Tag Archives: market development

Partnerships and Opportunities for Clean Cookstoves Support from Governments

This post aims to discuss where the opportunities may lie for governments and private sector organisations to enter partnerships for clean cookstoves market development. Both public and private sector actors have advantages and disadvantages in the approaches generally taken by such bodies in the clean cookstoves market space.

ghstakeholdersmap

Map of stakeholders in the clean cookstoves sector in Ghana. Image: http://cleancookstoves.org/binary-data/RESOURCE/file/000/000/311-1.pdf

Public-sector operations have the ability to achieve scale quickly and effectively, however are often lacking in terms of lasting presences in markets due to the financing models (direct dissemination, direct subsidy) used most commonly in these circumstances. These models tend to lead to consumers failing to maintain use of disseminated equipment, leading to a shrinking of the market presence for cookstoves technologies in the longer term. Private sector market actors, conversely, can take longer to achieve scale in their operations, and have to contend with acquiring financing, either through their operations or donors, to continue maintaining their market presence.

Hence, there are significant, proven opportunities for the combination of approaches. Public-private partnerships (PPPs) have the potential to alleviate the negative aspects of both public and private approaches, with private sector actors operating as delivery agents for overarching public-sector objectives, or public sector operators supporting the development of a functioning private market.

The development and marketization of the Sri Lankan clean cookstoves sector, with donor agencies, the state electricity agency, and private sector companies all collaborating to develop a functioning private cookstoves market, is a good example of how PPPs can achieve successful results in the clean cookstoves market context. Support from the Ceylon Electricity Board (CEB) in distributing clean cookstoves to their existing customers allowed the development of functioning private production enterprises across the country, with a guaranteed market for their produce. Local production of clay stove liners is still continuing in the country. [1]

enablingenvironment

Steps in improving the enabling environment for clean cookstoves. [2]

The creation of an enabling environment for new businesses to enter the clean cookstoves market is another crucial role of governments in developing a clean cookstoves sector. The above image shows a number of pertinent steps that can be taken to do this. Starting at a consumer level, raising awareness of the benefits of a clean cookstove technology, through to allowing small and large businesses to access financing to scale their operations, and enabling credit facilities either through public or commercial banks, governments have the potential to significantly contribute to the ease of starting and maintaining a functioning private clean cookstoves market.

– Daniel Kerr, UCL Energy Institute

[1] Amerasekera, R.M. (2006) Commercialisation of improved cookstoves in Sri Lanka: A case study. Available at: http://www.inforse.org/Case/Case-SriLanka-Stoves.php3

[2] GVEP International (2012) Global Alliance for Clean Cookstoves Kenya Market Assessment, Sector Mapping. Available at: http://cleancookstoves.org/resources_files/kenya-market-assessment-mapping.pdf

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Promoting LPG Uptake in Developing Countries

Increasing the use of LPG fuels as a means of achieving greater sustainability has been a targeted policy for a number of developing countries in recent years. However, projects to promote LPG access have met with mixed success. The barriers to increasing the use of LPG in developing countries, particularly for poorer communities or those in rural areas, are numerous, including issues of price of fuel, access considerations and the reliability of supply, and the price of LPG-using equipment, for example stoves..

A number of projects have endeavoured to mitigate these barriers and improve the state of LPG markets in their respective countries and regions. The Ghanaian LPG sector is often cited as an example of a successful government-level intervention to develop LPG markets.

The case of LPG in Ghana

The earliest government programs in the sector began in 1989, and recent government policy on energy has put access to LPG for households and institutions and security of LPG supply as high priorities in the national energy strategy. Government strategy has addressed two key themes: increasing indigenous production, storage and equipment production capacity for LPG, and removing barriers to access for both the urban and rural populations of the country. Results of these interventions have included improving the production and storage capacity of the Tema oil refinery, re-capitalising the Ghana Cylinder Manufacturing Company to indigenously produce LPG cylinders, and price-levelling the cost of LPG fuel across the country to promote rural market growth.

However, direct subsidies such as those used in Ghana for levelling the price of LPG fuel can have unintended consequences and distort markets. There has been seen in the rise of LPG conversions for taxis and minibuses in the country, taking advantage of the newly-subsidised LPG fuel for transport use. The rise in LPG use in road vehicles was also due to increased government taxes on transport fuels in 2012 and 2013, which do not include LPG in their remit. The combined effect of being able to avoid taxation on petrol or diesel, as well as take advantage of subsidised domestic LPG, has led to increased LPG use in the automotive sector. More recently, from 2013 onwards, supplementary imports to the Tema Oil Refinery’s LPG output, as well as the government’s scaling back of price controls and subsidies, have reduced automotive LPG use. [3]

Other countries, such as Indonesia and India, have also implemented direct subsidy models, such as the Indonesian kerosene conversion megaproject from 2007-2009, and the Indian LPG sector, which as of 2015 was offering direct subsidies to consumers for the purchase of LPG fuels and equipment through the government’s Direct Benefit Transfer system. Both of these projects have seen a huge shift from the use of kerosene for cooking and heating to the use of LPG, and both projects have achieved this through re-targeting government subsidies towards LPG, and away from other fuel sources. In the case of Indonesia, LPG use following the conversion project rose to over 80% of rural and 90% of peri-urban and urban households by 2013. The Indonesian program also intervened in the equipment sector, distributing 44 million LPG conversion kits to 15 provinces in the country, enabling consumers to convert to LPG fuel without the high initial investment in LPG-using equipment. [1] [2]

pertamina-graph

Increase in LPG usage before and after the kerosene-LPG conversion project in Indonesia. Source: Pertamina, 2013, http://www.pertamina.com/en/

However, experience with developing a functional private market for LPG in some developing countries is limited, particularly in Sub-Saharan Africa. The persistent issues of access to the LPG fuel and reliability of supply, as well as transport considerations for rural areas and a lack of a distribution network, can hamper the development of markets. The next post in this series will investigate business models for use in the LPG sector by private or public-private participants.

– Xavier Lemaire and Daniel Kerr, UCL Energy Institute, February 2016

[1] Budya & Arofat (2010) Providing cleaner energy access in Indonesia through the megaproject of kerosene conversion to LPG. Energy Policy, Vol. 39, pp. 7575 – 7586.

[2] Andadari et al. (2014) Energy poverty reduction by fuel switching. Impact evaluation of the LPG conversion program in Indonesia. Energy Policy, Vol. 66, pp. 436 – 449.

[3] Biscoff et al. (2012) Scenario of the emerging shift from gasoline to LPG fuelled cars in Ghana: A case study in Ho Municipality, Volta Region. Energy Policy, Vol. 44, pp 354 – 361.