p–ISSN: 2723 - 6609 e-ISSN: 2745-5254
Vol. 5, No. 7 July 2024 http://jist.publikasiindonesia.id/
Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 7, July 2024 3196
Economic Potential of Renewable Energy with a Financial
Feasibility Approach in Kupang, NTT
Achmad Factur Rahman
1*
, I Nyoman Gita Indrawan
2
Institut Teknologi Sepuluh Nopember, Indonesia
Email:
*Correspondence
ABSTRACT
Keywords: biomass
product, NPV, BCR and
pay back periode.
The use of biomass as fuel at PLTU Bolok can reduce
emissions, save basic costs for providing electricity and
increase fuel alternative competitiveness for PLN. A lot of
unproductive vacant land can now be used to plant calliandra
trees and used for cofiring, the use of woodchip biomass for
cofiring PLTUs can also build a community economy. This
research aims to analyze the feasibility of investment using
a financial aspect approach in the biomass procurement
program in Kupang, NTT. This business feasibility analysis
was carried out to find out whether the biomass development
plan was feasible from a financial aspect. This research will
analyze the Net Present Value (NPV), Net Benefit Cost
Ratio (BCR), and Payback Period values for the business.
Introduction
Electricity is a basic need of the community, where almost all equipment to support
community life requires electrical energy. In Indonesia, most of the electricity is
generated by Steam Power Plants (PLTU) (Al Hakim, 2020). In addition to the positive
impact of PLTU as a power producer, it turns out that there is a negative impact of PLTU's
electricity production process, namely exhaust gas emissions. Coal-fired power plants are
ranked 5th (39.8%) as a source of air pollution (Nelly et al., 2023).
Several coal-fired power plants in Indonesia currently use biomass for the main fuel
mixture, which can affect the reduction of the amount of exhaust gas emissions. One of
the biomass materials used is a type of woodchips, which are pieces of wood that have
been processed previously so that they can be used as fuel mixtures for coal-fired power
plants (Wardana, Qomaruddin, & Soeroto, 2021). Woodchips as a co-firing biomass of
coal-fired power plants do not contain sulfur like coal, so they can reduce coal-fired power
plant exhaust emissions. In addition, the production of Woodchips biomass also helps
improve the community's economy from the process of planting energy forests as raw
materials for Woodchips (lamtoro, Gamal, and kedondong plants) and also the
management of wood production sites into Woodchips (Setyono, Mardiansjah, & Astuti,
2019).
From the results of existing research, the island of Timor currently has 11,166
hectares of energy forests (producing woodchips) and has the potential to develop up to
Economic Potential of Renewable Energy With a Financial Feasibility Approach in Kupang,
NTT
Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 7, July 2024 3197
126,620 hectares. From the data, it is known that the production of woodchips from
energy forests can reach 244 tons/day or 9% of the biomass mixture for coal-fired power
plants on the island of Timor.
This research will discuss the financial benefits of investing in wood
management/production sites into Biomass Woodchips as raw materials for coal-fired
power plant fuel mixtures. So that it can attract the interest of entrepreneurs.
Research Methods
This study will analyze financial benefits using the Net Present Value (NPV)
method, Benefit Cost Ratio (BCR), and Payback Period. The data collection technique is
to collect data from the Biomass Woodchips production site for 3 months.
Perhitungan Net Present Value (NPV)
NPV is the present value of all funds expected to come in, minus the present value
of all cash outlays (initial investment). The NPV calculation involves the use of a discount
rate that reflects the cost of capital or the desired rate of return. In this case, the discount
rate used is 30% annually.
Fo the caculation of he NPV vaparensroduction) / 3172.00pare (Layak) NPV < No NPV
=
NPV = -Rp192,054,102.82
After calculation, the NPV shows a negative value of Rp -192,054,102.82. This
indicates that assuming an expected rate of return of 30% per year, the project is
considered unprofitable as NPV < 0.
Benefit Cost Ratio (BCR)
Benefit Cost Ratio (BCR) is a comparison between the present value of the
benefits obtained and the costs incurred. If the BCR exceeds 1, then the investment is
considered feasible.
BCR =
Information:
1. Initial Investment Cost = IDR 2,500,000,000,-
2. Annual Income = Average Income/month x 12 = IDR 947,606,064,-
3. Factory Lifetime = 5 Years
4. BCR > 1 (Eligible), BCR < 1 (Not Eligible)
Nilai BCR
The calculation results show that the BCR value is 1.89, which indicates that the
benefits obtained from this investment exceed the costs incurred. With a BCR value > 1,
this indicates that the investment is considered feasible or profitable according to the BCR
criteria.
Achmad Factur Rahman, I Nyoman Gita Indrawan
Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 7, July 2024 3198
Results and Discussion
The data obtained from one of the woodchips producing places/factories is as
follows (Table. 1):
Table1
Information:
1. Price/Ton (Rp): Selling price to Steam Power Plant (PLTU)
2. Production Cost: Purchase price of raw materials, equipment maintenance costs, fuel
costs for cutting tools, employee salaries, etc.
3. Initial Investment (Building and Production Machinery) is IDR 2,500,000,000,-
Payback Periode
Payback Period is the period of time required to return the initial investment from
the net income generated. The shorter the payback period, the more profitable it is.
Periode
Information:
1. Initial Investment Cost = IDR 2,500,000,000,-
2. Annual Income = Average Income/month x 12 = IDR 947,606,064,-
3. Factory Lifetime = 5 Years
4. Payback Period < 5 years (eligible), Payback Period > 5 years (not eligible)
Payback Periode
The Payback Period calculation result of 2.6 years is shorter than the 5-year time
limit, indicating that this investment is considered feasible. This means that the
investment can be said to be profitable based on the Payback Period criteria because the
investment return period is less than 5 years.
According to Kasmir and Jakfar (2012) in (Ristantri & Supriono, 2020), a business
feasibility study is an in-depth process that aims to evaluate a business or business to be
run, with the main objective of determining whether the business is feasible to run or not.
This process involves a thorough analysis of available data and information, which is then
measured and calculated using certain methods. Furthermore, the objectives of
conducting a business feasibility study include:
1. Avoiding the risk of loss, because by conducting a feasibility study, potential losses
can be identified and anticipated early on, so that the risk of loss can be minimized.
Economic Potential of Renewable Energy With a Financial Feasibility Approach in Kupang,
NTT
Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 7, July 2024 3199
2. Facilitate planning, with a feasibility study helping to develop a more structured and
realistic business plan based on accurate data analysis.
3. Facilitate the implementation of work, because of good planning, the implementation
of work becomes easier and more directed.
4. Facilitate supervision, feasibility studies provide a clear framework for supervision,
making it easier to monitor business progress and performance.
5. Facilitates control, because with a feasibility study, control over various aspects of the
business becomes more effective, because there are already guidelines and standards
set from the start.
To test the feasibility of the investment, this study uses three evaluation methods,
namely Net Present Value (NPV), Benefit-Cost Ratio (BCR), and Payback Period. Each
method provides a different perspective on investment feasibility. The following are the
results of the investment feasibility study for the management and production of wood
into Biomass Woodchips as raw material for the Bolok PLTU fuel mixture in Kupang,
NTT. First, the calculation results using the NPV method show that this method considers
the time value of money. Using a discount rate of 30% per year, the present value of the
expected annual income over five years is calculated, then reduced by the initial
investment. The calculation results show that the NPV is IDR -192,054,102.82.
This result indicates that the investment is not profitable, as the present value of
future net cash flows is less than the initial investment cost. The negative NPV indicates
that, assuming the desired annual rate of return is 30%, this investment does not generate
enough value to cover the initial costs and provide the expected rate of return. Therefore,
from an NPV perspective, the investment is not viable. To achieve a positive NPV, the
desired annual rate of return must be less than 26%. Thus, the investment in the
management and production of wood into Biomass Woodchips as a raw material for the
power plant fuel mix shows that this investment is not viable.
This NPV calculation is in line with research by (Ridwan, Romli, & Soeroto, 2022),
which shows that if the NPV value is greater than zero or positive, then the project will
provide greater benefits so that the investment is accepted or feasible to run. NPV results
as an investment feasibility analysis are also applied to Mixue sharia franchises in
Indonesia. The NPV method shows that if NPV> 0, then the Mixue franchise is
considered feasible as an investment for franchise business people in Indonesia. In the
NPV calculation for the Mixue franchise, within a period of 12 months, the optimal point
is obtained in the 9th month (Sofwan, Putra, & Efendi, 2023).
The second stage is the Benefit Cost Ratio (BCR) test, which calculates the ratio
between the total expected benefits and the total costs incurred. The BCR result value
produces a value of 1.89, indicating that the expected benefits of this investment are 1.89
times the initial investment cost. Because the BCR value is greater than 1, investment in
the management and production of wood into Biomass Woodchips as a raw material for
the PLTU fuel mixture is considered feasible.
Research by (Hidayat, Winardi, & Nugroho, 2019) supports this by stating that if
the BC Ratio is greater than 1, then the benefits generated over the economic life of the
Achmad Factur Rahman, I Nyoman Gita Indrawan
Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 7, July 2024 3200
project exceed costs and investments, making the project favorable. However, if the BC
Ratio is less than 1, the benefits generated are not enough to cover the costs and
investment, making the project unfavorable. Investment feasibility testing using BCR has
also been carried out previously by (Rejekiningrum & Saptomo, 2015), who analyzed the
financial feasibility of a solar-powered automatic disc irrigation system for agricultural
development. The results of the analysis showed BCR values between 1.34 and 3.78,
indicating that the solar-powered automatic disc irrigation system for the development of
commodities such as mangoes, sugar apple, grapes and chili is very feasible to implement
(Pattiapon et al., 2021).
The third investment feasibility was tested using the Payback Period method.
Payback Period measures the time required to return the initial investment from the
expected annual income. From the calculation results, it was found that the Payback
Period is 2.6 years. Since the Payback Period value is shorter than the economic life of
the project, which is 5 years, this indicates that the investment is feasible. Therefore,
based on this analysis, the investment in the management and production of wood into
Biomass Woodchips as a raw material for PLTU fuel mixture is considered feasible.
This result is in line with the statement according to (Abuk & Rumbino, 2020), if
the Payback Period is shorter than the project life, then the investment is feasible. The
feasibility of investment using the Payback Period method has also been carried out
previously in research by (Ristantri & Supriono, 2020) on the property project of PT
Kharisma Katulistiwa Hijau. The Payback Period calculation results in a value of 1.70,
which indicates that the time required to return the investment is smaller than the
investment period, so this investment is feasible.
The results of this analysis confirm the importance of considering all investment
metrics together in decision-making. While a negative NPV indicates risk, a positive BCR
value and a short Payback Period may indicate that the investment is worth considering,
especially if the investor is willing to lower the desired rate of return or has a higher risk
tolerance. Therefore, the final decision should be based on the risk assessment as well as
the investor's preference for the rate of return and payback period. Another consideration
is that in addition to providing economic potential for entrepreneurs, biomass production
also contributes to the improvement of the community economy through the process of
planting energy forests as a source of raw materials.
Conclusion
From the results of the Net Present Value (NPV) calculation assuming a profit of
30% per year, the Woodchips production plant is not feasible to maintain. For the value
of profit assumption so that the NPV value is in the feasible category, the profit value is
< 26% per year.
For analysis using the benefit-cost ratio (BCR) value, if the results obtained are >
1, then investment can be said to be feasible. Likewise, from the results of the analysis
using the Payback Period, the results of the payback period < the Factory Lifetime so that
the investment can be made is feasible. In addition to having economic potential for
Economic Potential of Renewable Energy With a Financial Feasibility Approach in Kupang,
NTT
Jurnal Indonesia Sosial Teknologi, Vol. 5, No. 7, July 2024 3201
entrepreneurs, biomass production also helps improve the community's economy from
the process of planting energy forests as raw materials.
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