fertilizer promotion

    + +

    Pollution - -

    This credit system helps farmersbecause it is not disrupt otherbusiness capital

    Higher technology. biogas output produced isgreater so that it is more effective in use asenergy source to farmers daily needs of energy

    Higher technology with greater biogas output, along with applied creditsystem and subsidies are expected to increase the number of biogas digesteradoption. However, there is a question about the biogas utilization as energysource has greater value than the cuts of milk payment for credits?

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    16

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Conclusions

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Some Conclusions

    18

    Biogas investment are expensive investment,therefore, to reduce the costs we need to create afinancing system that could facilitate instead ofmaking farmers more economically vulnerable

    There are financing schemes offered, be itgovernment grants or even credit system andsubsidies offered by NGO such as BIRU Programcooperated with KPSBU

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Some Conclusions (2)

    19

    Financing system through credit system andsubsidies was perceived more successful to increasethe adoption of biogas technology in Lembang area

    One of the contributing factors in increasing biogasproject sustainability is the issue about utilization ofbiogas residues, bio-slurry

  • P A P P I P T E KPusat Penelitian Perkembangan Iptek

    Thank you !

    Purnama Alamsyah | [email protected]

    Kusnandar | [email protected]