New and renewable energy development should be encouraged because Indonesia is net importer of oil. Government subsidy for transportation and electricity is more than 300 trillion rupiahs per year. Presidential Decree No. 5, 2006, mandates that energy mix target by 2025 is 17% for new and renewable energy. The demand growth of energy is about 7%, compare to developing country only 2 – 3%. This study aims to develop renewable energy policy models concerning biomass for rural electrification; to identify factors that influence price of feed in tariff determination, in particular wood-based biomass, and designing the role of social forest as raw materials for bio-pellet industry in sustainable supply chain. Research method using soft systems methodology is the application of Interpretative Structural Modeling (ISM) and Strategic Assumption Surfacing and Testing (SAST). The results showed that key elements of development policy model are feasible biomass energy tariff, competent human resources, coordination among related local government offices and community participation. Other important factors are funds and investment for business, microfinance, state owned forest lands, and smallholder plantations policy one spatial regions plan institutions. The strategic assumptions have been identified, which is sufficient supply of raw materials industry, availability of alternative potential industrial biomass raw materials in the local, the obvious trade system to accelerate the model implementations, that requires regulatory support from local governments, inventory land use and forest area inventory, and support of community leaders.
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