Martin Tobias Family Foundation: Building a biodiesel plant on Sumba Island in Indonesia

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June 25, 2008

Building a biodiesel plant on Sumba Island in Indonesia

So Claude Graves, the founder of Nihiwatu surf resort called me. He has been developing Nihiwatu for 20 years into a model of sustainability and responsible resort development. The latest challenge? what to do about fuel prices and how to keep that money local. The answer? Biodiesel. Through a mutual friend Claude and I start in the fall of 2007 e-mailing and designing a biodiesel refinery over email. His plan is to pay local people in Sumba (average wage $.50/day) to pick up and dry coconuts. Then crush them for the oil (60% oil), make biodiesel from oil to run electric generators at Nihiwatu and use the meal for feed or make nutrition bars out of it. By March 08, Claude had all the funds for the equipment and scheduled the coconut crushing/expelling equipment to be installed in April. He also had all the biodiesel mixing equipment fabricated in Bali and delivered to Sumba by early May 08. In May 08 the Indonesia government lowered the subsidy on fuel due to the high cost of that subsidy relative to $135/barrel oil. That caused the price of a litre of diesel to rise 30 percent overnight and has continued to spark riots across the country. It is a good time to consider alternatives.

Ok, I just decided to stop horn tooting and just get down to the project and what happened. The Tobias Foundation partnered with the Sumba Foundation to build a small scale biodiesel refinery at Nihiwatu resort with the goal of redirecting all the resort's diesel purchased into biodiesel from the local economy. Create revenue for Sumba Foundation with no extra cost, or maybe savings to Nihiwatu resort. Use the biodiesel by products in the nutrition and farming and other revenue generation projects for locals. Tobias Foundation donated time, expertise and money around biodiesel manufacturing and co-product refining.

Project planning was Nov '07- April '08
Equipment installation, commissioning, training April - May '08
Nihiwatu running on biodiesel in generators June 08.

Plant design size, two 750L biodiesel reactors, 4 ton a day coconut crusher.

Operating capacity of biodiesel plant June 08 when Tobias Foundation left: 750L/day biodiesel.
Nihiwatu resort diesel consumption 3-400L/day.

The biodiesel plant was designed to make 3-4x the daily demand of Nihiwatu resort to allow for sales of biodiesel to other customers and creation of back-log biodiesel. As of June 08 the limiting factor has been availability of Copra (the dried coconut shells). The local copra production has been mostly bought by Chinese investors for export for overseas processing. There has been little incentive to increase production. But now with a local processor buying every day, production is expected to increase. Sumba Foundation provides trucks to drive around the island purchasing copra.

Fixed Cost expenses:
Property plant and equipment about $100,000USD provided by Sumba Foundation and donors.
Training and start-up costs about $15,000USD provided by Tobias Foundation.

Variable economics:

in June 08, the government controlled Diesel price on Sumba was 13,000RP/L about $1.30USD/L. This price is still subsidized and under the market price you would get from $135/Brl crude. The all in cost including all operation expenses, Sumba Foundation overhead, and all raw materials to produce a litre of biodiesel from local copra was about 9,000 RP/L, about $.90USD/L, a savings of over 40%. It will be up to a negotiation between Nihiwatu and Sumba Foundation how to split the savings, but the bottom line is that it is cheaper to make your own biodiesel on Sumba than to buy diesel from the petroleum company.

That is a HUGE conclusion and economic driver. The Tobias Foundation focuses on setting up sustainable businesses that promote renewable energy. Where this works best is when the customers of the renewable energy don't have to pay more or even can have a savings. Then you are not asking a business to do something non-economic for an altrustic reason. You are just giving them a better product at a better price. That is capitalism. That is sustainable. That is what happened in Sumba with the biodiesel refinery.

The next phase of analysis will be for the Sumba Foundation to follow up on the economic impact of keeping all that oil money on the island. Measuring the economic multiplier effect of that money going local instead of to the oil company. That will be very interesting.

Some pictures:

martin and claude in front of bd refinery

the bd plant building

nihiwatu beautiful villa and pool

coconuts collected in the field

claude and drying copra in the sun

raw copra as bought from local people

the twin biodiesel mixers

copra crusher and oil expeller

coconut oil expeller

measuring the lye

manual sodium methelate mixer.

test batches

demethalation unit (recovery of excess methanol)

Sumba school supported by the Foundation

The benefactors of all this work.