Biomass: Indonesia’s Green Energy Treasure That Investors Are Starting to Scramble for

Liga Asuransi – In the effort to realize the energy transition towards a more sustainable future, biomass has emerged as one of the most promising green energy sources in Indonesia. With abundant natural resources, ranging from agricultural and plantation waste to forestry, Indonesia has enormous biomass potential to be utilized as an alternative energy source to replace fossil fuels.

This enormous potential not only supports the 2060 Net Zero Emissions (NZE) target but also opens up extensive investment opportunities for the private sector, state-owned enterprises, and foreign investors who view biomass as a strategic sector with long-term growth. As energy demand and global demand for clean energy increase, biomass is slowly transforming from a “dormant resource” into a hot commodity, highly sought after by many.

However, despite these significant opportunities, biomass project development also presents its own challenges, ranging from raw material supply availability, logistics, regulations, to the need for comprehensive financial support and risk protection. This is where renewable energy project insurance plays a crucial role in providing certainty and confidence to all stakeholders.

Biomass Potential & Current Trends in Indonesia

Biomass utilization in Indonesia is increasingly receiving serious attention, particularly as part of the clean energy transition strategy and carbon emission reduction. Here are some key facts and trends that can form the basis of this article:

• Target of 3 million tons of biomass by 2025
  PT PLN Energi Primer Indonesia (PLN EPI) has set a target of using up to 3 million tons of biomass this year, as part of its efforts to support a clean energy mix and reduce emissions. (plnepi.co.id)

From 2021 to 2024, the volume of biomass utilization increased from approximately 312,000 tons to 1.8 million tons. (Liputan6)

• Potential of agricultural waste & palm oil
  Indonesia has enormous biomass potential from agricultural, plantation, and industrial waste. For example, global biomass production from oil palm plantations is estimated at 424 million tons per year, including empty fruit bunches, fronds, stems, and shells.haisawit.co.id)

Indonesia’s biomass industry is also beginning to penetrate the export market: biomass products such as palm kernel shells (PKS) and wood pellets have generated approximately Rp 1.04 trillion in transactions in Japan. (Kontan)

• Implementation of Co-Firing & Energy Policy
  Biomass has been used as a blended fuel (co-firing) in coal-fired power plants (PLTU) to reduce the proportion of coal. By 2024, PLN (State Electricity Company) implemented biomass co-firing in 47 PLTUs, with a total biomass consumption of approximately 1.62 million tons and emission reductions of approximately 1.87 million tons of CO₂. (Forest Watch Indonesia)

With this scheme, the contribution of non-variable renewable energy from biomass increases to 1.86% of the coal-fired power plant’s energy mix. (Forest Watch Indonesia)

• Corporate & Investor Initiatives
  Some companies are also taking concrete action: for example, PTBA (the Indonesian Coal Company) is conducting a trial of wood pellet co-firing at the Tanjung Enim coal-fired power plant as part of its move towards clean energy. (ptba.co.id)

Perum Perhutani also plans to build three biomass factories in energy plantation forest areas with an investment of around Rp 133.6 billion, targeted for operation by the end of 2025. (joss.co.id)

• Deforestation Risk & Legality
  Despite its enormous potential, biomass utilization also faces criticism regarding its impact on deforestation and the sustainability of the raw materials. For example, imports of wood pellets from Indonesia have increased sharply, and there are concerns that this production is driving the conversion of natural forest land to biomass production. Forest Watch Indonesia

Economic Impact & Investment Opportunities of Biomass in Indonesia

Biomass utilization is not only a solution for the clean energy transition, but is also beginning to demonstrate significant economic multiplier effects, both at the national and regional levels. From job creation and export opportunities to the involvement of local businesses, biomass is increasingly becoming a strategic sector worth considering.

1. Driver of Local Economic Growth

Biomass is often sourced from agricultural waste, plantations, and energy plantations, which are widely distributed throughout Indonesia. This opens up significant opportunities for local farmers and cooperatives to participate in the supply chain, from raw material collection to wood pellet or palm kernel shell (PKS) production.
According to data from the Ministry of Energy and Mineral Resources, the implementation of biomass co-firing at coal-fired power plants (PLTU) by 2024 has created more than 10,000 new jobs in the biomass collection and processing sector, particularly in Java, Sumatra, and Kalimantan.

2. High Value Exports to International Markets

International markets—particularly Japan, South Korea, and Europe—are beginning to look to Indonesian biomass as an alternative energy source to coal. Japan, for example, is the largest buyer of Indonesian palm oil mills, with export transactions reaching IDR 1.04 trillion in 2024. This presents a golden opportunity for local producers to expand production scale, quality standards, and export legality.
Furthermore, European countries are starting to look for alternative supplies following the global energy crisis, so Indonesia has the potential to become an Asian biomass hub if it can ensure the sustainability and stability of supply.

3. Attraction of Large Investment for Power Plant Projects

PLN has mapped more than 50 potential coal-fired power plant (PLTU) locations for sustainable biomass co-firing programs. This has led to the emergence of new business schemes, ranging from Power Purchase Agreements (PPAs) for Biomass Power Plants (PLTBm) to long-term partnerships between PLN and biomass producers.

Perum Perhutani, for example, is currently building three biomass plants with a total production capacity of around 130,000 tons/year, which are targeted to be operational in 2025. The investment value reaches IDR 133.6 billion, and this project is expected to absorb local labor and support the supply of raw materials for co-firing the Java-Bali PLTU.

4. Policy Support & Incentives

The Indonesian government, through its National Energy Master Plan (RUEN), is targeting a 23% share of renewable energy by 2025, with biomass expected to be a significant contributor. Support is provided through:

• Feed-in tariff scheme forPLTBm small to medium scale,

• Ease of licensing and provision of land for Energy Plantation Forests,

• Fiscal incentives for investment in biomass production equipment and power plants.

In addition, emission reduction regulations and carbon trading mechanisms are starting to open up additional opportunities in the form of revenue from carbon credits, which can increase the financial viability of biomass projects.

5. Opportunities for the Insurance & Financing Sector

Biomass investments, such as the construction of a wood pellet plant or PLTBm, require comprehensive protection against the risks of fire, operational disruptions, and third-party liability risks.

L&G Insurance Broker, a specialist in renewable energy project underwriting, is ready to assist developers and investors in developing Property All Risks, Erection All Risks, and Liability Insurance programs that meet international standards. With this protection, biomass projects can more easily obtain financing from banks and financial institutions.

Challenges & Strategies for Indonesia’s Biomass Sustainability

Despite Indonesia’s vast biomass potential, realizing this sector’s development is not without various challenges, both technical and economic, and regulatory. Without a well-thought-out strategy, this significant opportunity could languish at the discussion level, without having an optimal impact on the national energy transition.

1. Limited Consistent Raw Material Supply

One of the main challenges with biomass is the sustainable supply of raw materials in large quantities and of consistent quality. Many coal-fired power plant (PLTU) co-firing projects have been hampered by unstable supplies of PKS (wood pellets), both in terms of volume and moisture and calorie content.
Indonesia has abundant raw materials from agricultural waste (rice husks, corn cobs), plantations (palm kernel shells, empty fruit bunches), and energy plantations. However, these supply chains remain fragmented and lack efficient logistics systems. In many regions, raw material collection still relies on traditional methods, resulting in high transportation and storage costs.

2. Technology and Infrastructure are Still Limited

InvestmentBiomass, such as the construction of a wood pellet factory or PLTBm, requires comprehensive protection against the risks of fire, operational disruptions, and third-party liability risks.

L&G Insurance Broker, a specialist in renewable energy project underwriting, is ready to assist developers and investors in developing Property All Risks, Erection All Risks, and Liability Insurance programs that meet international standards. With this protection, biomass projects can more easily obtain financing from banks and financial institutions.

3. Certainty of Regulations & Tariff Schemes

Biomass investors still face uncertainty over electricity tariffs and lengthy sales and purchase agreement (PPA) processes. Although PLN has committed to the co-firing program, many developers complain about the complicated administrative process and incentives that are not yet attractive enough to offset the investment risks.

Furthermore, carbon trading mechanisms and sustainability certification for exported biomass are still evolving, requiring businesses to adapt to changing global standards.

4. Competition with Other Export Commodities

PKS and wood pellets are now highly sought-after export commodities. As a result, some suppliers prefer selling to foreign markets at high prices rather than meeting local demand for coal-fired power plants (PLTU). Without policies that balance exports and domestic demand, domestic biomass programs could lose competitiveness in terms of price and supply.

Sustainability Strategies to Address Challenges

To ensure that biomass truly becomes a “green energy treasure trove,” the following strategies are key to future success:

• Supply chain integration between farmers, cooperatives, processing industries, and power plants to ensure continuity of raw materials.

• Development of biomass logistics & technology infrastructure in major producing areas to reduce production costs and improve output quality.

• More attractive and clear long-term tariff and contract policies, thus providing certainty for investors and banks.

• Balanced domestic & export market development, with incentives to ensure the availability of biomass supply for the national energy program.

• Insurance protection and project guarantees from the planning stage, so that biomass projects can obtain funding more easily and are protected from operational risks.

L&G Insurance Broker is ready to be a strategic partner in every stage of biomass project development—from feasibility studies, EPC contracts, to the operational phase—with comprehensive protection solutions tailored to the renewable energy sector.

Conclusion and Recommendations

Indonesia’s biomass potential is no longer just an opportunity, but a “treasure trove” of green energy that is being sought by global investors. With abundant resources available from agricultural, forestry, and plantation waste, biomass could be a real answer to the need for clean and sustainable energy. However, as investment and biomass project expansion increase, operational, technical, and financial risks also increase—from potential equipment damage and disruptions to raw material supplies to legal liability for pollution.

This is where the role of renewable energy project insurance is crucial. Proper protection not only ensures business continuity but also boosts investor and financing institution confidence in the viability of biomass projects in Indonesia. Businesses need to ensure that every stage—from construction and equipment delivery to operation—is covered by a comprehensive insurance scheme.

If you are EPC, developer, or green energy investor It’s time to take concrete steps to secure your biomass project. L&G Insurance Broker is ready to help you design an insurance solution that suits your project’s characteristics and business needs.

📞 Contact L&G Insurance Broker at 0811-8507-773 for free consultation and comprehensive protection for your green energy project.