Clean Cooking Fuels Business Models: Lessons from Distributed Electrification? Hisham Zerriffi Liu Institute for Global Issues IAEE Pre-Conference Workshop on Clean Cooking Fuels, Istanbul, Turkey 6/16/2008

International Association of Energy Economics, Istanbul, Turkey (June 2008) 2 Distributed Rural Electrification  Rural populations: Low income Low income Remote and Dispersed Remote and Dispersed Low consumption Low consumption  Grid extension expensive  Often low resources and managerial capacity  Distributed generation technologies: Scalable Scalable Small networks or individual installations Small networks or individual installations Range of possible actors and models Range of possible actors and models

International Association of Energy Economics, Istanbul, Turkey (June 2008) 3 State of Research  Technology Specific Analyses  Technology Specific Analyses (Allderdice and Rogers 2000, van Campen, Guidi et al. 2000; Li, Xing et al. 2001)  Micro-level Project Reports  Micro-level Project Reports (Green, Wilson et al. 2001; Santos and Zilles 2001; Stroup 2005)  Business Success Stories  Business Success Stories (ESMAP 2001)  Common Characteristics: Ad-hoc Ad-hoc Limited to specific technology, region, outcome, end- use, etc. Limited to specific technology, region, outcome, end- use, etc. Don’t treat institutional issues systematically Don’t treat institutional issues systematically (Hurst 1990; Erickson and Chapman 1995; Allderdice and Rogers 2000; Martinot, Chaurey et al. 2002; Etcheverry 2003; Fishbein 2003)

International Association of Energy Economics, Istanbul, Turkey (June 2008) 4 Study Framework

International Association of Energy Economics, Istanbul, Turkey (June 2008) 5 Variation in Case Characteristics Brazil (6 Cases) Cambodia (6 Cases) China (6 Cases) Organizational Form Dominant: Centralized Utilities Alternative: Coops, NGOs, small entrepreneurs Dominant : Small entrepreneurs Alternative: government and international donor projects Dominant: Local governmental and private, some hybrid/dual Alternative: decentralized private tech dealers, centralized governmental Technology Choice Dominant: Diesel Alternative: Biomass, PV Dominant: Diesel Alternative: Biomass, PV, small hydro Dominant: Small hydropower Alternative: Small thermal, PV, wind Target Customer Base Dominant: Households Alternative: Varied Dominant: village electrification Alternative: households Dominant: village and higher electrification Alternative: individual systems Financial structure Dominant: Subsidized connections and low income consumers Alternative: Market Prices with cost recovery Dominant: Market prices Alternative: Highly subsidized Dominant: Cost-plus regulated prices Alternative: Subsidized, cash markets

International Association of Energy Economics, Istanbul, Turkey (June 2008) 6 Lesson I: Observations Are Not Analysis   Need to move beyond anecdotal evidence   CCF Implications: Continued case study research required Systematic study across cases required

International Association of Energy Economics, Istanbul, Turkey (June 2008) 7 Lesson II: Free Lunches Are Not Sustainable   Need to have some level of cost-recovery and financial sustainability.   CCF Implications: Capital cost subsidies should be market enhancing rather than market destroying Necessary to have “buy-in” Consumption subsidies should be avoided when possible

International Association of Energy Economics, Istanbul, Turkey (June 2008) 8 Lesson III: Electrons Do Not Equal Development   Focus on how electrification fits into larger development goals.   Renewables and conventional generation sources should compete equally to meet rural development needs.   CCF Implications: Need mix of technologies suited to improving local conditions (e.g. biogas, LPG, improved stoves) Need to assess synergies between household cooking fuels and community or productive needs

International Association of Energy Economics, Istanbul, Turkey (June 2008) 9 Lesson IV: Think Globally, Act Locally   Rural electrification is an important country-wide and global objective   Often best achieved through local means.   CCF Implications: Implementation dependent upon local conditions (e.g. resource availability, incomes) Requires strong central support from governments and industry

International Association of Energy Economics, Istanbul, Turkey (June 2008) 10 Lesson V: Unbias the Social Contract   Provision of services should be based on performance, not size.   New institutional mechanisms need to be created to include local actors   CCF Implications: Involvement of private sector Involvement of local public sector, entrepreneurs and other actors