Tag Archives: public-private partnership

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.

Advertisements

The ‘Real 5P Model’ in Cinta Mekar

Binu Parthan from SEA writes on the implementation of a pro-poor public-private partnership (5P) model for micro-hydropower in Indonesia.

I first heard about the 5P model or the Pro-Poor-Public-Private-Partnership in 2012 when I was in the mountain kingdom of Lesotho. The UN’s Economic Commission for Africa were scoping for an energy centre to be run by a cooperative as a 5P model.  I found the idea of PPPs in rural energy that focused on poverty alleviation quite compelling in the context of the rural energy work I was doing at the time. This approach was reflected in the Lesotho Energy Alternatives Programme (LEAP) that I developed for UNDP and the Sustainable Thermal Energy Partnerships (STEPs) project that Xavier Lemaire of UCL Energy Institute and I developed with during 2012-2013. Fast forward 2 years and the STEPs project is generously funded by UK Aid and on its way, and while responding to the baseline study on the STEPs project, I hear from Hongpeng Liu and Deanna Morris at the Energy Division of UN’s Economic and Social Commission for Asia-Pacific (UN-ESCAP) about the original 5P model which has been working for over 10 years in Cinta Mekar, Indonesia.

With kind support from Tri Mumpuni of People Centred Business and Economic Institute (IBEKA) (who incidentally is a recipient of Magsaysay award for her work on hydro power for rural electrification), weeks later I find my way to Cinta Mekar, a relatively remote hilly village about 3 hours drive from Jakarta. The Cooperative at Cinta Mekar – Makar Sari is headed by a diminutive Yuyun Yunegsih, a grandmother of three who was elected a few years ago by the 450 members of the cooperative. The cooperative manages the 120 kW hydro power plant which was commissioned in 2003. The investment in the hydro-mechanical and electro-mechanical equipment and the building materials were financed 50:50 by UN-ESCAP and a private company Hidropiranti. The facilitation was by IBEKA and the members of the community and cooperatives contributed labour and local materials for civil construction in a normal PPP mode. Today after 12 years the hydro power system is still working well and generating and selling electricity to the local utility – PLN at slightly over US cents 4/kWh. 40% of the $650-$1100 monthly revenues go to Hydropiranti and 40% to Mekar Sari cooperative while 20% is set aside for maintenance, repairs and replacement.

The Mekar Sari cooperative has done a number of impressive ‘pro-poor’ initiatives over the years with its share of the revenues. It has provided financial assistance to households which could not afford to obtain an electricity connection. The cooperative also provides scholarships to 360 kids from the community, provides a land fund for members who do not have land holdings, provides an allowance for women in the community to cover childbirth related expenses and also pays an allowance to older members in the community. It has plans to construct public toilets, drinking water fountains etc. all of which seems very impressive. This is an impressive ‘pro-poor’ element that I have not seen in energy projects in general. I have seen impressive pro-poor energy initiatives driven by visionary and charismatic individuals but not by organisations for such a long duration and consistent track-record.

While the social development and pro-poor schemes have been very impressive, the business side has been slightly less impressive. The cooperative has not been successful in renegotiating in higher off-take tariffs in the power purchase agreement with PLN which pays almost a three times higher tariff for similar community hydro plants. A major investment in a manufacturing facility to make gluten-free banana flour which would have employed 10 people have not been successful and lies largely unutilised as the supply chain and market prospects were not investigated properly. It’s possible that the cooperative may have benefitted from some hard-nosed business advice. However the initiative can be considered a notable success in establishing a technical and management solution at an institutional level which has worked for over 12 years and has continued to be profitable and having driven social development in the community.

From the STEPs project perspective it was interesting to see that almost all the electrified community was using LP Gas or gathering wood from the forests for cooking, thus affirming our view that the thermal energy aspect is often overlooked and left to individual households to solve. What was interesting was also that many households which could afford were using electric rice cookers for cooking the main staple food, and efficient electric cooking is something STEPs hasn’t paid much attention. For the STEPs project plans, 5P model which combines private sector quality, efficiency and investments with public and community investment and participation, with community organisations managing social benefits and which combines both electricity and gas supply could indeed be a better model economically and socially. The question whether the institutionalised community leadership in Cinta Mekar can be replicated elsewhere remains. After my visit I asked Yuyun what the cooperatives biggest challenge was and contrary to what I expected it turned out to be the efforts by the local government to take over the cooperative. So while technical, economic and social challenges can be overcome in rural energy services, political challenges often pose a greater risk to sustainability.

– Binu Parthan, SEA

Yuyun Yunegsih at the Cinta Mekar 5P Hydro Power Plant
Yuyun Yunegsih at the Cinta Mekar 5P Hydro Power Plant. Image: Sustainable Energy Associates

The Woman and Child in Bondo and Modern Thermal Energy Access

She was weak and frail, with her baby on her back and a large and unusually long log of wood on her head. You could sense that she was struggling to move under the weight of the log on her head and the baby on her back, but perhaps the promise of the large firewood and promise of less trips to gather wood egged her on. The water channel on her path was shallow but the fall was very steep, probably 40 m or more, she would have crossed the channel quite easily without the load. She jumped across, didn’t make it, slipped but fortunately held on to the brickwork and then pulled herself and her baby out and moved on. I had my heart in my mouth for a few seconds and was greatly relieved that she and her baby was safe. The women with her baby (see picture) could have easily slipped and dropped 40 m down with grave consequences.

This is a scene I witnessed two weeks ago at Bondo in Southern Malawi –one of African countries where over 90% of the population lack energy access. Several millions of women in Sub-saharan Africa and South Asia make such risky trips every day to gather firewood, twigs and shrubs for household thermal energy use, often putting themselves at physical risk. Such trips often expose these women to rough terrain, natural elements and attacks from animals and sometimes fellow humans.  Most of these women then cook food or boil water using inefficient traditional stoves or keep the fire burning through the night to keep themselves warm or wild animals away. These traditional thermal energy use results in major indoor air pollution which slowly kills them and their children through lower respiratory diseases. So women are exposed to health risks during the collection and use of traditional biomass for thermal energy.

Against this backdrop, last week, I was pleased to learn from the launch of the decade of SE4All from New York that the first two years of the decade will be dedicated to ‘Energy-Women-Children-Health’ nexus. This is a very welcome development and I applaud the SE4All leadership and partners for the attention to this space. However to be able to effectively address health related challenges of women and children in areas without energy access, electrification alone is not sufficient and providing modern and thermal energy to rural women is central to this issue. Providing modern thermal energy needs to go beyond a product delivery approach which often focuses only on efficient cook-stoves. While energy for cooking is important, hot water for sanitation and space heating are also quite important. While biomass – solid and liquid fuels, electricity and solar thermal could all play a role, Liquefied Petroleum Gas (LPG) can also play a supplementary role. The business of providing thermal energy as a service is likely to a low-return, long-term business and may need to be combined with electricity or agro businesses to increase viability. There are also important roles that public sector, private sector, Public-Private Partnerships (PPP) and the international community should play. Solutions will need to go beyond technology to address, financing, supply chain, institutional arrangements as well as policy and regulations. So all of us need to chip at this problem from all possible angles and the attention and support in this space in the next two years due to SE4All is very welcome.

As for the anonymous woman and her child, Peter Killick of Mulanje Energy Generation Agency, the micro-grid electricity service provider for Bondo who witnessed the scene with me, kindly offered to put a footbridge across the channel. While I am relieved that her future journeys to gather fuel will be safer, I hope to be back in Bondo in the future to see that she has access to cleaner energy technologies and fuel supply at her doorstep.

Dr. Binu Parthan, SEA

The Woman and the Child at Bondo

The Woman and Child in Bondo. Credit: Sustainable Energy Associates

STEPs Presentation at the Bengaluru SE4All Workshop

A presentation on ‘Rethinking Finance and Business Approaches for Energy Access’ was made by me at the Third International Triennial Workshop on Sustainable Energy For All : Transforming Commitments into Action. The workshop was organised by the NAM Science & Technology Centre and Society for Energy Managers (SEEM) at the green Christ University Campus at Kengeri, Bangalore during the period 21-24 February 2014. This was the third energy-related international event organised by NAM S&T Centre and SEEM and brought together a large number of energy sector experts from about 20 countries including 15 developing countries and several of them  from Asia and Africa. The five countries participating from Sub-Saharan Africa were from Nigeria, Mauritius, Tanzania, Zambia, and Zimbabwe. The workshop also adopted the Bengaluru declaration on sustainable energy for all.

An expert talk was given by me, presenting the current business and finance approaches to energy access and highlighting some of the new and emerging thinking in this space. The talk exhorted equal priority to thermal energy access alongside electricity and also encouraged the use of Public-Private Partnerships (PPPs). Several energy service business models such as PPPs, PAYG and emerging financing concepts such as crowdfunding, cryptocurrency etc were also presented. The STEPs project and its plans were also presented alongside a number of other progressive finance/business frameworks.. The interventions from the floor showed a keen interest in the issues of finance & business.

So the participation at the third triennial workshop on SE4All provided an opportunity to highlight the challenges with business and finance models in energy access and to encourage new approaches. The workshop also provided an opportunity to introduce the STEPs project, its objectives and plans to clean energy, energy access and development practitioners in Asian and African developing countries.

SE4All BP

Dr Parthan presenting at the SE4All Workshop. Image: Sustainable Energy Associates

Rethinking Finance and Business Approaches for Energy Access – Presentation – Sustainable Energy Associates

Dr. Binu Parthan, SEA

Clean Cookstoves and Entrepreneurship in Kenya

Daniel Kerr from UCL reports on recent partnerships for clean cookstoves in Kenya.

A number of international organisations are realising the benefits of cleaner methods of cooking in developing countries. In particular, the Global Village Energy Partnership (GVEP) are continuing to make progress in providing clean cookstoves and cleaner cooking fuels in Africa, through an ongoing partnership with the Global Alliance for Clean Cookstoves (GACC). A recent conference in Nairobi, the National Stoves and Fuel Conference, was co-hosted by the GACC and the Clean Cooking Association of Kenya, where GVEP was able to highlight the progress made under the Spark Fund Program, an initiative from the GACC under which GVEP was awarded US$375,000 in July 2013.

Under the Spark Fund Program, GVEP is working with local producers of clean cookstoves in the Central and Kisumu areas of Kenya to develop new stove designs with improved performance, particularly in terms of thermal efficiency and emissions reduction. Partnerships with local testing centres and universities are also in place to quantify these reductions and efficiency gains, with the aim of optimising designs whilst maintaining local manufacturing ability.

The Spark Fund Program is an effort to address the research and development gap often seen in micro-enterprise, due to the lack of funding and expertise. Engaging micro-enterprises in the development of new cookstove products is seen as a key step to further developing the clean cooking market in Kenya. As explained by Laura Clough, a technical specialist at GVEP: “As the sector looks towards developing new standards for improved cookstoves and making them cleaner and more efficient, it is important that local enterprises are able to participate fully in this process”.

Entrepreneurship and market development are both relevant to the STEPs project. Through the establishment of public-private partnerships with private organisations and entrepreneurs, and the development of market mechanisms and a market-oriented approach to program development, a faster pace of model penetration and a more sustainable, cross-applicable model will be developed.

– Daniel Kerr, UCL Energy Institute

More information on the National Stoves and Fuel Conference and GVEP’s participation can be found here: http://www.gvepinternational.org/en/business/news/gvep-called-showcased-its-work-cookstoves-international-conference-kenya

Global Village Energy Partnership on Facebook: https://www.facebook.com/gvepintl?fref=ts

GVEP Home: http://www.gvepinternational.org/

STEPs Poster at the Asia Clean Energy Forum

A poster on the STEPs project was presented in the Marketplace of Ideas segment in the Asia Clean Energy Forum during June 2013. The Asia Clean Energy Forum over the last 8 years has emerged as one of the key clean energy event in Asia. This year’s forum held during 25-28 June attracted 640 participants from 55 countries and was held at the Asian Development Bank headquarters in Manila, Philippines. The forum was organised very well and had a good selection of speakers. The participation was mainly from business and governments followed by development agencies. The forum was supported by ADB and a number of governments including the UK government.

A poster was developed by UCL and SEA highlighting key aspects of the project. The poster and the idea about the use of PPPs for thermal energy service delivery were received well at the market place with several delegates stopping to study the material and seeking clarifications. Most questions I received were more about the problem of thermal energy service than the approach we are proposing. So this seems to be a problem which needs more attention from development policy and academic research. I also joined the panel discussion at the main conference on maximising energy access focusing on financing issues. During the panel discussions, I also flagged the challenges with thermal energy access and the need for more efforts to address this problem. This view was also supported by interventions from the floor.

So the participation at Asia Clean Energy Forum provided an opportunity to highlight the challenges with thermal energy access in developing countries and to introduce the STEPs project to clean energy, energy access and development practitioners in Asia.

Dr. Binu Parthan, SEA

CIMG2180STEPs poster at the Asia Clean Energy Forum 2013. Image: Sustainable Energy Associates

Thermal Energy Challenges in Rural Lesotho and an Opportunity to Leap to Modern Energy

Dr. Binu Parthan of SEA offers his thoughts on the thermal energy situation in rural Lesotho:

Lesotho is a land-locked country of over 30,000 km2 land area located in in southern Africa. The country with a population of over 2 million is one of the least developed countries with a low Human Development Index of 0.45 placing the country at 160 out of 185. Lesotho consists of highlands with altitudes ranging from 1400 m to 3400 m above sea level and is often called as the Roof of Africa. The country remains cooler than the surrounding region with average temperatures of 20⁰C in summer and -2⁰C in winter. Sesotho people live in traditional Rondavels and need energy for cooking and heating with 61% of the population however depends on solid fuels – firewood, shrubs, animal dung-cakes and crop residues for their thermal energy needs. In rural areas where 83% of households are located the dependence on solid fuels is significantly higher at 80%.  The modern sources available for cooking and space heating are LPG, Kerosene and Electricity the use of which is mainly confined to urban areas. The traditional and inefficient use of solid biomass fuels and the resultant indoor air pollution is also affecting the health of more than 1.6 million of the Sesotho with 200 annual deaths due to indoor-air pollution.

I had been working over the past year supporting UNDP and the Ministry of Energy Meteorology and Water Affaires (MEMWA) to scope and develop a new programme Lesotho Energy Alternatives Programme (LEAP) which will address electrical and thermal energy needs of the village in the country. The LEAP programme when implemented will establish Public-Private-Partnerships (PPP) managed by private operators in rural areas providing electrical and thermal energy to households. The village energy service providers will use a range of technologies -LPG cookstoves, efficient biomass cookstoves, LPG room heaters, efficient biomass heaters etc. through an energy service arrangement.  While the energy service arrangement for electricity is clearer, possible arrangements for thermal energy needs to be developed further. The LEAP upcoming programme in Lesotho provides a good opportunity for the STEPs project team to collaborate and support the piloting of models for thermal energy services delivery.

– Binu Parthan, SEA

CIMG0624A Sesotho woman, next to her Rondavel, her new LPG canister and old biomass stove. Image: Sustainable Energy Associates.