Tag Archives: private-sector

Direct Dissemination (State Programs) vs Private Sector Models

This post, the second in our business models series, aims to explore the differences between state-led dissemination models and private-sector business models, both in terms of scalability, as well as affordability for consumer and the potential for developing sustainable markets and sustainable businesses.

There are a variety of business models that could be used to develop clean cookstoves businesses, which can broadly be categorised into three spheres: direct dissemination models, where the user receives a cookstove funded by an outside organisation (government, international donors etc.); vendor sales models, where consumers directly purchase a cookstove for a lump sum from a vendor, and micro-credit models, either delivered by vendors themselves or through dedicated micro-finance institutions. [2]

Vendor sales are the most common method of businesses interacting with end-users in the clean cookstoves sphere. These vendors either purchase cookstoves on a wholesale basis from producers or distributors, or are assisted by third-sector financing organisations to enable this purchase. BURN Cookstoves in Kenya, one of the largest integrated cookstoves companies in the country, uses a direct-sales model for its operations.

Micro-credit in the form of dealer credits are another common financing instrument used in vendor purchase models for clean cookstoves, allowing consumers to pay a periodic fee to progressively purchase a clean cookstove. Some vendors have clean cookstoves as their primary business, others use it as an additional income stream to a more traditional goods shop, or as another source of revenue in an energy service company business. For example, some solar home system concessions in South Africa, such as the Nuon-RAPS (NuRa) utility are using clean cookstoves to supplement their business with a smaller, secondary revenue stream, selling both cookstove equipment and fuels. NuRa uses sales of charcoal and ethanol gel cookstoves, as well as integrated fuel/hob LPG stoves, to supplement their main solar home system business.

The Kenyan clean cookstoves market is a good example of one that has transitioned from a direct dissemination model at a donor/state scale to a private-sector led distribution and sales model. Donor/development agency-led clean cookstoves programs in Kenya date back to the 1980s, and designs used in the initial deployment phase, such as the Kenya Ceramic Jiko (KCJ), have become staple designs of the market. Charcoal stoves however are still the predominant cookstove type used in Kenya, with estimates that 47% of the population use some form of charcoal stove, rising to 80% in urban areas such as Nairobi. Global Alliance for Clean Cookstoves estimates put the size of the market at 2.5-3 million households using some form of clean cookstove in 2012. As of February 2016, the GACC is continuing to work with partners such as the Clean Cooking Association of Kenya (CCAK) and other governmental and non-governmental organisations, to disseminate 5 million improved cookstoves by 2020.

kcj
Ceramic Jiko stove, often referred to as the Kenya Ceramic Jiko. Image: AFREPREN

The cookstove market is fragmented in Kenya, with the majority of cookstove production done on a small to medium scale. Distribution costs can be high because of this, and with a poor road network in some areas, it becomes more feasible for wholesale buyers to collect directly from producers. Cookstoves are sold through a combination of dedicated retailers and traditional vendors, with wholesale buyers acting as further distribution agents to demand centres. [1]

There are a number of reasons why private-sector models can have advantages over state/donor-led dissemination. The Kenyan market relies on private provision of cookstoves from manufacturers at a local level, with vendors purchasing cookstoves wholesale to be sold later. Whilst this can increase costs to end users due to multiple markups in the value chain, offering micro-finance at a vendor level allows vendors to access wider segments of the consumer market, allowing people who could otherwise not afford a cookstove outright the chance to progressively purchase one. Scalability and flexibility are also advantages to private-sector dissemination, with multiple opportunities across the value chain for businesses depending on local consumer preferences and material availabilities. [3]

The next post in this series will explore the concept of the clean cookstoves value chain further, and identify where potential business might be sited within this value chain.

– Daniel Kerr, UCL Energy Institute

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

[2] Gaul (2009) Subsidy schemes for the dissemination of improved stoves. Experiences of GTZ HERA and Energising Development. Available at: http://fsg.afre.msu.edu/promisam_2/references/Gaul_2009_Stove_Subsidies.pdf

[3] SNV (2015) ICS Business Toolkit, Starting, Managing and Growing an Improved Cook Stoves Business in Uganda. Available at: http://snv.org/en/countries/uganda/publications/snv-uganda-integrated-cookstove-business-toolkit

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Clean Cooking Technologies and Dissemination: Growing Markets

Clean cookstoves, also known as improved cookstoves (ICS) have the potential to significantly change patterns of household and institutional energy use in developing countries. However, access to clean cookstoves for consumers in developing countries remains low, despite high levels of fuel use appropriate to cookstoves being prevalent in developing countries, particularly in rural areas.

cookstovegraph1

Share of population using solid fuels with access to improved cookstoves in Developed Countries (DCs), Least Developed Countries (LDCs) and Sub-Saharan Africa (SSA) [1]

The use of clean cookstoves has the potential to improve livelihoods, particularly for women and children, in developing countries through alleviating the time burden of gathering fuel, allowing users to spend more of their time on other activities, for example income generation. Daily collection of firewood for cooking can vary in duration from 3 hours [7] to seven hours [8]. Clean cookstove technologies such as rocket stoves can achieve the same cooking results, in the same time, while using just 60% of the fuel [8]. Global Alliance for Clean Cookstoves research has shown that traditional cookstove-using households in India, Bangladesh and Nepal on average spend 660 hours/year on fuelwood collection, while improved cookstove households spend just 539 hours/year [9]. Indoor air quality improvements are another key benefit. Around 3.8 million premature deaths annually are caused by non-communicable diseases, such as heart diseases and lung cancer that can be attributed to indoor air pollution [3].

Removing poorly-combusting, high-smoke fuels such as traditional wood fuels from the household energy mix in developing countries, and reducing indoor air pollution consequently, would have huge positive consequences for public health in the developing world.

Clean cookstoves technologies tend to be demarcated on the type of fuel used, as well as the general design of the cookstove and its technological aims. These cookstoves can also be demarcated through cost, with lower-cost cookstoves made from clay or metal with a clay lining, and higher-cost stoves using factory-machined materials like metals. Differences in cost tend to lead to different target market, with low-cost cookstoves targeting rural consumers, and higher-cost cookstoves focusing on emerging middle classes and high-income employees. Costs for a household clean cookstove can range from US$10 to US$350+, and as such different business models are required to disseminate these stoves to best reach their target markets. High-cost stoves are most commonly directly sold to consumers, whereas low-cost stoves can be available through government or donor programs of dissemination, as well as through direct purchase, vendor-credit or micro-credit models. [4] [6]

stovetech-combined-wood-charcoal-ics

Stovetech combined wood/charcoal improved cookstove. Source: http://inhabitat.com/four-cooking-stove-designs-that-can-save-the-world/

Solid fuel cookstoves, for example cookstoves using traditional woodfuels, tend to aim for significantly more efficient combustion of fuels, reducing indoor air pollution in the form of smoke and particulate matter, as well as generating more heat. These efficient designs can focus on combusting fuel more effectively, through designing combustion chambers to allow for more aerobic combustion, whereas others focus on having a heavily-insulated cooking chamber to reduce heat loss, focusing on longer cooking times for the same amount of fuel. Other cookstove designs for developing countries focus on using more efficient fuels with low-cost technology. Some examples of this include efficient charcoal stoves, as well as LPG stoves designed for developing country use.

cookstove-blog-table-1

Lab efficiencies of various established cookstove designs used in the developing world. Table established by D. Kerr derived from http://catalog.cleancookstoves.org/test-results, with standards available online at: http://cleancookstoves.org/technology-and-fuels/testing/protocols.html

However, lab efficiencies do not always translate into real-world efficiencies. A recent Indian cookstoves study conducted by researchers at the University of Washington and the University of British Colombia found disparities in real-world use efficiencies in a recent CDM program of cookstove dissemination from the Indian government. Particulate matter emissions especially were higher than expected, which may have been due to the ‘stove-stacking’ phenomenon, where families continue to use traditional cookstoves after receiving an improved cookstove. Some 40% of households in this study were found to be doing this [5].

Dissemination of clean cookstoves, and growth in access to the technologies, has the potential to have a significant positive impact on the sustainability of energy use and improvement of livelihoods of consumers in developing countries. Whilst state-run programs have had some success in directly distributing clean cookstoves, market-based measures have been shown to have significant impacts over the medium-long term, and private cookstove markets have developed in a number of Sub-Saharan African countries, such as Kenya, South Africa and Uganda. Markets across the world have disseminated large numbers of cookstoves, with over 12 million disseminated in China in the 2012-2014 period, 4.5 million in Ethiopia, and nearly 3 million in Cambodia [12]. The Kenyan clean cookstoves market was sized at 2,565,954 units in 2012, with high levels of urban and peri-urban penetration (~35%), but significantly less rural coverage [10]. The Ugandan market by comparison is estimated to be around 600,000 households, with urban areas again dominating this group [11].

This series of posts aims to explore the variety of models that private businesses can use to achieve scale and sustainability in their operations in the clean cookstoves sector [2]. Direct dissemination will be compared to vendor purchase, vendor credit and micro-credit models in the second blog of this series. Post three will explore the clean cookstoves value chain and identify opportunities for business growth along the value chain, and the fourth post in this series will examine the role of government in promoting clean cookstoves businesses.

– Daniel Kerr, UCL Energy Institute

[1] Bazilian et al. (2011) Partnerships for access to modern cooking fuels and technologies. Current Opinion in Environmental Sustainability, Vol. 3, pp. 254 – 259.

[2] Rai & McDonald, GVEP International (2009) Cookstoves and markets: experiences, successes and opportunities. Available at: http://www.hedon.info/docs/GVEP_Markets_and_Cookstoves__.pdf

[3] WHO Website (2016) Household air pollution and health.  Available at: http://www.who.int/mediacentre/factsheets/fs292/en/

[4] Global Alliance for Clean Cookstoves (2016) Clean Cooking Catalog.  Available at: http://catalog.cleancookstoves.org/stoves

[5] University of Washington (2016) Carbon-financed cookstove fails to deliver hoped-for benefits in the field. Available at: http://www.washington.edu/news/2016/07/27/carbon-financed-cookstove-fails-to-deliver-hoped-for-benefits-in-the-field/

[6] Global Alliance for Clean Cookstoves (2016) Business and Financing Models., Available at: http://carbonfinanceforcookstoves.org/implementation/cookstove-value-chain/business-models/

[7] FAO (2015) Running out of time: The reduction of women’s work burden in agricultural production. Available at: http://www.fao.org/3/a-i4741e.pdf

[8] GACC (2015) The Use of Behaviour Change Techniques in Clean Cooking Interventions to Achieve Health, Economic and Environmental Impact. Available at: https://cleancookstoves.org/binary-data/RESOURCE/file/000/000/369-1.pdf  

[9] GACC/Practical Action (2014) Gender and Livelihoods Impacts of Clean Cookstoves in South Asia. Available at: https://cleancookstoves.org/binary-data/RESOURCE/file/000/000/357-1.pdf

[10] GVEP/GACC (2012) Kenya Market Assessment: Sector Mapping. Available at: https://cleancookstoves.org/binary-data/RESOURCE/file/000/000/166-1.pdf

[11] GVEP/GACC (2012) Uganda Market Assessment: Sector Mapping. Available at: http://cleancookstoves.org/resources_files/uganda-market-assessment-mapping.pdf

[12] REN21 (2016) Renewables Global Status Report. Available at: http://www.ren21.net/wp-content/uploads/2016/06/GSR_2016_Full_Report_REN21.pdf

South Africa’s Renewable Energy Procurement Program

Robert Aitken from Restio Energy offers his thoughts on South Africa’s renewable energy procurement program to date.

South Africa has undertaken a very ambitious renewable energy programme which has the world watching with great interest. It has been said that the current programme to secure 3720MW of renewable energy is the largest in the world at this point in time. The approach used by the government is a competitive bid scheme (IPP Procurement Programme) where the private sector is invited to submit proposals against a stipulated amount of renewable energy required. Each of the identified renewable energy technologies has an associated tariff cap beneath which the bid must sit. The renewable energy technologies involved include; on-shore wind, solar PV, concentrated solar as well as a small amount of biomass, biogas and small-hydro.

It is an innovative and effective scheme which has thus far has been heavily over-subscribed in each of the three rounds assessed. It represents an important step for South Africa for a number of reasons;

  • This is the first large scale utility based renewable energy project in the country.
  • It will provide security of supply by diversifying the generational mix (previously predominantly coal) of electricity in the country
  • It has an increasingly demanding ‘local content’ or localisation component which is intended to stimulate the local renewable energy technology industry
  • It also has a strong community component aimed at ensuring local communities in and around these utilities benefit in a meaningful way.

It is these sorts of parallel requirements that will contribute towards the long-term operations and imbedding of renewable energy in the country. However, one of the service gaps this initiative will not address is access to electricity. The REIPPPP is a powerful grid security initiative which demonstrates the country’s willingness to engage with the private sector, promote renewables etc. Despite this 3.4 million households within the country remain without a grid connection and many households that are electrified cannot afford to use electricity particularly for thermal applications. While security of supply is crucial, the South African government needs to ensure a mixed approach (grid/off-grid, rural energy service delivery, small scale distributed initiatives, etc.) if access for all is to be achieved.

– Robert Aitken, Restio Energy