Tag Archives: maintenance

What Business Model is Best for LPG Dissemination?

In the previous two posts of this series on LPG in developing countries, we have examined the concepts of fuel-switching to LPG from other, less sustainable fuels, and some ways of promoting LPG access in developing countries through government interventions. However, the development of LPG markets with private and public-private participants in developing countries has been slow, and few interventions attempted by governments and third-sector actors have had success in developing these markets.

Developing a private market for LPG in developing countries requires the existence of business models that are relevant to the technology and fuel source, as well as adaptable to changing consumer and market conditions.

Is fee for service a good model for LPG?

Fee-for-service business models, where consumers pay a monthly fee to an energy service company for their energy services, whilst the company maintains ownership of the system and maintenance/operations responsibility, have been used to great effect in other renewable technology sectors in allowing users to access energy services at a significantly reduced up-front cost, removing one of the primary barriers to business success and market development for renewable technologies.

Applying a fee-for-service business model to LPG equipment and fuels could help to promote the development of an LPG services business in developing countries. The high up-front cost of converting from other fuels to LPG can be mitigated through a monthly payments scheme, allowing the user to access the technology where otherwise they could not. This can be applied to LPG fuels as well as LPG-utilising equipment, such as water heaters or cooking equipment. However, there are disadvantages to the fee-for-service approach as a transaction model for LPG also. Equipment costs for LPG are generally low, particularly for cooking use, with the majority of the cost coming in fuels. Fuel costs are generally very high compared to other renewable thermal technologies. As such, direct purchasing of LPG equipment is within reach of a large proportion of consumers, mitigating the usefulness of a fee-for-service approach to spread out high equipment costs. Applying a fee-for-service transaction model is an approach that has been tested in rare cases: LPG fuel financing is used by some companies, for example VidaGas in Mozambique, where users can pay off cylinder purchases over a period of 2-3 months.

LPG business model table

Appropriateness of the most common thermal energy fuel types for common renewable energy business transaction models. Source: Robert Aitken, 2016. [1]

Other models for LPG dissemination

Some countries, for example Ghana, South Africa and Nigeria, have started implementing a cylinder exchange model for LPG fuels, as opposed to previous models where cylinders were bought as a unit for a much higher price. These cylinder exchange models have been used in the domestic LPG sector in Europe for many years, and involve exchanging empty cylinders at central locations for full cylinders, with the user only paying for the fuel in the new cylinder. This involves the energy service company retaining ownership of the cylinders in circulation, allowing the user to access fuel at a lower cost.

kenya lpg cylinders

A vendor inspects cooking gas cylinders at a cylinder exchange site in Kenya. Source: http://empoweredweb.blogspot.co.uk/2011/07/opportunities-in-gas-business.html

Whilst this model benefits the users greatly, from a company perspective it is challenging, requiring a large up-front investment in terms of cylinders and filling equipment for LPG, as well as bulk purchases of the fuel itself, and the need for safe and secure storage of the fuel. However, with policies to promote business development in place, for example start-up grants or low-interest credit underwritten by governments/NGOs, this model has the potential to greatly increase access to LPG in developing countries.

– Xavier Lemaire and Daniel Kerr, UCL, February 2016

[1] Aitken  Robert (2016), Technology and Business models for thermal energy services, STEPs toolkit, Under print.

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The recent evolution of China’s National Biogas Program and lessons learned for application in other regions

This blog aims to describe in brief the history of China’s national biogas program and its transition phases in both the 1980s (moving to prefabricated plastic digesters) and more recently in promoting household scale systems, as well as how this program compares to other government-scale programs in household and centralised biodigesters. [1] [2] [3]

The Chinese National Biogas Program is one of the most cited examples of a successful biogas dissemination program at a government scale. The first biodigesters started appearing in China in the 1920s, and from the 1970s onwards the government began introducing household-scale centralised biodigester systems for rural communities under the predecessor of the current program. The first major transition in the program took place in the 1980s. Previously to this, most biodigesters in the country were constructed on-site from brick or concrete, however this period saw the introduction of what are known in the country as “commercialised digesters”. This covers three constructions of prefabricated biodigesters. Fibreglass-reinforced plastic (FRP) digesters began appearing in the 1980s themselves, whilst so-called plastic soft (PS) and plastic hard (PH) digesters came into the market in the mid-90s. These digesters offered significant commercial and operational advantages, being able to be constructed at a central site and then disseminated, as well as being more reliable, having lower maintenance requirements and a better performance overall.

xia zuzhang china biogas graph

Source: Adapted from Zuzhang (2014) Domestic biogas in a changing China: Can biogas still meet the energy needs of China’s rural households, http://pubs.iied.org/pdfs/16553IIED.pdf

As of 2011, 41.68 million households were using biogas services through the National Biogas Program. As of 2010 production capacity for the three previously-described prefabricated digester types was approximately 2,500,000 per year, and as of 2014, approximately 50 million households had been reached with biogas supply, using over 16 million cubic metres of biogas per year [4]. At least one prefabricated digester manufacturer exists in each Chinese province, over 100 in total. These digesters are also marketed across South-East Asia, and also recently to Sub-Saharan Africa.

However, there exist a number of present challenges to the continued development of the Program. Current funding for biogas digester construction predominantly comes from state, regional and government sources in the form of a subsidy for rural households. Rural households are expected to contribute, but this varies widely from just the labour costs, to 50-70% of the total installation costs. Some funding criteria stipulated by the government also exclude large proportions of the rural population: for a village to qualify for biodigester subsidies for example, at least 70% of the households must own sufficient livestock. This funding regime, as it exists, makes no provision for servicing and maintenance, and whilst biogas service cooperatives are beginning to appear in rural areas, no effort has been made to assess the current proportion of functioning digesters nor repair any identified non-functioning systems at a local government level.

Possibly the largest constraint to the continued operation and growth of the program is internal migration in China. The rural population is falling significantly as urban development continues, with huge number of rural people moving to urban areas for greater employment prospects and wages. This also contributes to biodigester effectiveness; with traditional animal husbandry industries giving way to larger, centralised livestock farming, feedstock regimes are decreasing in suitability in rural China for household-scale digesters, presenting an ongoing constraint to the operation of the program.

– Xavier Lemaire & Daniel Kerr, UCL Energy Institute

[1] Raha, Mahanta & Clarke (2014): http://dx.doi.org/10.1016/j.enpol.2013.12.048

[2] Groenendaal & Gehua (2010): http://dx.doi.org/10.1016/j.energy.2009.05.028

[3] Deng et al. (2014): http://dx.doi.org/10.1016/j.rser.2014.04.031

[4] IRENA (2014) Renewable Energy Prospects: China. Available at http://irena.org/remap/IRENA_REmap_China_report_2014.pdf

Maintenance of biodigesters and issues surrounding maintenance/service arrangements

Even in the presence of mandated service agreements maintenance for biodigesters can still be an issue. For example, time constraints on private contractors [1] from central government to install and maintain digesters, lead to a slipping in maintenance standards. In a village in Assam interviewed in the paper, no follow up visits from the contractors were had for four years, and a 20% digester failure rate was recorded. Communications issues were a key contributor to this: the fact that a provision of a half of the installation subsidy for maintenance of plants over 5 years old was not communicated to households or the contractors.

broken biogas assam india

A broken biodigester in Assam, India, having not been repaired for 6 months. Source: Raha, Mahanta & Clarke (2014) The implementation of decentralised biogas plants in Assam, NE India: The impact and effectiveness of the National Biogas and Manure Management Programme. http://dx.doi.org/ 10.1016/j.enpol.2013.12.048

One of the more overlooked aspects of biogas digester services and operation is the maintenance requirements of digesters. Older digester designs (for example dome-type biodigesters constructed from brick or earth) require a regular maintenance schedule (monthly to quarterly is common) [2] in order to maintain best performance, including maintaining the chemical balance of the digesting chamber and its structural integrity, repairing cracks in the chamber if necessary. More modern household and collective-scale designs are based off a plastic digesting chamber, usually fibreglass-reinforced plastic (FRP), and as such require less intensive maintenance (annual maintenance visits are sufficient), but still have a maintenance burden to address for peak performance (for example, maintaining the chemical balance of the digester through appropriate feedstock insertion).

However, even in the presence of mandated service agreements for biodigesters, for example delivered through a fee-for-service energy service company (ESCO), maintenance can be overlooked. A useful case study illustrating this can be obtained from India’s National Biogas and Manure Management Program (NBMMP) [1]. The NBMMP relied on local governments in India contracting the private construction sector to construct biogas digesters for rural communities. Time constraints on these contractors on installation, stemming from the prevailing climatic conditions limiting the working period of the year due to monsoons, meant that maintenance standards, for which the contractors under the tender from local government were also responsible, and the overall quality of installation of digesters, slipped drastically. Some contractors reported having to fill an annual allocation of 6,000 digester installations in just three months, at a rate of over 60 digesters per day, often for small companies of just 5-10 technicians. Hence, some digesters were not being maintained for four years or more, and there was a 20% overall digester failure rate. Communication between the public bodies and private contractors was also an issue: the NBMMP made provision of half the subsidy granted to households for purchasing digesters as a maintenance grant over a five-year period, which was barely taken advantage of due to a lack of awareness on the part of households and contractors.

This case study makes clear the necessity of accounting for maintenance arrangements in the design of any biodigester business plan or program. Ensuring the maintenance schedule is followed will extend the life of the biodigester and improve its performance, resulting in greater satisfaction with the system from the point-of-view of end-users. This fact makes biodigesters particularly suited to a fee-for-service business model: regular maintenance can easily be combined with regular payment collection visits, reducing the cost burden on the company/organisation and improving service.

The final post in this series will focus on the recent evolution of the Chinese National Biogas Program, and the lessons to be learned for cross-application in other regions globally.

– Xavier Lemaire and Daniel Kerr, UCL Energy Institute

[1] Raha, Mahanta & Clarke (2014): http://dx.doi.org/10.1016/j.enpol.2013.12.048

[2] Surendra et al (2014): http://dx.doi.org/10.1016/j.rser.2013.12.015

Nuon-RAPS (NuRa) Utility Field Visit – 30th October 2014

The STEPs team, following the meeting component of the network meeting, used the 30th October as an opportunity to visit premises belonging to the Nuon-RAPS (NuRa) utility. NuRa is one of three concessionaires currently operating in KwaZulu-Natal province, providing both solar home systems and LPG to customers. The solar home systems are provided on a fee-for-service basis, with customers visiting an energy store on a monthly basis to top up their system credit, via an electronic key. LPG is provided to customers on a direct purchase basis. NuRa had 19,005 SHS customers as of September 2013, with a net customer growth of ~1,000 per year. LPG is supplied to the company on a 30-day credit by Totalgaz, and the company also offers direct sales of ethanol gel, having also previously experimented with improved cookstove provision.

NuRa Mkuze main energy store

The NuRa main energy store at Mkuze – 30th October 2014 – Image: Xavier Lemaire

The STEPs project team visited two energy stores in the course of the day; the main energy store (and the centre of operations) at Mkuze, and a smaller energy store in Jozini. In Mkuze the team viewed the main operations of the organisation, from the process of credit top-up and LPG sale, to the equipment for the SHS, to the maintenance and repair division. In addition to this, the team observed the training procedure for new technicians on-site in Mkuze.

Topping-up credit for the SHS is done via an electronic token (magnetic key) which the customer brings to the energy store to add credit to. Maintenance teams also have a version of this token which collects operational data from the system at point of maintenance, for assessment by the company. Installations take place via car and motorcycle, and the company maintains its own fleet of vehicles. Technician training is also done on-site, with several demonstration rigs at the Mkuze store for this purpose.

The company also operates LPG bottle top-up facilities at each energy store, where customers bring empty bottles to be refilled, or purchase a new system in the case of the Shesha stoves.

NuRa training site

Technician training at the Mkuze energy store – 30th October 2014 – Image: Xavier Lemaire

NuRa test components

Testing components at the Mkuze energy store – 30th October 2014 – Image: Xavier Lemaire

NuRa bike maintenance

Motorcycle fleet maintenance at the on-site workshop – Mkuze energy store – 30th October 2014 – Image: Xavier Lemaire

In Jozini, the team visited one of the rural energy stores servicing more dispersed communities further North in KwaZulu-Natal. There they observed operations at the energy store, and also took the opportunity to have conversations with customers of the store, asking about the scale of their energy use and energy costs, as well as desires for future service (refrigeration, television). Of particular interest was the point that customers still used traditional woodfuels in addition to their LPG service, the primary driver behind this being the free availability of woodfuel to low-income consumers.

STEPs Team at the Jozini Energy Store

The STEPs team at the Jozini energy store – NuRA field visit 30th October 2014 – Image: Daniel Kerr

NuRa Jozini energy store

The Jozini energy store – 30th October 2014 – Image: Xavier Lemaire

WP_20141030_12_18_08_Pro

The Shesha gas cooker, offered by NuRa to customers, an integrated 5kg LPG bottle and single hob. NuRA field visit by STEPs 30th October 2014 – Image: Daniel Kerr

The NuRa utility offers a number of useful lessons for the STEPs project. First and foremost, that it is possible to run a successful utility targeting bottom-of-pyramid consumers on a fee-for-service basis, integrating electricity and thermal energy services. The integration of product sale, installation, maintenance and service into one site and under one company (the energy store and NuRa itself) provides resilience for the business and enables the free exchange of information, as well as increasing customer satisfaction through regular maintenance from a trusted source. Finally, the on-site training of technicians through energy stores gives the utility a strength in capacity, and prevents the need for outsourcing to other technicians, reducing costs.

– Daniel Kerr, UCL Energy Institute