"Building Business Cases to Reach Scale: A Study on Biomass Cookstove Business Models in Asia and Africa"
CASE STUDY
IcoProDac / NLS -‐ GERES CAMBODIA Company's stage of development: IcoProDac Business Association, created by GERES and legally registered in 2004, is currently in expansion and growth. Its 270 members, made of producers, distributors and wholesalers of the New Lao Stove (NLS), work mainly in the informal sector, running operations out of their homes.. Artisanal production, low mechanization and robotization. Open source technology. Product: Artisanal production of improved biomass cookstove designed after the "Thai Bucket" stove. Stove saves 22% of wood and charcoal compared to traditional stoves. Provides a safer and quicker source of heat. It permits better air circulation and combustion. Made of heat resistant materials, which ensure longevity. Price: Fixed at the production unit level; the price policy is specified in the Association’s statutes. Final price at the end user level might vary according to a number of factors (geographical area, market trends, etc.) – from 3.5 to 7 USD Sales: Currently more than 400,000 NLS stoves are sold every year Investments are mostly made at the production level, donation of some basic equipment and tools, training of new producers, quality control, and monitoring. There were a number of investments made by the Business Units, especially at the level of the Production Unit, mainly in increasing production supplies and equipment. Company reported figures: In 2006, GERES Cambodia was the 1st project developer to bring a stove project (the New Lao Stove) to the voluntary carbon market (Verified Carbon Standard VCS). The NLS, targeted to urban areas and, avoided the emission of 1,464,625 tons of CO2eq (VCS credits generated from 2003 to 2011), NKS targeted rural areas, as it can burn fuel wood. By the end of 2013 GERES was reporting more than 3,000,000 ICS sold, covering 1,274,000 Households of the country (41 % of the Cambodian market)
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HISTORY1 Improved Cookstove Producer and Distributor Association in Cambodia (IcoProDac) is a Business Association, which was established in 2004 by GERES Cambodia. Vision: An estimated 95% households in Cambodia consume fuel wood and charcoal for cooking. This consumption puts pressure on forest resources and the natural environment. In order to use fuel wood and charcoal in a sustainable way and to sustain the forest, an appropriate methodology should be urgently introduced to address the problem. Mission: To enhance the sustainability of the program after completion of the project, it is imperative that the ICS Producer and Distributor Association in Cambodia be established to support the program. The objective of the association is to contribute to socio-‐economic development in Cambodia through: • Support on the ICS production with full respect to the standard • Cooperation with competent organizations and support the R&D of ICS • Facilitation of sustainable ICS production and distribution through network • Cooperation and support to the quality control and improvement of the ICS production • Respecting the price policy as agreed by the association • Establishment and management of a saving and credit cooperative to support the members with affordable micro finance scheme The member of IcoProDac shall be: A legal citizen of Cambodia; minimum 18 years old and maximum 65 years old when registered. Should produce any design of improved cookstove, certified by MIME/GERES and/or distribute ICS of any design at any scale and acknowledged by MIME/GERES. Rights of the members: Be the member of the saving and credit cooperative "Economic Pillar", access micro credit from the saving and credit cooperative "Economic Pillar", access technical assistance from GERES 1
This section has been extracted from IcoProDac legal Statutes Stoveplus Program GERES Ι
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Organizational Structure and Management The Steering Committee,the coordinator of the Association, consists of representatives from various NGOs and government institutions which voluntarily support the Association, and is composed of 3 members minimum and 7 members maximum. The Executive Committee is the legal representative and manager of the Association, it is composed of 5 members, representing all improved cookstove producers and distributors, and supporting NGOs. The Secretariat of IcoProDac consists of the Executive Committee Director, Secretary and the Treasurer. It is thebody responsible for the day-‐to-‐day management and operation of IcoProDac. Sources of funds could be International and National donors; NGOs and International Organizations; Financial assistance from national and international governments; Charity of the Association members; and Other legal income of the Association. Today, IcoProDac is 100% funded by GERES.
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THE BUSINESS ENVIRONMENT: Social and Environmental Impact
SECTOR MAPPING SUMMARY2
An ICS program could have very high social and environmental impacts in Cambodia, where 90 percent of households rely on solid biomass fuels for cooking. There is a very limited level of awareness about the adverse health impacts associated with cooking-‐related indoor air pollution (IAP), which is a leading cause of disease and death. Deforestation is also is a major issue. As wood becomes scarcer, charcoal production is expected to increase in the mid-‐ term, furthering deforestation.
Consumers
Rural households are the most exposed to the adverse impacts associated with household cooking, since they often use the least efficient devices (three-‐stone stove) and cook with wood. They are also more difficult to reach, earn less, and are less likely to see the advantage of saving fuel when fuel wood is available for free. Urban and peri-‐urban users generally progress from wood to LPG with increased wealth. However, charcoal remains a common secondary fuel so ICS could play a role as a secondary cookstove (most households have 2 cookstoves).
Cookstove Industry Cookstove production is a traditional industry in certain parts of the country, with well-‐established producers and distributors. An ICS industry association exists in Cambodia (developed by GERES).
The industry suffers from a lack of national government? standards and testing centres that could provide policymakers, donors, investors, stove experts, and program managers with a credible basis for comparing stove performance and safety while providing experts with a common set of terms for communicating and understanding stove performance.
Carbon Financing
Cambodia is a Least Developed Country (LDC), and therefore all carbon accounting standards are eligible. Currently there is one ICS project registered, and recently ended in 2013. There are experienced carbon finance service providers available to service the sector. There is also some baseline and monitoring data available for the country.
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GERES Case Study builds from the market assessment conducted by Domrei Research and Consulting Ltd., under the supervision of Nexus-‐Carbon for Development and Nexant, Inc. on behalf of the Global Alliance for Clean Cookstoves, it dates from July 2013.
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SWOT Analysis
STRENGHTS
WEAKNESSES
• Strong business model • Production process does not present major engineering/technical challenges • Strong distribution channels to BoP customers: In urban and rural areas, growing group of consumers who can afford cleaner cookstoves • Strong link between BoP producers and end demand (in certain areas) • All intangible benefits that increase peoples and their communities capacities to be in charge of their own development are highly appreciated by the end beneficiaries and local populations: job creation, improving health and hygiene, financial and natural resources savings. Creation of local institutions (Business association), which improves the governance and the participation in the decision-‐making • Rights of usage to the community (open source model) • Improvement of the capacities of small and medium enterprises • Good monitoring and evaluation systems • GERES New Lao Stove has high penetration in urban areas, but penetration in rural areas is lower, providing an opportunity for a rural-‐focused stove program to access carbon finance. that is why GERES developed the NKS model, which cooks with fire wood. • Strong industry knowhow, customer insight, deep knowledge of its business model. Long period of implementation: integrated into the local context, high ownership of the members of the
• Weak leadership at IcoProDac's level • Lack of managerial and technical skills at IcoProDac's level • High dependence (governance, financial, operational) on GERES Cambodia • Lack of capital. Lack of access to finance as working capital for all business units of the Value Chain (Producers, Distributors, wholesalers, retailers, etc.) & for the Business Association • Lack of financing for customers (some informal ways along the Value Chain) • Lack of suitable labour/inputs. Members (business units) state having difficulties with staff and workers • Producers are making low margins • Weak link between BoP producers and end demand (outside of production areas) • Lack of support service providers (no post sales services nor product warranty) • Weak customer, producer and channel awareness of new market-‐ based solution and appreciation of its benefits • Project management -‐ Complexity due to the project engineering -‐ (Carbon Finance) • Monitoring of decentralized projects for carbon finance purposes raised the transaction costs • Though women were involved, gender focus was not specifically integrated into the design.
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"concept" and "product"
OPPORTUNITIES
• Growing demand for ICS • A lot of room for improvement in building institutional support • IcoProDac could be implementing projects of the National Policy, Strategy and Action Plan on Energy in Cambodia of the Cambodian Government in the future on "Efficient Use of Biomass for residential and industrial purposes" • Cambodia is an LDC country, and therefore all standards are eligible. Currently there are no cookstove projects registered with the CDM. • Well-‐established prior carbon finance programs; extensive baseline and monitoring data available • High availability of resources and information on carbon markets. • Existing Designated National Authority: Ministry of Environment • Well-‐developed stove markets • Improvement of poverty levels • There are multiple, competitive carbon financing organizations to implement the work • Carbon market is now better known across the country, with increasing carbon finance capacity • Women are traditionally responsible for most of the domestic tasks (e.g. cooking, finding firewood, etc.). Women are seen as the managers of the home, and often make the household financial decisions, IcoProDac and its partner GERES should give the woman a central focus when designing their strategy and implementing it.
THREATS • • • • • • •
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Physical Infrastructure is a challenge (roads in particular) Use of three stone stoves is still common Other sources of cooking energy (LPG) Current demand for carbon credits is currently low Carbon markets are in a transitional period, waiting for the new international agreements in 2015 High dependence on GERES (governance and funding) Existing carbon finance cookstove projects have penetrated the Cambodian market, thereby increasing baseline stove efficiencies in urban areas No specific policies or strategies for Clean Cookstoves sector Lack of coordination between stakeholders Lack of specific regulations and laws Insufficient information on renewable energy potential for provincial level Subsidies for other types of clean energies Access to the biggest urban center is a challenge, in part due to government regulations
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BUSINESS MODEL: (through Value Chain Analysis)
SOME OF THE NLS New Lao Stove Value Chain Possibilities
Suppliers
Suppliers
Micro/small Producers
Micro/small Producers
Wholesalers
Distributors
Distributors
Retailers
Retailers
End Users
End Users
Suppliers
Micro/small Producers
Retailers
End Users
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