Rethinking the Investment Attractiveness of Clean and Energy Efficient Cooking Solutions.
Households cook daily. In a normal market situation, this is indicative of the demand for more efficient and cleaner cooking solutions. Sufficient market? An estimated, 4 billion people globally, live without access to clean cookstoves. This should be an interesting potential customer base for private sector to invest. Ironically, there is no significant flow of international and domestic finance towards the increasing energy access for cooking in sub-Saharan Africa and Asia. Take an example, in the past three years, financial support for manufacture and distribution of clean cookstoves staggered at US$40 million, while there is an estimated need for US$ 4 billion per year to realize transformative access to such products to meet the clean cooking needs. So, what needs to be done for the sector to achieve at least US$ 4 billion per year by 2030?
Without a doubt, clean and efficient cooking solutions can play an important role in achieving several sustainable development goals (SDG) targets – related to sustainable energy, the environment and health. Clean cookstoves can reduce the amount of charcoal and other fuel being used to cook food resulting in indoor air pollution that kills millions every year and releases CO2 into the atmosphere. This is an outcome level pitch for products which should be purchased now. Could this be a problem, that potential customers are unable to work out short term value for money considerations to inform immediate purchase? How about the cost of alternative cooking methods? In sub-Saharan Africa, access to firewood and charcoal is almost free of charge in most rural markets, where more than half of the potential customers reside.
From a cultural perspective, most communities have very strong attachment to the traditional cooking methods. While this is known to have contributed to slow uptake of clean and efficient cooking solutions, private sector led interventions have not been able to convince investors on how long it will take to convert sizable number of customers and achieve economies of scale within the classified underserved markets. For the market to gain traction, business models must show possibility and specificity to turn around the cultural dynamics in the ‘buy now and experience future transformative change’ decisions. Notably, consumer awareness is required.
While clean and efficient cooking solutions are regulated and subjected to taxation, competing products thrive unregulated or minimally regulated. Take the example of charcoal, whose distribution does not cost as much as much as Ethanol and still both sources of cooking energy target the same customer based in rural and peri urban markets. What can the government do to create a level playing field? Alternative unregulated cooking energy is affordable and easy to access, supply trends of such products are difficult to determine, hence flow of and reliable market information is challenged. Investments into clean cooking options require close to accurate predictability of competition. Can governments commit to deliberate and balance industry regulation? If achieved, this can improve investor confidence in clean and efficient cooking solutions.
It is important to note, that certain governments have determined it easy to prioritize efficient cooking technologies – while blinding the focus of clean cooking solutions. If funding sources follow public sector priorities, then clean cooking market will suffer more. Such interventions do not strive to provide a range of fuel options for the most deserving peri urban and rural markets.
Prior analysis and experience limit market-based strategies to deploy clean cooking solutions rapidly at scale. Clean cooking sector needs to be re – assessed and ‘industry – improving’ interventions, regulations as well as intensifying efforts to raise consumer awareness about a continuum of benefits for adopting clean and efficient cooking options. Development finance and other sources of patient funding is still needed to de – risk the industry and support market – based approaches while building the capacity of early stage businesses to attract the would – be commercial investors. This package of market evolution to attain bankability is likely to take between 15 – 20 years and therefore achieving US$ 4 billion per year of investment in the industry can only be realized beyond 2030.