Clean Energy Adoption in Africa: Initial acquisition cost is the biggest impediment

I should have written about this matter much earlier.

In our house we use a 6kg and 13kg LPG. We used to blend our cooking energy needs with Charcoal but now only use charcoal when cooking dry cereals and that is probably once a month.

We realised that we spend KES 160 ($1.6) per day on charcoal for all our cooking. This would translate to at least KES 4,800 ($48) per month. We probably would save 30 - 50% if we used efficient cookstoves like Jikokoa or Ecozoom.

With LPG, the 6kg gas lasts us for 3 weeks. Yes, we're a family of 6 and that's our consumption. At retail, we refill the 6Kg cylinder at KES 1,100 ($11). This means that in a month we spend around KES 1,600 ($16). Now you understand why we ditched charcoal. It was more than twice as expensive.

But that not my story. If the cost of charcoal is to this expensive compared with LPG, why is it that millions of people that live in slums and rural areas are still stuck with Charcoal? Expensive, stressful to light, and a terrible pollutant that is detrimental to one's health?

The answer #1 is the prohibitive entry cost. You need to spend approximately KES 5400 ($54) to acquire a 6Kg cylinder + gas + grill + burner. This is what we call Meko in Kenya. It's a complete cooking unit. Would efficient cookstoves that would save poor population anywhere between 30 - 50% in fuel cost help? Yes. But they too are expensive for most people. These stoves retails at KES 4,000 - 5000 ($40 - 50). Without adequate, flexible and universal financing, most people cannot afford such an amount upfront. The problem may not be the cost of fuel but the cost of acquiring the outright stove/gas cylinder. This is where a solution is needed. Enabling initial acquisition.

Equity Bank has a very good solution called Ecomoto through Equity Foundation but this is still prohibitive as one must have an account some level of transaction history, which most rural and slum dwellers might lack. We have other financing and PAYGo solutions coming up but it's not adequate. From the beginning, financial institutions like banks and MFIs have been a bit hesitant to offer flexible loans to finance clean energy products. We understand the risk factor. Would these institutions be more interested if they got loan guarantee to cushion them against risk? Maybe. There has been efforts through programs such as Energizing Development (EnDev) by GIZ and partners, Kenya Off-grid Solar Access Program (K-OSAP), a $150 million project by the government of Kenya and World Bank. All these targets to accelerate the Kenyas quest for universal access to clean energy by 2022. Still much ground remains to be covered.

The other attraction to charcoal is the fact that you can buy a small portion to suit your budget - from as low as KES 50 ($0.5) for a single cooking. That's not possible with LPG. A fill-to-budget solution would work. Dispensing of cooking gas still remains heavily controlled in Kenya. I've seen it work in Nigeria and a few other countries where you walk into a petrol station or designated gas stations and get your serving as per your budget.

Cost of fuel for majority of Kenyans is on the roof. KOKO Networks is trying to bridge this gap by offering PayGo solution on their hardware and cheap fuel.

It was also great news to learn that Safaricom has entered into partnership with M-Gas to offer metered, prepaid cooking gas services. The juicier part is that cooking unit will be installed at no upfront cost. This will be a PAYGO solution where customers pay the units they need on the go. This could be a disruptive move that most Kenyans have been waiting for. This will potentially be replicated in other African countries with developed mobile money solutions.

Clean cookstove providers should think on more avenues of easing initial acquisition of units. It would be interesting to see more innovative solutions like Stove + fuel where the stove is given for free or at subsidized prize and the company earns revenue through supply of fuel.

Better days lie ahead.

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William Mukaria | Nairobi | 3.08.2020

#SNV #Biolite #Burn #Jikokoa #Envirofit #Ecozoom #IFC #cleanenergy #Cookstoves #Africa #Paygo