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Slides for ACCI Report
THE WORLD BANK
State of the Clean Cooking Energy Sector in Sub-Saharan Africa
November 16, 2012
DRAFT FOR DISCUSSION
What do we mean by clean and improved cooking solutions?
What’s included?
Potential benefits
What is it?
Basic ICS Intermediate ICS Advanced ICS Modern fuels
Small functional improvements over baseline technologies; typically made from local materials by local artisans or self-built
Improved efficiency of combustion of fuel and emission gases, typically with rocket principles and (often) higher end materials.
Gasifier biomass stoves using natural draft principles or with fans, some biochar producing; emerging TEG/charging features.
• LPG
• Electricity
• Kerosene
• Natural gas
High
Renewable fuels
• Biogas digesters
• Biofuels / ethanol
• Solar / retained heat cookers
• Briquettes/Pellets
• Legacy chimney
• Basic efficient wood
• Basic effic. charcoal
• Portable wood rocket
• Fixed rocket chimney
• Highly improved charcoal stoves
• Natural draft gasifier (TLUD or sideload)
• TChar stoves
• Fan gasifiers / fan jet
Non-biomass stoves relying on liquid / gas fossil fuels or electricity.
Sustainable fuel or stove solutions that rely on renewable energy sources. Often part of stove/fuel system.
ISO tier 1 ISO tier 1-2 ISO tier 3 ISO tier 3-4 ISO tier 3-4
IMPROVED SOLUTIONS CLEAN COOKING ENERGY
Moderate High
2
• Solid fuel cooking by 700 million Africans imposes large and growing economic, health, and environmental costs on the region, with a disproportionate impact on women
• Strong and growing evidence that clean fuels and improved stoves can mitigate these costs, save lives, and improve environmental sustainability, but mitigation potential varies by technology
• The potential market is large, but only ~17% of African households rely on clean cooking solutions and, including all non-legacy ICS, penetration of clean and improved stoves and fuels is under 25%
• The convergence of several new demand, supply, and enabling environment trends suggests that the next decade will bring major progress in access to improved cooking energy
• The business as usual scenario for 2020 is encouraging, but still leaves >60% of Africans behind, potential health and environmental benefits largely unrealized, and energy poverty gaps growing
• Key barriers to uptake and use of clean energy include affordability, consumer behavior, distribution to last mile, producer technical capacity, A2F, product quality, and policy constraints
• Faster and more equitable growth is possible via a targeted focus on affordability, consumer education, access to quality products, and investment in sustainable fuel/stove value chains
Executive summary
3
Sub-Saharan Africa has the highest rate of solid fuel reliance globally
Percentage of developing world population relying on solid fuels by region
6 94
8 92
28 72
48 52
29 71
63 37
Solid fuels Modern fuels
31 69
58 42
71 29
81 19
88 12
95 5
Eastern Europe & Central Asia 83
Latin America & Car.
17
19 81
South-East Asia 53 47
South Asia 71 29
Sub-Saharan Africa 82 18
65 35 East Asia
Total population Rural population Urban population
Source: Dalberg fuel use database drawing on WHO Global Health Observatory Data Repository, DHS, MICS, LSMS, National Census. Uses latest year known (2005-2012) rather than parametric forecast model for missing datapoints. 5
Solid fuel reliance greatest in East and Central Africa
8% 8%
8%2%
1%
10%0%
5%2%1%6% 2%
Central Africa
91%
39
East Africa`
232
87%
West Africa
Southern Africa
85%
179
4%
5%
73%
76
Share of population using different types of fuels as primary cooking fuel, 2010
Note: Total countries profiled: 45; C=4; E=12; W=19; S=10; Source: Dalberg fuels database drawing on WHO Global Health Data repository and add’l surveys; Dalberg analysis
Rural Sub-Saharan Africa
7
25%7%
49%
43%41%
20% 13%
9% 6%9% 19%
11%
9%
Kerosene Gas
Electricity
Wood
64
3%
12%
3% 3%
41%
2%
59
Southern Africa
3% 70
East Africa
30%
1%
West Africa
Charcoal
Dung/other
139
Central Africa
40%
1%
Urban Sub-Saharan Africa
SSA solid fuel dependence will continue to grow quickly
Number of people living in households where the primary fuel is solid fuel (in Millions)
271 287 276
759 840 864 880
1,0511,140 1,144 1,116
252
2000
2,714
546
South East Asia
2015 F
East Asia
884
South Asia
3,150
2020 F
78
Lat Am & Carribean
SSA
3,209
80
787
2010
3,049
82
700
87
∆ 2010-2020 (millions)
+ 184
- 24
+ 40
- 35 - 5
1 Not modeled but known as an important potential driver Source: 2000-2010 data based on Dalberg fuel mix database; projection based on inertial penetration trends for underlying fuels from 2000-2010, adjusted for changes in population and urban/rural mix
Fuel mix drivers • Population growth
• Urbanization
• Inertial modern fuel adoption trends
• Incomes1
• Price differential between fuels1
• Gov’t policy changes1
12
Costs of traditional cooking significant, but improved solutions can help
13
Economics & livelihoods
SSA traditional cooking Mitigation potential via new solutions
Health
Environment
Gender and other social
Stat
e of
our
kno
wle
dge
• USD 50 bn opportunity cost across quantifiable health, environment, and economic impacts\
• 24bn to 41bn growth in fuel spend projected by 2020
• 3-20%+ share of monthly HH expenditure
• Time loss of >40 mn person years
• 12-17 mn jobs in woodfuel value chains
• Strong real world evidence for fuel and time savings (30-80%) depending on solution
• Theoretical impact of clean energy is labor saving, but net impact on jobs likely limited due to demand growth
• Add’l livelihood benefits due to ICS/clean fuel jobs and saved time for income generation (15-35%)
• 570-680k deaths and 18-22 mn DALYS for COPD/ALRI alone due to solid fuel cooking
• Significant unquantified impacts from other IAP-related illnesses, burns, firewood collection, and lifestyle nuisances (e.g., eye irritation)
• Hardest benefit to capture due to steep dose-response curve, behavioral changes needed, long lag time
• 25-60% IAP upper respiratory illness reduction from best-in-class solutions, most other impacts not yet clear
• 120-380 MT CO2 Kyoto GHG (~1% of global)
• Major source of BC emissions (6% ) resulting in local climate changes and potential global warming impact
• Charcoal contributor to forest degradation, with possible local deforestation effects
• Strong theoretical impact case, but difficult to measure
• Little data as of yet on systemic impacts (e.g., total woodfuel demand, degradation, local outdoor pollution)
• Disproportionate impact on women and girls for health, time poverty, and economic wellbeing
• Education, nutrition, and aesthetic impact
• Good evidence for improved (self-reported) health and economic impacts for women and girls
• Evidence for improved VAW outcomes weak
• Nutrition, education, aesthetic impact largely anecdotal
Cooking fuels are a significant share of expenditures for the poor
Source: National household survey data (2000-2011) from multiple sources; Dalberg analysis
6.7%
South Africa
9.0%
Uganda
15.0%
3.0%
11.4%
5.8%
Ethiopia
10.0%
7.0%
Malaw
i
2.5%
20.0% Kenya
5.8% 6.0%
Angola 3.3%
1.8%
5.9% 4.6%
Ghana
Madagascar
Richest Poorest
5%
10%
Cooking and lighting fuel spending as share of total household expenditures (%)
Economic impact
14
Significant, gender-skewed time poverty impacts of solid fuel use
7
7
37
6
6
9
16
19
20
12
30
3
2
5
4
3
3
Burkina Faso
Madagascar
Ghana
South Africa
Tanzania
Ethiopia (Tigray) 100
Benin
Malawi
Guinea
Men Women
Firewood collection (minutes per day)1 Cooking time (hours per day)
4.57
3.21
1.34
3.73
1.31
2.41
2.35
0.29
0.08
0.20
1.48
0.04
0.28
0.10
Malawi3
Lesotho2
Guinea
Tanzania
Burkina Faso
Ethiopia2
(Tigray)
Rwanda4
Source: World Bank/IEG (2006), Blackden & Wodon (2006), Cecelski (2000), FAO (2011), Lawson (2007), Tanzania TUS (2006), Huba & Paul (2007); Kiros (2011); Dalberg analysis
Economic impact
15
Solid fuel cooking is a fast growing public health crisis
1 Dalberg estimate applying 2004/2005 COPD/ALRI mortality ratio to 2010 solid fuel exposure 2 Pro-rated share of WHO/UNDP 2030 estimates using SSA region share of 2030 solid fuel population 3 Application of 2004/2005 ALRI/COPD mortality ratio from WHO to 2030 F solid fuel dependent population of 900 million Source: WHO, IEA, Dalberg IAP database; Dalberg analysis
Millions of deaths in Sub-Saharan Africa annually 2004-2030F
Solid fuel cooking-linked ALRI and COPD
.57
HIV/AIDS
.67
1.2
1.7
TB
.14 .25 .25
Malaria
.23
.6 .75 .702 .681
2004
2030 F
2010
.873
16
Health
BC emissions and forest degradation impacts could be substantial
1 Assumes fNRB of 90% for firewood and charcoal, share <0.5% if fNRB of 50% is used for charcoal and fNRB of 10% for firewood Source: Hosonuma et al (2012), SEI (2008), EPA (2011), Dalberg impact database, Dalberg analysis
GHG (Kyoto)
95%
4% 1%1
80%
SSA biomass cooking 6%
All other sources globally
14% SSA cooking In other regions
Black carbon
33%
6%
Timber logging
Sub-tropical Asia
Uncontrolled fires
74%
3% 9% 1%
16%
Lat. Am. Africa
8%
52%
Livestock grazing 12% 3%
Charcoal production / firewood collection
84%
Climate change contribution Cooking/charcoal production share of total, %
Drivers of forest degradation – not fully validated % attribution based on R-PIN proposal analyses
17
Environment
Woodfuel demand not the only challenge, supply is unsustainable and inefficient
SOURCE: AFREA (2011); WB (2011); Dalberg woodfuel value chain database; Dalberg analysis
Cross-cutting challenges
• Lack of sustainable forestry management, potentially leading to high rates of resource depletion and localized overharvesting
• Periodic charcoal bans mean that information on sector is limited and ability to influence sustainability is low
• High rates of informality account for 30-50% of end-price instead of being captured as tax revenue
• True economic costs of charcoal production not accounted for as wood seen as a “free” resource
• Disproportionate value capture by large transporters and wholesalers at expense of producers and retailers, especially women
Wood production and harvest Transport Charcoal
production Wholesale Retail
• Waste and GHG from poor efficiency kilns (8-20% vs. 25-40% potential)
• Low capacity
• Health hazards
• Oligopolistic control and often limited value for small transporters
• Significant informal payments
• Health hazards
• Significant informal payments
• Operate in shadow economy and cause tax revenue loss
• Unsustainable livelihoods due to capture of value by upstream intermediaries
• Weak forestry management
• Over-harvesting of “free” resource in public forests
• Land rights issues
Environment
18
Ethanol
Solar
Coal traditional
Biogas
Built-in rocket Portable
rocket
Natural draft gasifier Fan draft stove
Basic efficient wood
High-end charcoal 3 stone fire
Basic efficient charcoal
Kerosene
LPG
Traditional charcoal
Electric
Wide range of theoretical impacts depending on cooking solution
4 3 2 1 0
Health impact
Clim
ate
Impa
ct
Clean
Pollu
ting
Gree
n
1 Index on scale of 1-10 based on stove emissions of tons of GHG CO2-eq including all particles from fuel combustion and charcoal production weighted at GWC100; assumes fNRB of 0.5 2 Index on scale of 1-10 of daily PM 2.5 intake per person and CO mg/ m3 concentration, weighted 50/50 to capture both carbon monoxide and PM emissions health effects
Source: Berkeley Air Monitoring Stove Performance Inventory Report (October 2012); Grieshop et al (2011); Dalberg stove database; Dalberg analysis
185
Unhealthy
Mitigation potential of improved and clean solutions
19
DIRECTIONAL ONLY
Reach of clean and improved cooking solutions
Reach (# HH)
Legacy & Basic ICS Intermediate ICS Advanced ICS Modern Renewable
IMPROVED CLEAN
21
LPG: 7.8 mn
Electricity: 9.5mn
Kerosene: 11.6 mn
• 150k (excluding 550k+ retained heat cookers)
Legacy: 8mn
Basic ICS: 7.6mn
>4 mn stoves ~50k stoves
Africa examples
Pima gas LPG (Kenya)
Arivi kerosene (S. Africa)
CleanStar (Moz.)
CookIt (multiple)
Inyeyeri (Rwanda)
Lorena chimney
Mud stove (Malawi)
KCJ (Kenya)
Rocket Lorena (Uganda)
Envirofit (multiple)
Jiko Poa (Kenya)
Ugastove (Uganda)
Philips Fan Stove
Awamu (Uganda)
Jiko Bomba (Tanzania)
Source: Press searches, interviews, program M&E data, Dalberg analysis
Clean and improved solutions are under a quarter of the SSA cooking market
Source: Dalberg SSA fue database; ICS penetration database with data for 45 SSA countries from national program, donor, CDM, and individual manufacturer data; WHO chimney stove penetration database; Global Alliance Market Assessments; Dalberg analysis
71%
5%
Traditional stove
Legacy ICS
Non-legacy ICS 7%
Modern 17%
Renewable
<1%
Primary cooking technology mix in Sub-Saharan Africa (2010) 100% = 171 million HH
DIRECTIONAL ESTIMATE
22
Technologies like retained heat cookers not includes as they are not primary stoves
Chimney stoves often not truly improved (Tier 0) but included in broad ICS definition for completeness
Largely basic and intermediate stoves, “Clean” ACS <0.1%,
Substantial but unknown (10-25%?) portion of ICS are actually used by modern fuel households
Basic ICS 7.6 mil
Charcoal artisanal jikos
Wood basic artisanal
Charcoal semi-industrial
>4.4
>2.5
>0.6
38% 17%
<0.1%
59%
Legacy and basic stoves dominate the improved biomass sector, but intermediate solutions beginning to see scale and ACS have entered market
Intermediate ICS 4.1 mil
Rocket chimney
Portable wood rocket
Charcoal industrial
Rocket injera stoves
1.7 mil
<500k
100k
1.8 mil
Legacy stoves
Chimney legacy
Enclosed mud/clay
6.3 mil
1.8 mil
8.1 mil
Source: Dalberg ICS database drawing on public sources, program M&E data, and interview for 45 SSA countries
Household utilizing stove as primary cooking facility (2010) 100% = ~20 million SSA households
23
Advanced ICS
Natural draft gasifier
Fan draft gasifier / fan jet
15-40k
<10k
<50k
The majority of ICS have been distributed in urban areas, are portable, use wood fuel, and are domestically manufactured
100% = 11.8 million (excludes 8 mil legacy stoves)
Portable 66%
Fixed and semi-fixed
34%
Charcoal 44% Wood & multi-fuel
56%
Urban 65%
Rural 35%
24
98% Domestic
2% Imported
DIRECTIONAL ESTIMATE
Source: Dalberg ICS database drawing on public sources, program M&E data, and interview for 45 SSA countries
• Large and growing demand for clean and improved solutions
Large potential market –50% buys fuels already spending >20bn per year
Only 15-20% cannot or will not buy even basic ICS, but truly clean solutions are unaffordable to many
Demand set to grow with rapid population growth, urbanization, rising incomes, growing fuel prices
• Transformative changes in supply landscape
Advanced biomass solutions entering commercialization (fan gasifiers, TEG fan jet, ND gasifiers)
Continuing evolution in artisanal/semi-industrial sector with frugal design/replication of intermediate ICS
Business model and financing innovation to reach BoP (pay-per-use, fuel-stove packaging, small LPG cylinders)
• Enabling environment
Growing ecosystem of supporting intermediaries and improving, though still limited, funding environment
Evolution in policy landscape with increased recognition of harms and policymaker focus on biomass solutions
Learning from country programs on viable models for scale-up and market support
Emerging testing infrastructure and start of alignment on industry standards
Key sector trends
26
High
Middle
Low
Large potential market with diverse customer segments
Low
High
Medium
Modern fuels (LPG, Kerosene, Electricity, LNG)
Wood purchasers
Wood collectors Charcoal
Urb
an m
arke
t Ru
ral m
arke
t
Low (<BoP 500) Medium (BoP 500-1500) High (>BoP 1500)
SSA population by customer segment (100% = 164 million households)1
1 Excludes 6.5 million households who use “other” solid fuels including dung, crop waste, coal, or unknown Source: WRI, WB, DHS, WHO, Dalberg consumer segmentation database and analysis 28
Demand
Truly non-marketable segment for minimally improved ICS likely small
1 Excludes 6.5 million households who use “other” solid fuels including dung, crop waste, coal, or unknown Source: WRI, WB, DHS, WHO, Dalberg consumer segmentation database and analysis
SSA population by customer segment (2010)
100% = 164 million1
29
10%
11%
4%
Poor wood purchaser
Poor wood collector
15%
Mid-to-high income charcoal
Mid income wood collector
Mid-income wood purchaser 10%
Poor charcoal
32%
18%
Modern fuel
Not marketable population?
Willing to buy USD 15-30 solutions with appropriate financing?
Demand
Affordability constraint likely to be reduced with growing incomes
1 Purchasing power parity adjusts for price differences in identical goods across countries to reflect differences in purchasing power 2 Includes all of Africa, not just SSA countries Source: McKinsey Global Institute
Share of households in each Africa income bracket (Percent)2
30
Demand
Fuel prices will drive both overall demand and inter-fuel substitution
2006 2005 2004 2003 2002 2001 2000
LPG (kg)
350
300
250
200
150
100
50
2012 2011 2010 2009 2008 2007
Kerosene (l)
Wood (kg)
Charcoal (kg)
Charcoal (w/ 45% poverty premium)
400
Average household cooking by fuel using constant fuel diet (avg. real cost of MJ 320 cooking energy consumption in 2012 USD)
Source: Dalberg SSA fuel price database (22 countries for charcoal, 11 for LPG, 45 for kerosene) 31
Demand
Wide range of performance with new tech reaching commercialization M
oder
n IC
S Re
new
able
Legacy stoves
Basic efficient stoves
Chimney rocket
Portable rocket
Advanced charcoal
ND gasifier
Fan gasfier/jet
LPG
Electricity
Kerosene
Ethanol
Biogas
Solar
Briquettes/pellets
Retained heat devices
33
Supply
Source: Expert interviews, Berkeley Air Monitoring data, Dalberg analysis
Overview of key production models
Source: Interviews, press searches, Dalberg analysis
Industrial Semi-industrial Artisanal
Decreasing mechanization and increasing decentralization
34
10-15 firms
200-250k unit sales / year
USD 20-100 per stove
25-40 mid-sized fims
>300k units / year
USD 6-25 per stove
>10k artisans/masons
>3 million units per year
USD 3-15 per stove (portable)
Supply
• High tech , scalable manufacturing outside of SSA
• Mechanized domestic assembly of locally manufactured and imported components
• SSA assembly of imported precision tooled “flatpack” parts
• Individual artisanal producers with support from facilitating programs/ institutions
• Individual unaffiliated artisans and masons
• Local components , moderate levels of automation
• Decentralized workshop production, with central assembly/quality control/and distribution
Multiple new entrants and supporting intermediaries
Source: Interviews, press searches, Dalberg analysis
SolCom
Industrial Semi-industrial Artisanal
Decreasing mechanization and increasing decentralization
Workshop based
Producer networks & individual artisans
35
Mechanized assembly of local and imported components
High tech , scalable manufacturing outside of SSA
Decentralized production, central assembly/quality control
Individual artisanal producers with support from facilitating programs/institutions
Local components , moderate levels of automation
Local low-tech integrated
“Flatpack” assembly of precision tooled parts
International imported
Local hi-tech integrated
Africa assembly
Save80
Supply
Ugastove Awamu/ABE
Tizazu Makobu Enterprises PLC
Semi-industrial and industrial factories and workshops
CooksWell/Musaki Ent. Keyo Pottery Enterprise Burn Manufacturing
M&R, SECCO, Kiwia and Laustsen
Cerâmica Térmica
Katene Kadji
Toyola CookClean
New Dawn Engineering
Philips/African Clean Energy
Ken’s Steel Engineering
Peko Pe
GreenTech
Save 80
WorldStove
Potential Energy
Semi-industrial production Industrial production
Assembly only
Proliferation of domestic industrial and semi-industrial players
TsoTso stove
Source: Press searches, interviews, Karakezi (2008); Dalberg analysis
Arivi, Natural Balance
37
Growing diversification in distribution channels as sector seeks scale Supply – distribution
Source: Press searches, interviews, Dalberg analysis 39
3rd party dealer-distributor networks
Social sector partners Institutional sales Micro-franchisees Direct sales channel
Distributor / dealer networks including both large and small retailer formats
Manufacturer staff, commission-based door-to-door agents, proprietary stores
Bulk purchases and redistribution by institutional clients (e.g., relief agencies)
Sales/order fulfillment via MFI / NGO / gov’t extension agents
Micro-franchisee agents empowered an incented to distribute products
Save80
Innovation in consumer financing models Supply – financing
Overview of finance solutions for driving price reduction Option Details Example
Installment / PAYG plans • Consumers can pay for a stove in installments.
• Pay-as-you-go systems lower upfront costs for consumers and but transaction costs of collection are high and difficult to scale
Carbon finance (CDM) • USD 10-25 carbon credit claimed by the manufacturer as income or passed through to the consumer in lower prices..
• USD 42 million CDM funds channeled to stoves projects last year, but viability at scale unclear given state of carbon credit markets.
Microfinance • Small loans for stove purchase disbursed through MFIs/SACCOs and typically bundled with distribution arrangements
• No demonstrated capacity for scale today due to logistical challenges and low MFI appetite for financing <USD 60 products
Non-carbon “buy-down” performance based grants
• Performance based subsidies provided directly by donors/ governments to lower upfront cost of the stove to the end user.
• Subsidy can go to the manufacture to lower price of stove, or to the user for purchase (e.g. voucher mechanism).
Mobile enabled utility model
• Potential for mobile financing and utility based models with remote stove activation/deactivation (e.g., pay for 2 weeks use)
• Models currently being trialed for solar lighting and potential exists for extending model to cookstoves
Fuel amortization and cross-subsidy models
• Stoves offered for free, at cost, or with partial subsidy but funds collected from fuel revenue stream
• Stoves offered for free in return for fuel collection services
40 Source: Press searches, interviews, Dalberg analysis
Overview of key cost drivers
Source: manufacturer interviews, Dalberg analysis
32% 27%
Improved charcoal stove
USD 22
18%
11%
14%
16%
14%
Wood Rocket stove
USD 21
14%
15%
14%
14%
11%
Semi-industrial production
26%32%
Fan gasifier (pellet)
USD 49
11%
11%
8% 6%
12%
20%
Wood rocket
USD 41
5%
13%
23%
9%
10%
15%
Industrial production Artisanal
40%30%
18%
USD 5 USD 11
23%
Efficient charcoal stove
18%
Efficient charcoal stove
23%
21%
26%
42
Shipping and import duties Distribution costs Manufacturing margin Local transport Labor
Taxes Raw materials
Supply – product economics
Move to frugal design and Africa production for natural draft gasifier
1 Approvecho testing for Africa manufactured stove; self-reported results for India manufactured stove; results from pyrolysis only, not burning resulting charcoal Source: Manufacturer interviews, public value chain data, Dalberg analysis
13
10
10
6
39
Urban Africa end-
consumer price
Distribution costs,
margins, and VAT
Import duties
and shipping
Labor and mfg. margin
Materials
Industrially mfg. ND TLUD imported from India ND TLUD manufactured semi-industrially in Uganda
Recycled metal
8
5
3
Distribution and VAT
16
Urban Africa end-consumer
price
Materials Labor and mfg. margin
Easy to assemble design for low skill labor
Overall performance: ISO Tier 2-3 PM: 89 mg (range unknown)1
CO 8.1 g (range unknown) Fuel savings vs. 3-stone fire: 40%+
Overall performance: ISO Tier 2-3 PM: 25 -180 mg1 CO: 3-8 g Fuel savings vs. 3-stone fire: 45%
Costs across stove value chain, USD
Low VAT due to low baseline product cost; no import duties
Supply – product economics
43
Growing eco-system of supporting intermediaries
Source: Organization websites; Literature review; interviews; Dalberg analysis
Coordinating platforms
Testing centers/providers
Fuel & stove suppliers/distributors
Government agency/program
Donors and programs
National/International NGOs
SeTAR Centre
Global LPG Partnership
45
Enabling environment
CERER
Providers of finance / Investors
MEMD
Champions have emerged with focus on specific sectors /technologies
Source: Online websites/resources; Dalberg research and interviews
Modern and renewable fuels and stoves
Kerosene Bio-fuels Biogas Renewable solid fuels
Solar & Retained Heat LPG for the BoP
Global LPG Partnership
Many SMEs (USD 20-300k revenues
46
Enabling environment
Of 11 globally recognized testing centers, only one is in SSA, 3 others in development
Aprovecho Research
Center, USA
Colorado State University Engines and Energy Conversion Lab,
USA Centre for Research in
Energy and Energy consumption (CREEC),
Uganda
Sustainable Energy Technology and Research Centre
(SeTAR), South Africa
Asia Regional Cookstove Program
(ARECOP), Indonesia
EELC Technology Lab (EELC)
and Renewable Resources Lab (RRL), China
GERES, Cambodia
Prakti Design Lab,
India
GIZ – UMSS University of Cochabamba,
Bolivia
SENCICO, Peru
Zomorano University, Honduras
Kenya Industrial Research and Dev’t
Institute (KIRDI), Kenya
Environmental Protection Agency
(EPA), USA
Testing facilities for improved cookstoves around the world
Enabling environment
Centre d'Etudes et de Recherches sur les Energies
Renouvelables (CERER), Senegal
48 Source: Press searches, interviews, Dalberg analysis
In business as usual case clean and improved access will grow significantly
24%13%
20%
17%
16%
15%
14% 25%
7%14%
17%6%
5%4%
2010
0%
80
2020 Base case
Legacy stoves
Fixed chimney rocket
Portable artisanal ICS Semi-industrial ICS Industrial ICS/ACS
LPG
Kerosene
Renewablessolutions
Electricity
48
0%
0% 1%
Penetration (% of all HH)
2010 2020F
17% 18%
7%
18%
24% 36%
Improved stove and clean fuel penetration of SSA households (Millions of HH, %)
Source: Dalberg ICS penetration forecast model; Dalberg analysis
+25 mil HH
+7 mil HH
50
18%6%
18%
2010
5%
72%
23 45
ICS
62%
2% Legacy improved
2020
Traditional
unimproved
17% Clean stoves/fuels
… but this growth is not sufficiently quick and, likely, insufficiently equitable or sustainable
Source: Dalberg analysis
South Asia
East Asia
Lat Am.
100%
20%
40%
90%
60%
10%
80%
0%
30%
70%
50%
Improved 2010
Traditional cooking
Improved 2020
Would still leave SSA in much worse situation in 2020 than where other developing countries are today
Inertial growth likely to be highly unequal, with many access laggards
SSA countries
51
Major barriers to more rapid uptake
Source: World Bank regional consultations; GACC market assessments; Sector interviews; PCIA; Dalberg analysis PCIA
Consumer demand Supply Cross-cutting enablers
• Affordability (product and fuel)
• Consumer awareness
• Access
• Culturally appropriate design and convenience
• Low product quality
• Cost-effective distribution
• Producer and distributer A2F
• Producer technical capacity
• Lack of after-sales
support
• Policy and regulations
• Quality standards and testing infrastructure
• Lack of consumer/ market intelligence
• R&D and technical innovation barriers
• Lack of sector coordination
• Program monitoring and impact assessment
52
How can the market grow even faster?
• Investment in unlocking demand via consumer education campaigns, consumer finance solutions, and stove price reductions via tech innovation and performance based incentives
• Strategic investments by donors in underserved markets to “kindle” new market growth (e.g., set up of artisanal sector, consumer awareness) in totally unpenetrated geographies
• Acceleration of industrial and semi-industrial solutions (e.g., from 35-50% to 45-70% annual sales growth) via access to finance, market linkages, quality testing support to multiply number of new entrants and help existing players grow faster
• Re-alignment of policy and regulations to support market (e.g., taxes and tarrifs)
• Success of ambitious programs or projects across modern and renewable fuels unrelated to improved biomass cooking solutions, e.g.:
• ABPP – targeting 2 million SSA biogas users by 2020
• Global LPG Partnership – 30 million incremental new HH in SSA by 2018-2020
• Ethanol (Cleanstar)– scaling to 1-2 million HH Africa-wide by 2020
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The funding gap to improved and clean cooking energy access is large
1 SSA share of USD 70 million estimate by IEA based on SSA proportion of global solid fuel users 2 Dalberg estimate based on tally of known and estimated donor, CDM, and private sector investments in the past year (or, where applicable, historical annual average) 3 IEA funding need estimate showing range from “New Policy Scenario” for the minimum to “Universal Access” for all Source: Dalberg analysis
22
IEA estimate of SSA funding need
(average 2010-30)3
300-1100
Dalberg estimate (2011)2
50-125
IEA estimate 20111
SSA clean/improved cooking energy annual funding gap USD millions
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Enabling environment
3,833
2,000
217
HIV/AIDS
10-18x
Malaria ALRI/COPD from solid fuel cooking
Annual funding per death (2012)1
9-10x
With substantial new investment in the sector and targeted interventions a more aggressive scenario is possible
Penetration of SSA HH
2010 2020b
17% 28%
7%
40%
24% 68%
Improved stove and clean fuel penetration of SSA households (Millions of HH, %)
55
24%13% 9%
20%
17%11%
16%
15%
17%
4%6%
5%8%
14% 25% 29%
7%
14% 15%17%6%
Electricity
LPG
Industrial ICS/ACS Semi-industrial ICS
Portable artisanal ICS
Fixed chimney rocket
2012 Aggressive case
142
2%
48
0%
0% 1%
3%
2012 Business as usual
80
0% Renewablessolutions
Kerosene
2010
+68 mil HH
+26 mil HH
Global LPG Partnership
Recommendations – Private sector
1. The SSA household cooking market is ripe for investment and market entry with increasing commercial opportunities for first mover producer, distributor, and financier entrepreneurs
2. Product quality and consumer orientated design can drive adoption and greater scale
3. Segment-specific customization is important for many end-users but there is also strong demand for relatively standardized products that translate across borders and customers
4. Private sector enterprises serious about building scale in Africa should consider on-shoring the production and/or assembly of stoves in large SSA demand markets or regional hubs due to the significant potential net benefits from a product price and distribution perspective
5. The cooking fuel market is orders of magnitude larger than the market for cooking appliances, highlighting benefits of business models that integrate into fuel supply chains
6. Product bundling and partnerships with existing distribution networks will be critical to scale – building one’s own proprietary distribution is effective, but typically expensive and slow
7. Compelling impact data is relatively scarce, particularly for newer, higher performing technologies, well structured investments in M&E will be important competitive differentiators with public sector, donor, and social impact investor community
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Recommendations – Governments, NGOs, and Donor Community
1. Cleaner, more efficient production of solid biomass and the development of renewable fuel markets should be pursued alongside efforts to encourage the adoption of modern fuel and improved biomass stoves
2. Artisanal production continues to be an important solution for many consumers even as parallel efforts are being pursued to maximize the environmental and health benefits of cooking interventions through more advanced technologies and benefits of industrial scale production
3. More sustainable and equitable reach of clean cooking energy solutions will require donors, NGOs, and governments to engage both on market acceleration, market creation, and non-market solutions
4. Smart subsidies and incentives linked to performance are therefore an essential tool for clean cooking energy promotion; direct subsidies should be used sparingly to avoid market distortion
5. Access to finance challenges spans upstream and downstream needs, but donor interventions are likely to make the biggest impact on producer and distributor financing bottlenecks
6. Large-scale consumer awareness efforts are needed to drive faster adoption and ongoing use of clean cooking energy solutions
7. Despite growing knowledge on the sector, the donor community must address major gaps in data on the African consumer and real world impacts
8. Investment in standards and quality testing will be critical to help producers and distributors strike appropriate balance between affordability and quality and minimize potential market spoilage
9. Market development must be integrated with policy reforms including rationalization of taxes/duties),integration of sustainable biomass fuels into energy strategy, and regulatory regime for modern fuel and renewable fuel development
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Overview of SSA customer segments
Poor wood collectors
Mid income wood collectors
Poor wood purchasers
Mid income wood purchasers
Poor charcoal users
Mid-high income charcoal
Modern fuel users
Segment size 53 mil (32%) 25 mil (15%) 17 mil (10%) 16 mil (10%) 6 mil (4%) 18 mil (11%) 29 mil (18%)
Current spending Monthly fuel cost (stove cost)
n/a n/a $1-10/month ($ 0–5)
$5-25/month ($ 0-5)
$5-20/month ($1-5)
$5-35 / month ($1-12)
$5-40/month ($10-100)
Household income <BoP 500
BoP 500-1500 <BoP 500 BoP 500-1500 <BoP 500 60% BoP 500-1500, 40% >1500
>95% BoP 1500
Location of consumer 90% rural, 10% urban
90% rural, rest urban
>60% urban, esp. W. Africa
38% urban, 62% rural
50% urban
75% urban, rest peri-urban
>80% urban
Awareness of solid fuel health harms/risks
Awareness of improved fuels/stoves
(Physical) access to improved products
Ability to afford improved solution
Access to finance
Cultural resistance to new technologies
Source: various end-user surveys, Shell Foundation, Global Alliance Market Assessments; Dalberg customer segmentation database; Dalberg analysis 60
The penetration renewable cooking solutions is negligible, but biogas, ethanol, and renewable solid fuel pilots are garnering significant attention
Source: Dalberg Africa ICS and clean energy database
0.65 (<1%)
Biogas digesters <20k Uganda, Burkina Faso, Kenya, Ethiopia, Rwanda, Tanzania
Ethanol / ethanol gel <50k South Africa, Ethiopia, Malawi, Nigeria, Mozambique, Zimbabwe, Botswana
Solar cookers <70k Darfur, Chad, S. Africa, Kenya, Senegal
Retained heat cookers >550k Predominantly South Africa, but some models in Nigeria, Tanzania, Botswana
Briquettes / Pellets <10k Kenya, Tanzania, Uganda, Rwanda, Ethiopia, Senegal
HH reached Key geographies for commercialization
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