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BoP Product Incubation Project BoP Sector Report (Water, Lighting, Cookstove)

March 2013

2

Key messages (1/3)

Context

• Global BoP spend on clean water services and clean energy is over USD 450 billion, representing significant social and financial ‘inclusive business’ opportunities for corporations. The BoP Technology Selection Project seeks to identify high-potential technologies in clean water and clean energy that offer scalable solutions to problems faced by the BoP. We conducted detailed reviews of three sectors (safe water, lighting, cooking) to identify high-potential technologies that represent interesting opportunities for Japanese companies

Safe water

• The lack of access to safe drinking water remains a massive global issue. Today, 780 million people drink unsafe water, with dramatic health and economic consequences. The issue is made more complex by the fast-evolving character of the need: rural migration shifts the nature of water demand, developing water scarcity leads to reliance on deeper water tables with new types of contamination (e.g. fluoride), and human activities create new types of pollution (e.g. through fertilizers and pesticides)

• Traditional water treatment technologies such as boiling, sand filtration, ceramic filtration, and chlorination, have been complemented by a broader set of options including UV, RO, UF and NF. Innovations in enabling technologies, such as remote system monitoring and innovative payment solutions, also create opportunities for more efficient delivery models

• The relevance of water purification technologies depends on the characteristics of water contamination locally and their application range; in spite of its comparatively high cost, RO, which has the broadest applicability, is rapidly spreading for BoP community systems. At the household level, the standard is not set, with expensive solutions co-existing with very low cost ones (e.g. chlorination, ceramic filters)

• A review of existing community players underscores the need for business-enabling technologies and close attention to operational success. A review of household players highlights the importance of low upfront cost and financing options, close alignment with local conditions, and attention to awareness building

3

Key messages (2/3)

Clean lighting

• Due to the poor electrification levels in South Asia and Sub-Saharan Africa, lighting represents a massive need; as population growth outstrips grid expansion, lighting needs will keep expanding rapidly. Today, over 1.4 billion people lack access to grid electricity, many of whom have no choice but to rely on technologies for their lighting needs that are harmful environmentally, economically and socially. Approximately 260 million households rely on unsafe and inefficient lighting technologies such as kerosene lamps

• A broad set of new off-grid solutions is emerging to meet BoP needs, either through combination of off-grid generation and efficient illumination options, or through solutions integrating energy and lighting, such as solar portable lanterns (SPLs). Innovations in enabling technologies, such as pay-as-you-go systems, also create opportunities for more efficient delivery models

• Among off-grid generation technologies, renewable off grid generation solutions have higher upfront cost but are more economical to run than traditional solutions; of renewable generation technologies, solar, biomass and biogas-based systems have the widest applicability in developing countries. Among illumination solutions, LEDs appear to be the most effective and the most cost-efficient lighting solution. Among integrated solutions, SPLs are the most economical in the long-term and they have a catalytic effect (they can be used to charge other devices)

• A review of existing players highlights the importance of enabling technologies, as well as the need to provide integrated solutions; it also underscores the value for Japanese companies of exploring these markets with existing players

Clean cookstoves

• The cumulative negative impact of inefficient solid fuel cooking on households, economies and the global environment is large and cross-cutting. Today, over 3.1 billion people depend on solid fuels such as wood, biomass, charcoal and coal for primary cooking needs; the vast majority of these solid fuel users have no choice but to rely on unsafe and inefficient traditional cookstoves

4

Key messages (3/3)

Clean cookstoves (cont.)

• There are two broad categories of possible improvements over traditional solid fuel cooking practices: improved stove technology and improved fuel usage. A broad set of improved cooking technologies is emerging that offers significant improvements with respect to health, environmental and social impact, achieved either through improved solid fuel cookstove technology or through utilization of more efficient modern, processed or renewable fuels

• Intermediate and advanced improved cookstoves are affordable solutions that provide major benefits to users and offer attractive solutions

• A review of existing household systems players highlights the importance of affordable upfront stove cost and financing options; user-centric product development; and awareness generation among potential users

Recommendations

• Japanese participation in BoP market has been relatively limited due to lack of a mature enabling environment and limited knowledge of BoP market needs. The involvement of Japanese companies with the BoP has increased since 2009 with support from METI, JICA, NEDO, JETRO; to date, initiatives have been focused on South Asia and Africa and are predominantly in pilot phase, with a majority of initiatives focused on the water sector

• Our recommendation for involvement of Japanese companies in the next phase of the project is threefold: to focus on upstream activities (R&D, partnering with local organizations); to concentrate on a handful of promising technologies (RO, Solar, LEDs, SPLs, ICSs); and to invest in enabling technologies such as remote monitoring and metering, payment solutions, and decentralized power solutions, which can have applications across different segments of demand for BoP users

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Table of Contents

1. Context and approach

2. Detailed sector reviews

3. Recommendations for Japanese involvement

Appendix

6

A typical off-grid BoP household has an array of household needs, the majority of which are currently inadequately fulfilled

Source: “The next 4 billion”, World Resources Institute; Census of India, 2001

Sanitation

Needs: Low energy, water efficient, durable & portable solutions for households

Cooking

Needs: Clean, safe and efficient cooking solutions to replace traditional firewood cookstoves

Communication and connectivity

Needs: Access to mobile, internet, satellite connectivity along with low cost communication devices

Lighting

Needs: Durable, energy efficient/renewable energy-powered solutions to provide enough light for 1-2 rooms

Clean Water

Needs: Effective water purification methods and efficient distribution channels

Entertainment

Needs: Cheap and low energy TVs, and laptops for news and recreational activities

Refrigeration

Needs: Low cost/ low energy fridges; volume of fridge lower relative to mainstream

Heating/Cooling

Needs: Energy efficient space heaters for winter and low energy cooling devices with capacity to cool at least one room

7

More than 3.2 billion people, 46% of the global population, do not have access to piped water supply; around 780 million people lack access to an improved drinking water source

BoP consumers spend a total of USD 20 billion annually on accessing clean water

Source:: Progress on drinking water and sanitation, 2012 update, UNICEF and WHO; “The next 4 billion”, World Resources Institute

8

More than 1.4 billion people, over one fifth of the world’s population, live without access to electricity, while at least a further 250 million people are estimated to be severely under-electrified

The BoP population spends USD 18 billion annually to get access to light

Source: International Energy Agency; Electricity Access Database 2009; Global Off-Grid Lighting Association; IFC ‘From gap to opportunity – Business models for scaling up energy access’

9

3.1 billion people, more than 40% of the global population, depend on solid fuels such as wood and charcoal for their primary cooking needs

Consumers spend over USD 35 billion annually on traditional fuels such as biomass, charcoal and wood for cooking purposes

Source: Dalberg country database drawing on WHO, MICS, DHS, National Census data; Dalberg SSA cooking fuel market-sizing and forecast model

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Project objectives and work plan • Sasakawa Peace Foundation is supporting a project

that seeks to identify impactful and viable opportunities for Japanese firms to participate in BoP markets for clean energy and water

• The project will be carried out over three years: - Phase 1 (over 10 weeks): identification of high-

potential technologies - Phase 2: Pilots to test specific technologies and

capture BoP consumer feedback - Phase 3: Incubation of the most promising

technologies and products

• This document presents the findings for phase 1

Context and project overview

Context • The base of the economic pyramid represents a

massive market opportunity: 4 billion people, a USD 5 trillion market

• Several MNCs are finding innovative ways to tap this market and access new growth avenues, and this engagement has become visible in the area of water and clean energy. Examples include: - Unilever (household-level water purification

systems) - Schneider Electric (solar lanterns and home

systems) - Shell (fuel-efficient, clean cookstoves)

• Japanese companies have well-recognized innovation capabilities and need new growth avenues, but have yet to actively leverage their innovation capabilities for BoP users

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• Review of existing literature

• Interviews with industry experts Step I: Understand the landscape of available and emerging technologies

• Scale / nature of the issue faced by BoP households

• Economic / environmental / health impacts of the issue

• Current and potential customer base

• Existing technologies

We followed a three-step process to identify potential technologies

Selection Steps Methodology Areas of analysis

Step III: Identify key players and factors driving successful business models

• Identification and categorization of key players

• Preparation of case studies (successful and unsuccessful business models)

• Identification of success factors

• Learning from successful and failed business models

Step II: Analyze performance of technologies

• Comparative performance analysis of existing technology solutions

• Economic, environment and social impacts of various technologies

• Ease of marketing, distribution and scale-up

• Costs (Upfront and running costs)

• Ease of operation

Criteria for selection of high-potential technologies to meet BoP needs in clean energy and clean water

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Note: The above criteria exclude factors that require prior knowledge of local conditions, practices, socio-economic characteristics of the target market and exact product/solution characteristics. These factors will be studied in years 2 & 3 of the project

Source: Dalberg analysis

Category Criteria Analysis section

Potential market size • Wide applicability (e.g. across a variety of fuel sources/water contamination types/distribution models)

A

Economic, Environmental and Social impact

• Effectiveness in providing safe water/lighting/cooking • Efficiency (e.g. delivers savings) • High safety levels (e.g. safer water, lower risk of fire) • Job creation potential

B

Ease of operation and maintenance

• Limited skills required for operation and maintenance • Low frequency of maintenance/replacement of key system components • Low weight/bulk, minimal space/land requirements, portability • High quality of end product

B

Affordability • Low upfront cost • Low running cost (fuel, spares, maintenance)

B

Ease of marketing and distribution

• High degree of fit with current practices and ease of habit adoption • Ease of local production and assembly • Adaptability of product design to varying needs and contexts • Scalability of product design

C

Criteria analyzed across three-step process were used in selection of high potential technologies

Section A. Review of the issue and existing technologies Section B. Technology comparison Section C. Review of business models and key players

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Table of Contents



2.1. Clean water

2.1.A. Review of the issue and existing technologies

2.1.B. Technology comparison

2.1.C. Review of business models and key players

2.1.D. Identification of high potential technologies and components

2.2. Clean lighting

2.3. Clean cooking


Appendix

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780 million people globally lack access to an improved drinking water source and 10 countries represent about 66% of this population

Proportion of the population using improved drinking sources, 2010

Source: Progress on drinking water and sanitation, 2012 update, UNICEF and WHO; Dalberg analysis

Legend

91 – 100%

75-90%

50-75%

<50%

Insufficient data

119

97

66

46

43

36

28

23

18

17

China

India

Nigeria

Ethiopia

Indonesia

DRC

Bangladesh

Tanzania

Sudan

Kenya

10 countries with highest populations lacking access to clean drinking water In million people

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Unsafe water is responsible for a massive health and economic burden

Note: Disability adjusted life year (DALY) is a summary measure of population health. One DALY represents one lost year of healthy life. WHO 2012 - Global costs and benefits of drinking-water supply and sanitation interventions to reach the MDG target and universal coverage

Source: Making water a part of Economic development - UN Water; Water in a changing world - United Nations World Water Development Report 3

W.Asia 0.7%

Latin America and Caribbean

0.9%

SE. Asia 1.1%

Caucasus and Central Asia

0.7%

N. Africa 1.2%

E.Asia 1.4%

Oceania 1.6%

S.Asia 2.9%

Sub-Saharan Africa

4.3%

Economic losses attributed to inadequate water supply and sanitation % of GDP, 2012

590

2950

19240

35580

52460

Dengue

Intestinal nematodes

Malaria

Malnutrition

Diarrhea

Annual global disease burden attributable to water, sanitation and hygiene Disability adjusted life years (DALY), in ‘000

~1.4 million children die each year from preventable diarrhoeal diseases

Human impact Economic impact

Yearly global economic loss attributed to unsafe water estimated at USD 260 billion

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Traditional water treatment technologies have been complemented by a broader set of options

Source: Bank of America ESG & Sustainability report; Interviews with industry experts; Dalberg analysis

• Boiling water

• Chlorination

• Sand filters

• Ceramic filters

Traditional Recent developments

• Solar water disinfection (“SODIS” method, actively disseminated by Eawag since 2000)

• Coagulants / flocculants plus chlorine (PUR by P&G distributed after 2003)

• Ultra-Violet (e.g. community UV site operators starting to operate at scale in India since ~2008)

• Reverse Osmosis (e.g. community RO site operators starting to operate at scale in India since ~2009)

• Ultra Filtration (Technology still at early stages of adoption for BoP)

• Nanofiltration (Recent membrane filtration process at early stages of adoption for BoP)

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Landscape of water purification technologies (1/2)


Boiling

• Energy and time-consuming

• Does not address chemical contamination

• Negative environmental impact

• Bringing water to the boil is effective in killing or inactivating most bacteria, viruses and pathogens

• Heat source

Chlorination

• Only effective against micro-biological contamination

• Negative impact on taste

• Chlorine is a disinfectant used to control micro-biological contamination in water. Chlorination of public drinking supplies is the most commonly used form of purification globally

• Additive powder / tablet / liquid

Solar disinfection


• Ineffective with turbid water

• Requires daily sunlight

• Wait time of six hours for clean water

• Emerging solar disinfection based household products; contaminated water is filled in a transparent PET-bottle or glass bottle and exposed to the sun for 6 hours. During this time, the UV-radiation of the sun kills diarrhoea-causing pathogens

• UV-radiation of the sun

Slow sand filtration

• Slow sand filters work by using a complex biological film the grows naturally on the surface of the sand. The sand itself does not perform any filtration function but simply acts as a substrate

• Ceramic, synthetic, fibre membrane


• Does not leave any residual disinfectant in the water

• Difficult to transport due to weight

Ceramic filters


• Low flow rate


• Variable quality control for locally produced filters

• Ceramic water filters rely on the small pore size of ceramic material to filter out dirt, debris and biological contaminants

• Porous ceramic filter

De

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pti

on

C

om

po

nen

ts

Dra

wb

acks

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Landscape of water purification technologies (2/2)

Source: Dalberg analysis; secondary research; Interviews with industry experts

Coagulants / flocculants plus chlorine

• May not be suitable on a day-to-day basis over a longer term as multiple steps required for purification

• This method utilizes an additive containing both coagulants and time-release chlorine. Coagulants first help impurities to form larger clumps, causing them to settle. Chlorine is then released over time to kill pathogens

• Additive powder/tablet

Ultra violet (UV)

• Requires pre-treatment


• UV systems are typically used to pre-treat a water supply that is considered biologically unsafe (lake or sea water, well water, etc.). Uses ultraviolet (UV) light at wavelengths short enough to kill microorganisms

• UV lamp

Ultra filtration (UF)

• Requires specific pre-treatment due to fine nature of membranes

• Can only remove bivalent chemical ions

• Filtration capabilities through nano-particles

Reverse Osmosis (RO)

• Reverse osmosis (RO) is a membrane-technology filtration method that removes many types of large molecules and ions from solutions by applying pressure to the solution when it is on one side of a selective membrane

• RO membrane

• Recovers only a small percentage of the water entering the system due to low back pressure; rest is discharged as waste water


Nano-filtration (NF)


• Does not remove dissolved solids

• Slow flow rate

• This technology is defined by small pore-sized membranes. It frequently serves as pre-treatment for surface water, seawater and treated municipal water before reverse osmosis filtration

• Ultra filtration membrane

Des

crip

tio

n

Co

mp

on

ents

D

raw

bac

ks

• Nano-filtration is a cross-flow filtration technology which ranges between ultrafiltration and reverse osmosis. The nominal pore size of the membrane is typically about 1 nanometre

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Table of Contents



2.1. Clean water





2.2. Clean lighting

2.3. Clean cooking


Appendix

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There are three basic types of water contamination: physical, biological and chemical

Source: US EPA; CDC; Oxford Journals; UNICEF WHO 2008 Data; Dalberg analysis

Type of contamination Contaminant Examples Source

Physical Suspended particles

Soil particles, small gravel

Soil erosion, activities around water sources

Biological

Protozoa Cryptosporidium, giardia

Human and animal faecal waste

Bacteria E. coli, salmonella Naturally present in environment. Some originate from human and animal faecal waste

Viruses Hepatitis A, rotavirus Human and animal faecal waste

Chemicals

Inorganic chemicals

Arsenic, cadmium, copper, lead, fluoride

Runoff from fertilizer use, leaking from septic tanks, sewage, erosion of natural deposits, corrosion of household plumbing systems

Organic chemicals Benzene, carbon tetrachloride, chlorobenzene, styrene

Herbicide runoff, discharge from factories and drycleaners

Dissolved solids Calcium, magnesium, sodium, salts

Anaerobic source waters, sea water

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Regional patterns can be identified for water contamination, but the nature of the contamination must be validated locally

Source: National Metallurgical Laboratory, Jamshedpur, India; Environmental Information System Centre, Department of Environment, Government of Tamil Nadu

Presence of contaminants across different regions in India Presence of contaminants across different districts in Tamil Nadu, India

Nitrate

Iron

Fluoride

Chloride

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(1) Ease of maintenance not depicted for household filters; Cost and frequency of component replacement are driving factors for household solutions

Note: Filtration of physical contaminants not presented on this page; all technologies are complemented by pre-treatment. Boiling not presented on this page

Source: Secondary research; Interviews with industry experts; CDC Drinking Water Treatments for Household Use; Dalberg analysis

The most comprehensive water treatment technologies are also the most complex to operate and maintain

Energy independence

High Low

Key technologies Ease/low cost of maintenance1

Reverse Osmosis RO maintenance requires expensive, complex components and training

Ultra filtration UF maintenance requires less training than RO maintenance

Slow sand filtration Basic training, no spare parts

Ceramic Filtration Need a supply chain in place for new ceramic filters

Nano-filtration NF maintenance requires expensive, complex components and training

Solar disinfection Basic training on the SODIS method, no spare parts

Chlorine Chlorine easy to acquire in most locations

UV UV components cheaper than RO components and complexity lesser

Coagulants + chlorine No maintenance required, but need supply chain in place

Biological Chemical Treatment effectiveness:

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(1) Ceramic filtration can be used as a pretreatment, e.g. for RO and UF. Typically not used as a standalone community solution

Note: Boiling excluded from further analysis being an unclean solution; slow sand filtration excluded as it Is primarily used for treating physical contaminants


Most technologies can be used for both household and community-level solutions

Household Community Key technologies

Applicability across delivery models:

Reverse Osmosis

Ultra filtration

UV

Coagulants + chlorine

Chlorine

Ceramic Filtration

Nano-filtration

Solar disinfection

Slow sand filtration

Boiling

1

24

0

20

40

60

80

100

120

140

160

180

200

0 20 40 60 80 100 120 140 160 180 200 220 240 260

Ceramic filtration

Chlorine

NF UV

Coagulants + chlorine

UF advanced filter

RO

Household products span broad price range; for UV and RO, no solutions currently exist with upfront price points low enough to be relevant for BoP

Note: Five year running costs include upfront cost of the device, maintenance costs and energy costs over 5 years based on the following assumptions: An average BoP household has 5 members who consume 2 litres of clean water everyday plus 5 litres consumed by the household (e.g. for cooking). Inflation and increasing energy costs have not been taken into account

Proxies used: RO – HUL, Eureka Forbes, Kent; UF advanced – Permionics; UF basic – LifeStraw Family; Coagulants – P&G Pur, PolyGlu; UV: HUL, Philips; NF – Tata Swach (2 products), Living Guard filter; Chlorine – Antenna Water, PSI Medentech Aquatabs, PSI Waterguard; Ceramic – Hydrologic, Potters for Peace

Source: Company online resources; Hystra - Access to Safe water For the base of the pyramid; UNDP 2011; WHO 2008; Secondary research; Dalberg analysis

Upfront cost of devices, in USD

Comparison of average upfront costs vs. average five year running costs for household-level water purification solution

In real USD

5 y

ear

ru

nn

ing

cost

s, in

USD

Solar disinfection

Low upfront costs, high running costs High upfront costs, high running costs

Low upfront costs, low running costs High upfront costs, low running costs

UF basic filter

Purification solutions with high upfront prices are sold in developing countries but are not relevant for BoP consumers

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For community solutions, consumer prices are a function of primary purification technology, company business models and regional characteristics

(1) Historical data regarding past model of WHI UV Filtration community solution. Water Health International now provides an RO solution. (2) Chlorination as primary technology, PUR and Aquasure include coagulation; Cascade Design product includes oxidation

Source: Secondary research; Hystra - Access to Safe water For the base of the pyramid; IFC – The Market for Water Treatment and Vending in Kenya 2011; Dalberg analysis

0.01

0.030.04

0.03

0.05

0.020.030.03

0.07

0.05

0.06

0.09

0.12

Aquaya - Cascade Designs / PATH

Aquaya - PUR

Sunspring (Innovative

Water Systems and GE)

WHI 61k model

Byrraju UV Perfector E (Norit)

SkyHydrant E-Health Safe Water Network (Ghana)

Naandi Sarvajal Water Access

1.60

Aquasure Safe Water Network (India)

Retail price of 20L of water by primary purification technology In USD per 20 liters of water

Reverse Osmosis Ultra Filtration UV

1

NF Chlorination2

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Table of Contents



2.1. Clean water





2.2. Clean lighting

2.3. Clean cooking


Appendix

27

Examples of key players across the global clean water ecosystem


Associations

Social enterprises

Corporations

Academic/ R&D centres

Government

Bilateral / Multilateral orgs.

NGO / CSR initiatives

Water Utilities

28


Many solution providers are developing offerings to serve BoP users commercially

Organization Type Nature of solution Geography

Household-level solutions

Unilever Corporation Sells low-cost household water purifier systems based mainly on carbon filtration and chlorination

Global

P&G Corporation Sells / distribute through multilateral organizations a water purification additive

Global

Hydrologic Social Enterprise Sells low-cost ceramic water purifiers Cambodia

Tata Corporation Sells low-cost household water purifier systems based on nanotechnology

India

Population Services International

NGO (adopting a social enterprise model)

Organizes large-scale distribution of chlorine products using commercial and non-profit channels

Africa

Vestergaard Frandsen

Corporation Distributes the Lifestraw, a treatment solution for individuals / households

Africa

Community-level solutions

Naandi Water Social enterprise Installs and operates community water centers India

WaterHealth International

Social enterprise Installs and operates community water centers Africa, India, Pakistan

Sarvajal Social enterprise Installs and operates community water centers India

E-Healthpoint Social enterprise Installs and operates community water centers and health outlets

India

Grundfos Corporation Installs and operates community water distribution points Africa

Case studies presented in the following pages

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Unilever ensured their device remained low-cost and ‘aspirational’ while catering to consumers without access to running water and electricity

Hindustan Unilever (HUL) is the largest FMCG company in India. It entered the water market in 2005 with its ‘Pureit’ brand of water purifiers. HUL decided to target the BoP market in 2010 and launched the BoP targeted ‘Compact’ model, with half the capacity but the same functionality. The approach was a long-term one with investments in the BoP markets would be cross-subsidized by the margins made in the higher income segments.

The cost of the device is USD 25 for the BoP targeted ‘Classic 14 litres’ model and goes up to USD 145 for an advanced ‘Marvella’ model. The lifespan of the device is estimated at 5 years. The cost to consumer comes up to USD cents 0.71 per litre of purified drinking water.

As of November 2011, over 5 million devices had been sold making Pureit the No. 1 water purifier in India by volume. Today, Pureit is being sold in 8 countries in Asia and Africa.

Model

Cost to consumers

Scale

Technology used

Innovation

The product has been adapted to suit the local needs of BoP population – low pricing, high durability, ability to function without running water and electricity. A clear colour indicator alerts the user that the components must be replaced to maintain system effectiveness. The product has been marketed as ‘aspirational’, given the strong brand of HUL and same quality across the product range. There has been a multi-channel approach to reach the user segments – establishing the product in mid-level user segments before targeting the low or high income segments.

Pureit has the ability to treat surface water (biological contaminants) and function without running water or electricity. It is a chlorination based product and the purification process involves four levels of filtration: i) Pre-filtration, ii) carbon trapping, iii) chlorination and iv) carbon block polishing.

Challenges

The product requires regular cleaning of the different chambers and parts and requires training for user– replacement of the ‘germ kill’ component twice a year.

Source: Unilever online resources; Interview with HUL; Dalberg analysis

30

Hydrologic provides a simple, no-frills product to meet very localized needs of the BoP in Cambodia

Hydrologic started from a ceramic filter project by the US-based NGO International Development Enterprises (IDE). In 2001, IDE Cambodia brought the ceramic filter under the name from Central America to South East Asia. The affordable filters are sold to NGO programmes, and via shops and rural sales agents.

Hydrologic sells the filters at two price points - USD 13.50 for the basic version called ‘Tunsai’ and USD 23.50 for the superior version, called ‘SuperTunsai’.

By February 2012, 226,000 filters had been sold. The pot has a two-year lifetime, so an estimated 90,000 are in use, which bring clean water to around 420,000 people.

Source: Secondary research; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

Hydrologic has a multi-channel sales and distribution approach, including through NGOs subsidizing the product. Hydrologic is launching a pilot with discount coupons, whereby NGOs provide discount coupons to selected parts of the population, which can be redeemed at commercial retailers. This would ensure that NGOs serve poorer households, without undermining a commercial outlook.

Filter is a 10-litre porous ceramic pot, impregnated with silver nitrate. It fits into a plastic container with a lid and tap, to store and dispense the clean water. When filled with untreated water, the water percolates through the ceramic but bacteria are physically blocked and killed by the silver.

Challenges

Almost no effectiveness against chemical contaminants, and limited effectiveness against biological contaminants. Also, has a short shelf life of 2 years.

31

The LifeStraw illustrates a good scientific answer to the water treatment challenge, but a poor fit to user preferences

Source: Lifestraw online resources; Time magazine; Dalberg analysis

Vestergaard Frandsen operates under a Humanitarian Entrepreneurship “profit for a purpose” business model with a core business of developing emergency response and disease control products. Their LifeStraw product won the "Best Invention of 2005" from Time Magazine and ‘INDEX: 2005’ International Design Award. The LifeStraw has been available since early 2006.

The wholesale cost of a single life straw is about 3-6 USD in the developing world and LifeStraw Family starting from about USD 20-25 in the developing world. LifeStraws have often purchased by aid agencies and disaster relief agencies. LifeStraws can now be purchased in the US for emergency and camping purposes for USD 20.

LifeStraw and LifeStraw Family have been distributed to nearly every major international humanitarian disaster since 2006 and have been used in broad public health campaigns in the millions. LifeStraw is now also targeting the outdoor gear and preparedness market in the developing world.

Model

Cost to consumers

Scale

Technology used

Innovation

The LifeStraw has been hailed as a potential game changer in the quest for clean water by letting anyone simply carry a filter straw with them, transforming polluted water source into a healthy drinking source. The LifeStraw uses a different approach than other water filtration devices.

LifeStraw relies on water being pushed through an ultrafiltration membrane by the vacuum applied during the sucking process. Water first passes through a plastic pre-filter at the bottom of the straw which removes coarse particles. Then the water passes through the ultrafiltration membrane and is ingested directly from the straw. The straw filters a maximum of 1,000 L of water, so it will last for over one year when used by one person. LifeStraw Family is a complementary product with similar principles.

Challenges

LifeStraw does not match the usability constraints of real life users. At the rate that the LifeStraw filters water (100cc/min), a user would have to spend about 20 minutes sipping water per day to get the required 2L of water and significantly change the way they consumed water (always carrying the straw and leaning over into a water source to sip with it). As a result, actual usage rates of users who own a straw are much lower than expected.

32

Sarvajal procures low cost equipment and assembles the system itself, bringing down the capex costs for the franchisees considerably

A for-profit social enterprise that operates community water filtration plants through local franchisees in rural India. Franchisees buy a license from Sarvajal and pay a monthly fee to operate a kiosk. Sarvajal is responsible for installation, maintenance and quality monitoring. Water sourced locally, free access given by local communities.

Sarvajal franchisees sell water in 20 litre containers. The retail price to the consumers comes up to ~ US cents 0.60 per litre. Storage containers are provided on a security deposit to the consumers. 80% of franchisees provide a home delivery service within their villages. Monthly prepaid cards are used to drive compliance.

As of 2012, 154 water plants in 7 states, reaching out to ~85,000 people across rural, peri-urban and urban areas.

Model

Cost to consumers

Scale

Technology used

Innovation

All machines have a two-way monitoring device which gives real-time information on water production and enables tracking of service issues before they can create downtime for franchisees. Sarvajal has also installed 17 ‘water ATMs’ (automated teller machines) in urban slums in 4 states.

Reverse Osmosis technology for purification. Sarvajal has managed to source extremely low cost equipment, and assembles it itself to keep costs down. The machine has a capacity to purify 500 litres of water per hour.

Challenges

30-70% water is rejected in the RO purification process, depending on water quality. Sarvajal has been working with University of Michigan to find ways to use reject water for public toilets or other functions. A business challenge is that there is currently no mechanism to avoid bad payers within the consumer base.

Source: Sarvajal online resources; Hystra – Access to Safe Water; Dalberg analysis

33

HealthPoint Services addresses multiple needs of the BoP, including clean drinking water and health services, at a single point of service

HealthPoint Services manages and operates E-Health Points (EHPs). These are kiosks that provide clean drinking water, medicines, diagnostic services, and advanced tele-medical services. This set up helps to drive penetration as quality health facilities and clean drinking water are essential daily requirements among people.

They follow a model of monthly pre-paid subscription for 20 litres a day of water per household. The subscription fee of USD 1.50, and is collected in cash. EHP is also trying to start a local financing mechanism.

Operates 140 water points in the northern state of Punjab in India. They have recently expanded into the southern state of Andhra Pradesh with 15 water points there. They currently serve 500,000 users of clean drinking water daily.

Model

Cost to consumers

Scale

Technology used

Innovation

There is a strong focus on use of technology to lower cost: the kiosks are connected with a dedicated broadband connection with nearly 100% uptime. They have introduced automated dispensing of water, as well as have an automated management information system on water kiosk performance.

Since there is a high degree of chemical contamination and salinity in the groundwater in the program areas, EHPs use Reverse Osmosis technology for water treatment.

Challenges

The machines which are used for treating water reject up to 40% water due to use of RO technology, depending on water quality. This water is drained in the common drainage system without being treated.

Source: Interview with EHP; online resources; Dalberg analysis

34

Grundfos LIFELINK provides access to clean water by combining existing water service technologies with innovative payment and surveillance systems

LIFELINK is a subsidiary of Grundfos, the world’s leading pump manufacturer. LIFELINK offers a turn-key solution in rural communities for sustainable water supply through its pump system, which is submersed into a borehole with clean drinking water. The upfront cost of a system is funded by an external donor, and each month the community pays back a fraction of the loan to the donor and pays Grundfos for service and maintenance of the system.

The price of water in the LIFELINK system is decided by the local water committee and is in line with public tariffs for municipal water supply. Often, this price is much lower than the prices that communities previously paid for dirty water.

In Kenya, Grundfos LIFELINK is operating 38 sites and has impacted over 100,000 people as of March 2013.

Model

Cost to consumers

Scale

Technology used

Innovation

The main innovation is the development of the mobile phone-based payment system that allows the system to operate without an operator, and to avoid the problems associated with cash transactions and revenue collection. LIFELINK uses the Safaricom M-PESA money transfer service, transferring the subscriber’s M-PESA balance to an RFID key card which can then be used to draw water, with the payment going directly to the controlled account.

The Grundfos LIFELINK concept is based on a submersible pump system, powered by solar panels. Water is stored in a water tank and water can be dispensed from one or more water taps, using a pre-paid key fob (RFID key card). The solution is controlled via a computer-based system, including an integrated communication and surveillance module. The current system does not include treatment, though Grundfos is working to include this option.

Challenges

The LIFELINK projects have not yet achieved financial sustainability as they face significant challenges related to low volumes and highly seasonal demand.

Source: Grundfos LIFELINK online resources; Dalberg analysis

35

Clean water: Key factors of success have been identified from review of existing household and community-level delivery models

Source: Interviews with Safe Water Network, HUL, Fontus Water, Pentair and other research; Dalberg analysis

Low energy and low water wastage during

treatment

Close attention to operations and

awareness building

Low upfront cost / financing options

BoP consumers have low willingness to pay a large upfront cost to purchase a product, as their monthly disposable income is low. Providing access to finance can be a key driver of better adoption

• Test price points through sales before fixing pricing strategy

• Utilize low cost materials for device • Partner with MFIs, local banks

Implications

For new technology adoption, operational success defines success of the overall solution. Trust is hard to win back in the case of failed projects

• Work to raise awareness with local government, NGOs, self help groups, etc.

• Offer continued service and sales support to franchisees

• Devise proper incentives for franchisees

BoP consumers may not have sufficient access to electricity for some technologies. Also, since water is a scarce commodity, reject water from the systems may cause widespread concern about the solution

• Focus on low wattage systems (HH level) • Innovate to reduce percent of reject water /

develop mechanism to use reject water (Community level)

Close alignment with local conditions

It is necessary to tailor approach to local conditions in a country/region. Quality of local water, local community practices, community perceptions, etc. will drive the adoption decision

• Build knowledge around consumer preferences and practices

• Develop targeted marketing campaigns involving local stakeholders

• Offer free sampling for select household members

Key characteristics of successful solutions Findings

Focus on enabling technology for scale up

Enabling technologies (e.g. remote monitoring, mobile payments) can catalyze the scale up of a business model

• Understand consumer preferences w.r.t. billing and payment

• Explore cost-effective technologies to enable quality monitoring, billing and payment for a large and growing customer base

36

Source: Insights from Dalberg interviews with Safe Water Network, HUL, Fontus Water, Pentair; Dalberg analysis.

“Financing options for upfront costs of household filters can significantly drive adoption, in rural as well as urban communities” – H. Subramanium, COO, Earth Water Group

Clean water: Highlights from interviews

“Local practices differ – in Mexico, people are used to drinking bottled water while in rural India, people have been used to drinking water directly from the well. A common strategy across markets will not work.” – Deepak Saxena, Head-Partnerships (Water), Hindustan Unilever

“The primary purification technology is only one of the ten things required for success of a clean drinking water solution” – Poonam Sewak, Institutional Development Manager, Safe Water Network

“Most of the rural areas face a problem of low electricity supply. Hence, using RO and UV at the household level in such areas is not possible. You need to consider this before choosing solutions for BoP households” – Mukund Vasudevan, Country Head, Pentair India

“For managing multiple sites, we have to test the quality of the water remotely. It is working well, but we are open to new, low-cost sensors and remote monitoring systems” - Ravi Sewak, Country Director, Safe Water Network

Low energy and low water wastage during

treatment

Close attention to operations and

awareness building

Low upfront cost / financing options

Focus on enabling technology for scale up

Close alignment with local conditions

37

Clean water: Enabling technologies are creating opportunities for more efficient delivery models and are a key lever for successful scale up

Source: Bank of America ESG & Sustainability report; Interviews with industry experts; Dalberg analysis

• Inclusion of sophisticated two-way remote monitoring devices to tele-monitor production, performance and maintenance needs and enable tracking of service issues to anticipate breakdown or quality risk

• Higher general awareness around need for quality control standards and consistent service levels across individual kiosks further spurring this trend

Key innovations Description

• Prepayment cards that reinforce customer compliance and allow for better planning and monitoring of kiosk needs

• Payments to kiosks through mobile payment systems (e.g. through M-Pesa)

• Automated water dispensing through ‘water ATMs’, often powered by solar technologies and often in combination with automated management information systems on water kiosk performance

• Decentralized power solutions (e.g. solar) that open up new possibilities for the use of electricity-reliant water treatment solutions, such as UV or RO

• Water testing as a key requirement to scale up safe drinking water, but with inadequate current solutions

Remote monitoring and metering systems

Payment solutions

Decentralized power solutions

Water testing

38

Table of Contents



2.1. Clean water





2.2. Clean lighting

2.3. Clean cooking


Appendix

39

Note: Technologies have been ranked across various criteria from high-level perspective; importance of individual criterion will vary depending on local conditions, practices, socio-economic characteristics of the target market and exact product/solution characteristics. These factors will be studied in years 2 & 3 of the project. Some not applicable criteria have been excluded in analysis of household water purification solutions

Source: Interviews with industry experts; Dalberg analysis

Category Criteria RO NF UF UV Coagulant

+ Cl. Chlorine Ceramic Solar

disinf.

Potential market size Wide applicability / low reliance on specific inputs

Economic, environmental and social impact

Low energy reliance / low emissions

Low water wastage

High effectiveness in treating a range of contaminants


Low skill required for operations

Minimal space requirements / low weight & bulk

Quality of end product (taste, color)

Low frequency of maintenance & replacement

Affordability Low upfront cost

Low running costs


High adaptability of design

High scalability of design

Ease of habit adoption / high degree of fit with current practices

High possibility of local production and assembly

High Low

At the household-level, RO is promising given its wide applicability and high effectiveness; UF and NF are also attractive, with low cost solutions available

40

Community solutions should be selected based on specific community needs (water quality, access to energy, etc.); no technology has clear advantage

Category Criteria RO NF UF UV Chlorine

Potential market size Wide applicability across diverse conditions / variants in input


Low energy reliance / high fuel efficiency

Low water wastage

High effectiveness in treating contaminants


Low skill required to manage operations

Low frequency of maintenance & replacement of key components

Minimal land requirements

Affordability Low capital cost

Low running costs


High adaptability of design of community system to adapt and grow with needs


High Low

Note: Technologies have been ranked across various criteria from high-level perspective; importance of individual criterion will vary depending on local conditions, practices, socio-economic characteristics of the target market and exact product/solution characteristics. These factors will be studied in years 2 & 3 of the project. Some not applicable criteria have been excluded in analysis of community water purification solutions

Source: Interviews with industry experts, Dalberg analysis

41

RO system: Operating process relies on a variety of components to effectively treat an array of biological and chemical contaminants

Source: Dalberg analysis; Picture courtesy esp water products

Reverse osmosis (RO) components

Overview

1. Water first passes through one or more pre-filters (e.g. a carbon filter followed by a microfiltration cartridge)

2. Water then travels to the operational centre of the system - the RO membrane, where dissolved particles and ions too small to be trapped by the pre-filters are removed

3. After the membrane, water is routed to the storage tank. When the storage tank is full, an automatic shut-off valve stops any further water from entering the membrane

4. When water is drawn from the holding tank, it goes through a final stage of filtration such as UV disinfection where remaining biological contaminants are treated

• An RO system consists of pre-filtration processes followed by RO filtration and disinfection

• The purpose of pre-filtration is to remove contaminants that could damage the RO membranes, including large particles, suspended solids, and dissolved organic materials

• The RO membrane removes many types of dissolved particles and ions from solutions by applying pressure to the solution when it is on one side of the selective membrane

• The final product of this process is two-fold: a purified potable water stream and a waste stream that is routed for disposal or alternative use

Pros and cons

+ Highly effective in treating biological and chemical contaminants

+ Taste and smell of water is greatly improved

− 30-90% water is rejected in the RO purification process, depending on water quality

− RO maintenance requires expensive, complex components and training

− RO systems are energy dependent

Operating process

1

2

3

4

1

2

3

4

42

Community RO system: Core purification components such as membranes, cartridges and UV bulbs represent a total of 40% of operating cost

(1) Average monthly operating costs are for a 1000 LPH, 3000 ppm RO system (2) Life cycle of the membrane is estimated at 3 years; (3) Life cycle of the media is estimated at 3 years; life cycle of the UV bulb is estimated at 6 months; (4) Anti-scalant costs USD 6/liter and lime costs USD 40 cents/kg; (5) Electricity used for 8 hours per day at USD 10 cents/kWh

Source: Dalberg analysis based on interviews and secondary research

Operating cost breakdown for an individual community RO operator in India Average percentage of monthly operating costs1

• UV bulb and ballast are the primary UV components

• Media components include carbon, pebbles and strainer with O-rings

• Major chemicals used are anti-scalant and lime

10050

105530

Chemicals4 Media and UV components3

Cartridges RO membrane2 Electricity5 Total

• 1 five micron and 2 ten micron filter cartridges are used

INDICATIVE ESTIMATION

43

Community RO system: Components enabling monitoring and automation represent 30% of total capital costs for set-up of the purification system

(1) Average monthly operating costs are for a 1000 LPH, 3000 ppm RO system; (2) RO membrane and membrane housing; (3) Programmable logic controller


Capital cost breakdown for an individual community RO system in India Average percentage of upfront capital costs1 INDICATIVE ESTIMATION

10015

15

1025

25

10

Pre- and post-filtration components

RO filtration components2

Pumps Basic structure Total PLC3 automation system

Monitoring components

• Includes sand filters; cartridge and cartridge housing; UV disinfection components

• Includes feed pump, high pressure pump (used before RO membrane) and dosing pumps

• Includes metal frame for system; dosing tanks; CIP tank; PVC and steel piping

• On-site monitoring elements (e.g. control panel, gauges) represent ~40% of total cost

• Components enabling remote monitoring represent ~60%

44

Enabling technologies: Remote monitoring systems enable community operators to maintain consistent water quality across kiosks and maximize up-time

Source: Interview with Anuj Sharma, CEO of Sarvajal; Dalberg research; Water For All: Sustainable solutions for reducing and utilizing Sarvajal’s Reverse Osmosis brine in Northwestern India, University of Michigan

Overview

• Remote monitoring systems enable water service providers to measure water production, water quality, machine health and social impact across their multiple locations, all in real-time

• The remote monitoring system is a cloud-connected two-way device that transmits real-time information to central servers, using existing cellular networks, with each machine sending approximately 1,000 texts per month

• To suit the needs of BoP water service providers, remote monitoring systems should be designed to be robust, affordable and flexible

Operating process

1. Multiple data collection sensors along different steps in the purification process report real-time data on a variety of metrics

2. The system transmits this data through cellular technology such that staff at headquarters can monitor flows, TDS levels and maintenance issues in almost real time

3. When a maintenance issue begins to develop within the purification system, service personnel are proactively involved and informed before their site visit regarding which components they should bring from inventory. In case a serious issue is flagged (e.g. TDS levels are too high), the purification system will automatically be switched off until servicing personnel can correct the issue

1

2

3

Pros and cons

+ Improves ability to anticipate service issues before they create downtime for franchises

+ Ensures that franchisees report sales and enables pre-paid franchise payment system

+ Helps ensure consistency with respect to the quality of the water dispensed across different locations by mitigating human error

+ Reduces labour and transportation costs and increases life of machine

− Upfront cost and development effort for the water service provider

− Need for a standardized solution despite diverse franchisee needs

Remote monitoring and water tracking system

1 2

3

45

Table of Contents



2.1. Clean water

2.2. Clean lighting





2.3. Clean cooking


Appendix

46

Lighting solutions for the BoP need to take into consideration that globally over 1.4 billion people do not have access to grid electricity

Global electrification rate, 2009

Source: International Energy Agency, Electricity Access Database 2009

Legend

91 – 100%

75-90%

50-75%

<50%

288

95

82

76

76

64

59

44

38

33

India

Bangladesh

Indonesia

Nigeria

Ethiopia

Pakistan

DRC

Myanmar

Tanzania

Kenya

10 countries with highest number of people lacking access to electricity In million people

47

Africa’s off-grid population is expected to continue growing in the next decades, while the off-grid population in other regions is predicted to decline

Source: International Energy Agency, 2010

34 21

589

809

13 5

698

561

Latin America Eastern Europe Africa Asia

2009 2030

-4.5%

CAGR

-6.6%

+0.8 -1.7%

Evolution of the global un-electrified population, 2009-2030 In million people, CAGR in %

48

Traditional lighting technologies have a high economic, social and environmental cost

(1) Per liter of kerosene and per MwH of electricity

Source: IEA; Lighting Africa 2010; Lawrence Berkeley National Laboratory; Indian Knowledge, Wharton 2012; Business Today; Ohio University 2011; Dalberg analysis

Environmental impact Economic impact

Premium paid by BoP households for kerosene and electricity1 Range BoP consumers pay over normalized prices

29%

Electricity

614%

114%

Kerosene

40%

Annual CO2 emissions for different off grid lighting sources In kilograms of CO2

• Lighting spending representing a significant share of household expenditure, with avoidable spending as a result of reliance on inefficient fuels

• Lost opportunities for income generation from time spent on fuel collection

• Significant green house gas emissions resulting from inefficient fuel production and consumption

• Catalytic warming effects of black carbon emissions from reliance on unclean fuels

• Broad range of health conditions associated with indoor air pollution (IAP), incl. acute lower respiratory infections, chronic obstructive pulmonary disease, ischemic heart disease, stroke

• Burns suffered by household members by overturned kerosene lamps

Social impact

0020

80

250

LED Battery powered flashlight

CFL Incandescent bulb

Kerosene lamp

High end of range

Low end of range

49

A broad set of new off-grid solutions is emerging to meet BoP needs

Off-grid energy

Source: Dalberg Analysis

+

Integrated technologies

Illumination

• Petroleum derivatives such as gasoline and diesel

Traditional

• Incandescent bulb

• Candles, kerosene lamps and biomass • Burn inefficiently, releasing harmful particulate

matter

Advanced

• Wind, micro-hydro, solar and biogas • Limited improvements in fuel efficiency but

better health and environment outcomes than traditional sources

• CFL bulbs and LED (CFL being replaced by more efficient LED based illumination devices)

• More expensive than incandescent bulbs but produce more lumens per watt and have a longer life than other illumination devices

• Battery powered flashlights and renewable-energy based appliances such as solar portable lanterns and solar home systems

• More expensive than traditional solutions but safer

50

Integrated technologies: Landscape of technologies for off-grid BoP populations

Kerosene lamp Solar portable lantern (SPL)

Battery powered flashlight


Candle

A candle is a solid block of wax with an embedded wick that absorbs liquid wax and moves it upward while the candle is burning

Wax, wick

Burns inefficiently and releases harmful gases that cause indoor air pollution and related health problems

Releases large amount of CO2, and usage can cause fires that put life and property at risk

Kerosene is absorbed by a wick or mantle and burns with a clear, bright, yellow flame

Wick or mantle, fuel tank

Lanterns are powered by a solar photovoltaic panel that converts sunlight into electricity

Solar PV panel, battery and LED or CFL bulb

High upfront cost

Flashlight emits light, powered by electrical energy stored in batteries

Battery, light bulb

Used batteries can be toxic if not disposed of properly

Des

crip

tio

n

Co

mp

on

ents

D

raw

bac

ks

Biomass

Biomass is biological material obtained from living or recently living plant matter that can be processed into electricity, fuel and heat

Firewood, animal and plant waste, crop residue

Burns inefficiently producing harmful particulate matter

51

Generation: Landscape of technologies for off-grid BoP populations D

esc

rip

tio

n

Co

mp

on

ents

D

raw

bac

ks


Diesel Biomass gas Biogas Biodiesel

Biodiesel does not have a very long shelf life; noisy

Biodiesel is a vegetable oil or animal fat-based fuel that is either blended with diesel or used directly as a fuel in normal diesel generators

Engine, generator, battery

Diesel is used to power generators that convert mechanical energy into electrical energy

Engine, generator, battery

Noisy; emits harmful gases that affect health and environment; accessibility to fuel can add to costs in remote areas

Biogas digester is a system that produces biogas through the natural anaerobic decomposition of organic material

Tank, tubes

Produces a limited quantity of energy and is dependant upon proximity to energy users

Biomass gasifier is a chemical reactor that converts biomass materials such as wood, charcoal and rice husk into a gaseous fuel through thermo-chemical processes

Feed hopper, blower, reactor, gas burner, char separator

High capital costs; requires constant cleaning due to inefficient burning of biomass, which produces high tar content

Solar Micro hydro Wind

Hydraulic turbines convert potential energy of flowing water into mechanical energy. A connected generator then converts mechanical energy into electricity

Rotor, generator, battery

Suitable only to regions with access to a source of flowing water; power output can fluctuate across seasons

Wind turbines convert wind energy into mechanical energy. A connected generator then converts mechanical energy into electricity

Rotor, tower, generator, battery

Turbines can be noisy and wind can be inconsistent and unpredictable

Requires large area of land; generates power intermittently

Solar photovoltaic panel converts sunlight into electricity, using a thin layer of semi-conducting material

PV cell, frame, generator, battery

52

Illumination: Landscape of technologies for off-grid BoP populations


Incandescent lamp

An electric light produced by a filament wire that is heated to a high temperature by passing an electric current through it

Filament, glass bulb, gas filling

LED

Casing, semiconductor chip, diode, anode and cathode

When a light-emitting diode is switched on, electrons are able to recombine with electron holes within the device, releasing energy in the form of photons

High upfront price and limited temperature tolerance, with falling efficiency as temperature rises

Has shorter operating life and requires more energy to operate than other lighting devices

CFL

Phosphor and particularly mercury (found in the tubes) can be environmentally hazardous, if not disposed of properly

A fluorescent light bulb that has been compressed to the size of a standard-issue incandescent light bulb

Phosphor coating, mercury vapor, base, ballast housing and cover

Des

crip

tio

n

Co

mp

on

en

ts

Dra

wb

acks

53

Table of Contents



2.1. Clean water

2.2. Clean lighting





2.3. Clean cooking


Appendix

54

Kerosene lamp

Low frequency of replace-ment of key components

Access to after-sales service

Ability to charge additional devices

Integrated technologies: SPLs can be used to charge other devices and need fewer battery replacements but require after-sales services

(1) Nickel-Metal hydride battery technology-based SPL; (2)Lithium ion battery technology based SPL


Not applicable

Not applicable

Can charge mobile phones and operate low-wattage fans

Can charge mobile phones and operate low-wattage fans

Can be easily repaired or replaced locally

Battery can be easily replaced, but repairing damaged bulb can be difficult

Access to support services is limited for damaged components

Access to support services is limited for damaged components

Kerosene replenishment every ~2-3 days and periodic wick replacement

Battery replacement required every ~3 days

Battery replacement required every ~13 months

Battery replacement required only once every ~27 months

High Low

NiMH SPL

Battery-powered flashlight

Li-ion SPL

Type of technology

NiMH SPL1

Li-ion SPL2

55

Integrated technologies: Although SPLs have a higher upfront cost than kerosene lamps and flashlights, they are more economical in the long term

Note: Total cost of ownership includes upfront cost of the device, maintenance costs and energy costs over 5 years calculated with the assumption that an average BoP household has 5 members who use 5 hours of lighting everyday. Inflation has not been included in calculation.


200

100

0

50

150

250

300

$60 Li-ion SPL

$120 NiMH SPL

$268 Battery-powered flashlight

$281 Kerosene lamp

Year 5

Year 4

Year 3

Year 2

Year 1

Year 0

Comparison of 5 year cumulative cost of ownership of integrated technologies

In real USD

Co

st o

f o

wn

ersh

ip, i

n U

SD

Year of usage

56

Generation: Among renewable technologies, solar, biomass gas and biogas-based systems have the widest applicability across regions


Type of mini grid Source energy availability Minimal land requirements

Low level of skill required for operations

Region specific; higher in coastal and hilly regions

Turbines occupy limited space and do not hinder agricultural activity

Intermediate training required

Region specific; higher in coastal and hilly regions

Typically run-of-the-river plants with low land requirement


Available in all regions though type may vary

Located near households to prevent leakage of gas during pipe transport

Advanced training required for managing feedstock, O&M

Limited varieties of plants can be used to produce bio-diesel

Limited land requirement Advanced training required for managing feedstock, O&M

Available in most regions of the developing world though intensity varies

Panels typically placed over large areas of land


Biomass widely available though type may vary

Limited land requirement Advanced training required for managing feedstock, O&M

Generally widely available though at varying price points

Limited land required but needs to be installed at a distance from communities due to high GHG emissions

Basic training required

High Low

Wind

Biogas

Diesel

Micro hydro

Biomass gas

Biodiesel

Solar

57

15

11

7

20

16

21

Solar

Biomass gas

Diesel

Biodiesel

Wind

Biogas

Micro hydro

(1) Generating cost is the sum of capital cost and operating costs expressed on a levelized unit cost basis (USD per kilo watts per hour), with levelizing conducted over economic life of the plant; Energy generation costs assume an average capacity of the energy source to be between 50 and 250kW Note: Biogas, biomass and biodiesel can be used for CHP applications, which improves the economics of running such systems significantly Source: Biogas and Micro hydro data sourced from“Technical and Economic Assessment of Off-grid, Mini-grid and Grid Electrification Technologies”, ESMAP, 2007; Wind, Biodiesel and Diesel data sourced from The Economics of Renewable Energy Expansion in Rural Sub-Saharan Africa, World Bank, 2010; Solar and Diesel data from Dalberg reports

Average energy generation costs for off-grid applications by source1

In USD cents/kWh – includes amortized capital costs

Average capital costs for off-grid applications by source In USD/kW capacity of plant

2,780

2,600

2,490

1,220

1,000

930

640

Wind

Biodiesel

Biogas

Diesel

Solar

Micro hydro

Biomass gas

Generation: Renewable off grid generation solutions tend to have higher upfront costs but are more economical to run than traditional solutions

Traditional energy source Renewable

45

58

40 – 100 watts 9 – 50 watts 4 – 10 watts

2 – 20 lumens/watt 25 – 75 lumens/watt 10 - 100 lumens/watt

750 – 2,000 hours 6000 – 10,000 hours 20,000 – 100,000 hours

Illumination: Among illumination technologies, LEDs provide the highest light output per watt and have the longest operating life

Source: Rensselaer Polytechnic Institute 2009; Dalberg analysis

Lumens/watt (efficacy)

Wattage (power consumption)

Life

Incandescent CFL LED

59

Illumination: Although upfront costs of LEDs are high, low running costs make LED technology the most economical solution in the long term

(1) For non-traditional sources of lighting, 60-watt equivalent of incandescent bulbs were used for CFLs and LEDs. 5-year running costs include expected costs of replacement for the appliances. Electricity costs: Rs. 3/kWh. Biomass costs: Rs. 6/kWh.

Source: Lighting Africa; Dalberg analysis

7

1

1Incandescent

(60 watt)

CFL (13 watt)

LED (6 watt)

4

10

42

8

18

81

Incandescent (60 watt)

CFL (13 watt)

LED (6 watt)

Grid-connected electricity

Off-grid electricity (biomass)

Average 5-year running costs1

In USD Average upfront cost In USD

Upfront and 5-year running costs (grid vs. off-grid) of illumination technologies

60

0

2000

4000

6000

8000

10000

0 10 20 30 40 50 60 70 80 90 100

Illumination: Overall, LEDs emerge as not only the most cost effective but also the most efficient lighting technology

Source: Rensselaer Polytechnic Institute; Internet research; Dalberg analysis

LED (6 watt)

Co

st e

ffec

tive

nes

s (L

ifet

ime

usa

ge h

ou

rs t

o u

pfr

on

t co

st in

USD

)

Efficacy (lumens/watt)

Incandescent (60 watt)

CFL (13 watt)

Comparing cost effectiveness and efficacy of illumination technologies Hours/USD; Lumens/watt

61

Table of Contents



2.1. Clean water

2.2. Clean lighting





2.3. Clean cooking


Appendix

62

Examples of key players across the global off-grid lighting ecosystem

Source: Dalberg research

Associations

Social enterprise initiatives

Corporates

Academic / R&D centres

Government agency / program

Donors and funders

NGO / CSR initiatives

63 Note: Gen.: Generation technologies; Illum.: Illumination technologies; Integ: Integrated technologies

Source: Secondary research; Dalberg analysis

Many solution providers are developing commercial offerings to serve BoP users in the off-grid lighting space

Organization Type Nature of solution Geography Gen. Illum. Integ.

Husk Power Systems

Social Enterprise Installs and operates biomass based mini grids India ✔

Desi Power Social Enterprise Installs biomass based mini grids India ✔

Trony Corporation Manufactures solar PV panels Global ✔

Tata Power Solar Corporation Installs and manages solar mini grids India ✔ ✔

Hitachi Corporation Manufactures solar PV panels Asia ✔ ✔

d.light Social Enterprise Designs, manufactures and sells solar lanterns South Asia, Africa ✔

Greenlight Planet Social Enterprise Designs, manufactures and sells solar lanterns South Asia, Africa ✔

Azuri Technologies Social Enterprise Sells solar home systems with a metering system that enables ‘pay-as-you-go’ service

Africa ✔

OMC Corporation Installs and operates solar, wind and biogas mini grids and rents solar lanterns and battery boxes

India ✔

Selco Social Enterprise Sells solar home systems India ✔

Technosol Social Enterprise Sells solar home systems Nicaragua ✔

Schneider Electric Corporation Sells solar home systems, lanterns and Solar DC micro-grids

South Asia, Africa ✔ ✔ ✔

Philips Corporation Designs and manufactures solar lanterns Africa ✔ ✔


64

Husk Power Systems trains local community members to operate its biomass gas/husk-based power plants

Power plants are installed in places where there is a reliable source of rice husk within a distance of 10 km. HPS staff visit a village to assess its suitability for a plant and explain how the scheme works. If 400 or more households commit to paying a monthly fee for electricity, HPS will install a plant and connect the homes and small businesses that have signed up.

Electricity fees start at INR 100 (USD 2.20) per month for a basic connection. One month’s deposit is required when a customer signs the supply contract with HPS. Under the terms of the contract, HPS agrees to provide service for at least 27 days every month, and pro-rates the fees if this level is not met.

By the end of March 2011, HPS had 65 fully operational plants, and a further ten under construction or starting operation. 48 plants are wholly owned and operated by HPS, and the other 17 run under some type of franchise or partnership. Plants have 500 customers on average, so about 32,500 households are supplied. With five or six members in a household, this means that about 180,000 people benefit from HPS.

Source: Access to Energy for the Base of the Pyramid, Hystra; Ashden Awards; Husk Power Systems

Model

Cost to consumers

Scale

Technology used

Innovation

HPS improved the design of its gasifiers considerably and now does much of the manufacturing itself. Gasifiers are optimised for rice husk (a difficult material to gasify) but can also work with other types of agricultural residue and wood. HPS’s value proposition lies in making the plants so simple to operate and maintain that high-school educated people from the village can be trained to manage and run them.

Sack loads of rice husk or other biomass residues are poured into the gasifier hopper every 30 to 45 minutes. The biomass burns in a restricted supply of air to give energy-rich producer gas. The gas passes through a series of filters which clean it, and it is then used as the fuel for an engine that drives the electricity generator. Electricity is distributed to customers via insulated overhead cables.

Challenges

The main challenge for achieving growth is providing training to the 9,000 or more people that will be needed to operate over 2,000 plants HPS aims to operate by the end of 2014.

65

Greenlight Planet has developed products across the USD 12 - 30 price range that it distributes through an innovative direct sales network

Greenlight Planet designs and distributes solar-powered lanterns to off-grid villagers in India and Africa through direct sales, established local partners and rural micro-entrepreneurs.

The products range from the basic Sun Grid Eco, a USD 12 solar lantern, to the Sun King Grid, a brighter, tougher solar lantern that can also provide power, retailing for USD 30.

Greenlight Planet products are available in over 20 countries in Asia and Africa. It has sold its products to over 1,000,000 consumers through 230 employees and 1,000 distributors. Greenlight plans to reach 10 million customers through 10,000 distributors by 2015.

Source: New Venture India; Ashoka; Greenlight Planet; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

Greenlight’s solar lanterns use lithium ferrous phosphate battery technology, which ensures customers can use their light for 5 years before requiring a battery replacement. Partly due to the high costs associated with using existing distribution channels, Greenlight Planet has created an innovative, decentralized distribution network that directly serves BoP populations. Village-level entrepreneurs, “Sun King Saathis”, are recruited and trained by Greenlight district managers and team leaders.

Greenlight’s standard 5-volt high-power output line, high quality lithium ferrous phosphate batteries, can charge a cell phone in an hour, power additional accessories like an audio system or an electronic mosquito repellent. It provides a platform for third-party developers to develop electronic equipment that off-grid villagers can plug in to a reliable power source.

Challenges

The high upfront investment required from customers has suppressed demand. Greenlight implements some partnerships with MFIs and is trying to develop a pay-per-use model. Greenlight Planet has also been unable to access affordable, local working capital to finance its inventory.

66

Azuri Technologies’ Indigo mobile payment system reduces lock-in risk for customers by enabling use of lighting systems on a ‘pay-as-you-go’ basis

Azuri Technologies’ Indigo system combines mobile phone technology with solar technology allowing customers to buy scratch cards to pay for their energy usage. Customers are able to charge their mobile phone and have 8 hours of clean lighting for two rooms.

Users of IndiGo system pay around USD 10 up front. They then buy scratch cards for as little as USD 1 each, and send the number on each card by text message to a central server that responds with an access code that is tapped into the IndiGo unit and provides a certain number of hours of lighting. Each payment goes toward buying the system outright, and a typical family will have paid for it after 18 months of use.

Impacted over 6000 households in Kenya, Zambia, Malawi and South Sudan.

Source: eight19; The Economist; Azuri Technologies; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

By offering solar power as a service, without high purchase costs, users can access clean electricity for less than their current spend on kerosene. Azuri has pioneered the Indigo Energy Escalator which encourages users to up-grade to larger systems over time, to access more electricity and ultimately reach full home electrification. Users move over time from a starting point as a disconnected rural farmer to an informed, connected one with the benefits of electricity. Users can get off at any point and so they are not committed to a long-term debt.

The technology platform consists of a very low cost prepaid meter supported by a sophisticated cloud-based software. The Indigo scratch card is validated using SMS from a mobile phone and the resulting one-off passcode entered into the Indigo unit which causes it to operate for a period of time.

Challenges

Some of the challenges include high capital investment on payment technology and difficulty in ensuring repayments. A further challenge is developing a comprehensive distribution model to achieve scale.

67

OMC’s unique business model consists of supplying power to an anchor customer while providing lighting solutions, on rent, to nearby communities

OMC builds, operates and owns micropower plants that extract clean energy from sun, wind and biogas. Power is either transmitted to telecom base stations and sold on demand to community customers, by charging and renting out solar lanterns, power boxes and other power utility products.

There is no security cash deposit or fixed cost and subscribers pay on the basis of usage. The charge for a single electric lantern is USD 10 cents a day or USD 3 every month. Charge for the box varies from USD 5-10 per month.

OMC is supplying electricity to over 100,000 people in India and plans to reach 350,000 people by the end of 2013.

Source: OMC Power; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

OMC’s ‘Bijli Box’ can power a couple of bulbs, a fan and a LED based television set. The company has employed youth from the villages to replace the spent boxes with charged ones at daybreak. Every evening at 6pm, OMC employees collect these boxes from the generating unit and deliver them to their subscribers in nearby villages.

Micropower plants extract clean energy from sun, wind and biogas. The micropower plants also have battery banks and diesel generators for backup, as well as a power management system for optimal energy efficiency and remote access.

Challenges

Challenges include scaling up training for local citizens in operating micropower plants and managing the distribution of solar lanterns and power boxes in nearby villages.

68

Although Schneider Electric provides a range of high quality BoP community and household solutions, it prices out a large section of the BoP population

Schneider Electric provides complete solutions, from renewable off-grid power generation to home lighting systems, through the BipBop program. Schneider’s home lighting systems, known as ‘In-Diya’ are sold through established local partners, such as Grameen Bank in Bangladesh, that help with both distribution and financing of solutions.

In-Diya home system costs ~USD 1,300 and is available at USD 20 per month through an installment scheme.

Provides BoP solutions, ranging from off grid mini grids to solar portable lanterns, in Asia and Africa.

Source: Schneider Electric; INSEAD; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

Schneider has launched a solar-based DC micro grid system that it is currently being tested through pilots. The micro grid requires no inverter, is easier to maintain and can fulfil BoP household energy requirements with reduced power use. Schneider has also developed a charge controller that is more efficient in transmitting electricity.

In-Diya home lighting system can illuminate a room of 12ft x 12ft uniformly for normal activity. In off-grid area people can use In-Diya with a 12V 10Wp solar panel and 12V, 5Ah battery.

Challenges

Critical challenges to expand the deployment of residential and portable products include developing dedicated partnerships with microfinance institutions, NGOs, cooperatives and local entrepreneurs with wide market reach and in-depth knowledge of local specificities.

69

Household solutions: Key factors for success have been identified from review of existing integrated and illumination solution providers

Source: Interviews with Schneider Electric, Simpa networks, and Greenlight Planet; Dalberg analysis

Support additional devices

Rely on enabling technologies for scale-up

Low upfront cost

Lowering upfront cost by scaling down the light output of the product, without compromising on quality, and providing financing options can be important drivers of user adoption

• Scale down light output without compromising on quality of product

• Test price points before devising pricing strategy • Partner with MFIs, local banks

Findings Implications

Enabling technologies to monitor lighting usage patterns, enable mobile payments, and manage dispersed marketing and distribution teams can help streamline business processes as well as drive user adoption

• Test and introduce technologies that can streamline processes across the lighting value chain

• Educate customers as well as employees on new technologies

Lighting systems that can support devices such as fans, mobile phones and low-wattage televisions help satisfy multiple energy needs of a customer

• Develop lighting systems that can power other devices such as fans, mobile phones and low energy-consuming televisions

• Partner with manufactures and distributors that produce low energy-consuming household appliances

Local marketing and distribution strategy

Marketing and distributing products through pre-established local channels such as MFIs, cooperatives, NGOs and local entrepreneurs can help manage costs and increase market reach

• Regularly train and assess distribution team • Partner with MFIs, NGOs and cooperatives • Build innovative distribution strategies such as

developing and supporting a team of local entrepreneurs

Key characteristics of successful solutions

70

“By scaling down the power of our product, without compromising on its quality, we have been able to develop a product that is affordable for 80 out of 100 BoP households” – Anish Thakkar, CEO, Greenlight Planet

Household solutions: Highlights from interviews

“Partnering with organizations that have strong local networks helped us expand our market reach and allowed us to focus on our key strengths” – Abhimanyu Sahu, Director – Offer Creation, BipBop, Schneider Electric

“We are testing a sales force management system to track the performance of our widely dispersed ‘saathis’ (distributors)” – Anish Thakkar, CEO, Greenlight Planet

“From our ‘saathis’ (distributors), we learnt that customers wanted lighting solutions that can also operate fans and charge phones” – T.Patrick Walsh, CTO, Greenlight Planet

Source: Interviews with Schneider Electric, Simpa networks and Greenlight Planet

Support additional devices


Low upfront cost

Local marketing and distribution strategy

71

Community solutions: Key factors for success have been identified from review of existing mini grid models

Source: Interviews with Schneider Electric, Simpa networks, Husk Power Systems and OMC Power; Dalberg analysis

Provide ‘solutions’ not ‘products’


Low upfront cost

High upfront costs pose a significant financial risk to the local entrepreneur/franchisee, and lack of access to finance is a key barrier to adoption

• Source mature technologies at low costs • Partner with local banks in developing

financing schemes for local entrepreneurs/franchisees

Findings Implications

Enabling technologies to monitor lighting usage patterns, enable mobile payments, and manage customer service teams can help streamline business processes as well as drive user adoption

• Test and introduce technologies that can streamline metering and payment systems

• Educate customers as well as employees on new technologies

Higher user adoption can be achieved by providing consumers a solution that bundles together multiple products and services (e.g. selling bulbs with the mini grid connection, instead of selling just the mini grid connection)

• Test different combination of solutions • Partner with manufactures and distributors of

complementary products • Partner with MFIs, local banks

Focus on employee training

Focus on quality training, combined with an employee performance tracking system, can help motivate and increase efficiency of employees

• Regularly train and assess team • Build incentive strategies for motivating team • Test and introduce technologies that can help

monitor employee performance

Key characteristics of successful solutions

72

“Without access to finance, several local entrepreneurs are unwilling to bear the risk of setting up mini grids” – Gyanesh Pandey, CEO, Husk Power Systems

Community solutions: Highlights from interviews

“We are constantly looking at ways in which we can improve our training for employees and develop incentive structures” – Pär Almquist, Chief Marketing Officer, OMC Power

“Progressive payment systems allow a BoP household to adopt cleaner off grid solutions as they take the product risk away from the customer” – Michael MacHarg, Co-Founder, Simpa Networks

“Selling composite appliances or a solution package, consisting of allied products, is a more successful strategy than selling individual products in the BoP market” – Abhimanyu Sahu, Director – Offer Creation, BipBop, Schneider Electric

Source: Interviews with Schneider Electric, Simpa networks, Husk Power and OMC Power

Provide ‘solutions’ not ‘products’


Low upfront cost

Focus on employee training

73

Across delivery models, enabling technologies play a particularly critical role in the scale up of solutions


• Technology platform consists of a very low cost prepaid meter supported by a sophisticated cloud-based software

• System can be embedded inside standalone products such as solar home systems and mini grid systems as an extremely flexible metering, customer and revenue management solution

• Metering systems reinforce customer compliance and allow for better planning and monitoring

Key innovations Description

• Innovative payment solutions allow customers to buy scratch cards to pay for energy via mobile phones

• Users pre-pay for their intended usage and each payment contributes to the purchase price of the lighting system

• Ease of trial-ability enhanced based on reduced risk of lock-in

• Sales force management systems allow organizations to monitor performance of widely dispersed sales and distribution team members

• Technology platforms supported by sophisticated cloud-based software are emerging

Metering systems

Payment solutions

Sales force management systems

74

Table of Contents



2.1. Clean water

2.2. Clean lighting





2.3. Clean cooking


Appendix

75

Integrated technologies: For BoP households, SPLs are the most attractive option

(1) Duration of light output compared for the same total expense

Note: Technologies have been ranked across various criteria from high-level perspective; importance of individual criterion will vary depending on local conditions, practices, socio-economic characteristics of the target market and exact product/solution characteristics. These factors will be studied in years 2 & 3 of the project. Some not applicable criteria have been excluded in analysis of integrated lighting solutions

Source: Interviews with industry experts, Dalberg analysis

Category Criteria Kerosene lamp

Battery powered flashlight

SPL

Potential market size Wide applicability/ low reliance on specialized inputs


High fuel efficiency

Low emissions

High safety levels

Duration of light output1

Quality of light output


Limited skill required for after sales service

Low weight/bulk / portability

Low frequency of maintenance & replacement of key parts


Low running costs

Ease of marketing, and distribution

High adaptability of design/ability to charge additional devices

High degree of fit with current practices

High Low

76

SPLs: Key components - LEDs, PV and batteries – are the largest contributors to total cost within the SPL value chain

Source: Dalberg analysis based on interviews

SPL value chain Percentage of total costs across SPL value chain

Total Retail

15-25

Distribution / wholesale

15-25

Taxes / tariffs

5-30

Transport

5-8

Assembly

5-7

Materials

30-50

• Component costs falling over time, with significant cost reductions across all major components – LED, PV and battery

• Increased automation in manufacturing process

• Ability to tap into a global pool of labor

• Local assembly

• Improving transport infrastructure

• Lowering / elimination of tariffs and VAT on SPLs

• Better training / education of customs officials

• Engaging in key partnerships, including NGO / philanthropic

• Increasing availability of credit for distributors

100

77

SPLs: Manufacturing costs are driven by key components; costs for production are projected to come down by ~50% by 2020

Source: GTM Research, Thin Film Industry Forum, IRENA, DOE, McKinsey Analysis, Pike Research Analysis, Lux Analysis, Economist, InterChina Consulting Analysis, Interviews; Dalberg analysis

$ 1.57 $ 2.28 $ 4.37

$ 6.12

-74%

0.240.501.62

3.71

-94%

$ 2.20 $ 3.19

$ 4.10 $ 4.45

-51%

$ 5.43 $ 4.94 $ 4.94 $ 5.06

2020 (e) 2015 (e) 2012 2010

Decomposition and forecast of the median lantern component cost In USD, 2010 – 2020

Total manufacturing cost

29%

11%

27%

33%

% of total (2012) Component cost trends

10

11

15

20

2012 2010

-52%

2020 2015

PV

LED

Battery

Housing, assembly and labor

+7%

78

Batteries: Rechargeable batteries are a key component of SPLs and flashlights as well as generation technologies

Des

crip

tio

n

Ap

plic

atio

ns


NiCd

Employ a nickel hydroxide based cathode, with a metallic anode (Nickel-Cadmium)

Two-way radio, emergency medical equipment and power tools

Limited service life with high maintenance required

NiMH

Limited service life with high maintenance required

Employ a nickel hydroxide based cathode with a hydrogen storing anode (Nickel-Metal hydride)

Electric vehicles, solar lanterns, and aircrafts

SLA

Employ lead dioxide as the active material of the anode

Numerous applications from back-up for grid energy storage to starting, lighting and ignition (SLI) in conventional combustion engine vehicles

Low density and relatively lower durability

Li-ion

Employs a lithium metal oxide cathode and a carbon anode with an organic electrolyte

Electric vehicles, mobile phones, solar lanterns and aircrafts

High upfront costs. If overheated or overcharged, may suffer from cell rupture, which In extreme cases can lead to combustion D

raw

bac

ks

79

Batteries: Li-ion batteries have the highest energy density and are easiest to maintain

Source: Secondary research

Technology SLA NiCd NiMH Li-ion

Energy density 30-50 Wh/kg 45-80 Wh/kg 60-120 Wh/kg 90-190 Wh/kg

Recharge cycles 200-300 1500 300-500 300-1000

Durability Lowest High High High

Toxicity Toxic Acutely toxic Benign Benign

User charging requirement

Must always be kept in a charged

condition

Lasts longer if battery is fully

discharged each use

Lasts longer if battery is fully discharged

each use

Lasts longer with partial rather than full discharges

Maintenance Apply topping charge every 6

months

Discharge to 1V every 3 months to

avoid memory effect

Less memory effect than NiCd

No maintenance required. Loses capacity due to age

regardless of use

80

Batteries: Li-ion battery prices are expected to fall significantly by 2020

Source: Pike Research; Lux Research; McKinsey Research; Bloomberg New Energy Finance; Dalberg analysis

100

2020 (e) 2018 (e) 2016 (e) 2014 (e) 2012 2010 2008

600

500

400

300

200

NiCd

NiMH

SLA

Li-Ion

Evolution of battery prices over time In USD per kWh; 2008 - 2020

Pri

ce o

ver

kilo

Wat

t h

ou

r, U

SD

- 10%

- 4%

0%

0%

CAGR

81

Batteries: Many SPL manufacturers have shifted to Li-ion technology; Li-ion market share is expected to continue to grow rapidly in next years

Source: A123 Batteries web site, Interviews with ~20 manufacturers of quality-approved lanterns; Dalberg analysis

30% 27%22% 20%

12%

5%

35%

NiMH

NiCd

2015 (e)

50%

55%

5%

2010

4%

1% SLA

2014 (e)

60%

27%

28%

2%

2013 (e)

46%

29%

3%

Li-Ion

2012

39%

30%

4%

2011

14%

52%

Estimated SPL market share by battery technology Percentage; 2010 - 2020

Innovation in battery chemistries continues to

drive performance

Over half of products using lithium ion

technology have switched from using lithium cobalt

oxide technology to lithium ferrous phosphate (LFP). LFP technology has key benefits over lithium

cobalt oxide, such as lighter weight and longer

lifetime.

82

Batteries: Amongst Li-ion battery technology, LFP technology has significant advantages over other technologies

Source: A123 Batteries web site,; Dalberg research

Performance criteria Lithium cobalt oxide Lithium ferrous phosphate

Specific Power ~250 – 340 W/kg >300 W/kg

Energy Density 250-730 Wh/l 220 Wh/l

Nominal Cell Voltage 3.2 V 3.3 V

Cycle Durability 400-1200 cycles 2,000 cycles

Environmental Safety High, with proper disposal of cobalt Highest – no cobalt to dispose of

Human Safety High – but dangerous if abused Highest – does not decompose at high temperatures

x

83

Generation: Wide applicability, lower lifetime costs, and ease of operations make solar mini grids particularly attractive for off-grid BoP communities

Category Criteria Wind Micro

hydro Biogas Biodiesel Solar Biomass

gas Diesel

Potential market size

Wide applicability / low reliance on specialized inputs



Low emissions / wastage

High safety levels

Ease of operations and maintenance

Limited skill required for operations


Minimal land requirements


Low running costs



Long plant life

High Low

Note: Technologies have been ranked across various criteria from high-level perspective; importance of individual criterion will vary depending on local conditions, practices, socio-economic characteristics of the target market and exact product/solution characteristics. These factors will be studied in years 2 & 3 of the project. Some not applicable criteria have been excluded in analysis of generation technologies


84

Solar PV: Prices of both crystalline silicon (c-Si) and thin film PV technology have fallen significantly since 2008, with price trend expected to continue

Note: c-Si: Crystalline silicon

Source: GTM Research; IRENA; Dalberg analysis

Photovoltaic (PV) price trends In USD per watt; 2008 - 2020

0.54

1.1

0.39

0.56

0.93

1.4

2020 (e) 2015 (e) 2012

1.6

2010

2.6

2008

Thin Film

c-Si

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Pri

ce p

er w

att

- 14%

-15%

CAGR

85

Solar PV: Although more expensive, c-Si continues to dominate PV technology used for SPLs

Source: Thin Film Industry Forum; GTM Research; Dalberg analysis

75%

15%20%

25%

c-Si

Thin film

2015 (e) 2012

80%

2010

85%

• Efficiencies expected of thin film have not materialized

• Competitiveness of c-Si modules exceeding cost reduction expectations for thin film

• Failure to live up to expectations have undermined trust in thin film technology

• Global downturn forced solar companies to slash margins, making it difficult for non-established players to survive

• Thin film industry as a whole has not been able to emulate success of First Solar, CdTe-panel producer, on which many expectations were based

Estimated SPL market share by PV technology Percentage; 2010 - 2015

Why hasn’t thin film taken over c-Si market share?

86

Illumination: High quality of light output and infrequent replacement requirements make LEDs the most attractive illumination technology

(1) Duration of light output compared for the same total expense

Note: Technologies have been ranked across various criteria from high-level perspective; importance of individual criterion will vary depending on local conditions, practices, socio-economic characteristics of the target market and exact product/solution characteristics. These factors will be studied in years 2 & 3 of the project. Some not applicable criteria have been excluded in analysis of illumination technologies


Category Criteria Incandescent CFL LED

Potential market size Wide applicability / low reliance on specialized inputs



Low environmental hazard after disposal

Duration of light output1

Quality of light output


Low frequency of replacement

Affordability

Low upfront cost

Low running costs



High Low

87

LED technology: Future cost and performance trends also position LEDs as the most energy efficient and cost effective illumination solution

0

50

100

150

200 LED

CFL

Incandescent

2020 (e) 2010 2000 1990

Performance forecasts for illumination technologies Efficacy in Lumens/watt; 1990 - 2020

Source: Rensselaer Polytechnic Institute 2009; DOE; Dalberg analysis

Effi

cacy

(Lu

men

s/w

att)

5

20

15

2012 2010

-15%

-34%

-30%

2018 (e) 2016 (e) 2014 (e)

10

0

2020 (e)

Blended Average

LED price (cool white)

LED price (warm white)

Evolution of LED prices In USD per kilolumen; 2010 - 2020

Pri

ce p

er k

ilo lu

men

88

LED technology: Consumer demographics and falling prices will continue to expand addressable market for LED lighting fixtures

Source: World Bank 2011; Dalberg analysis

Projected growth of addressable market In millions of households; 2012 - 2020

As incomes rise and LED prices fall, the entire addressable market for LED lighting fixtures will grow exponentially.

Africa

Asia

2020 (e)

220m

2016 (e)

160m

2012

120m

78

106

145

42 54

75

89

LED technology: Transformative market impact of LEDs can be further realized by customizing LED chips for off-grid use

Manufacturing of

LED chip

Manufacturing of

LED packaging

Manufacturing of LED fittings /

fixtures

Assembly of

finished product

(1) Value chain is simplified / non-exhaustive for the purposes of this study

Source: Expert interviews; Bardsley Consulting et al 2010; Dalberg analysis

• Complex and capital-intensive process to manufacture semiconductor chips

• With limited customization, LED chips can be used for a wide variety of applications

• Assembly of LEDs, involving customization between applications, and power source (i.e., AC vs. DC)

• 5- and 12-volt-compatible LEDs are simply ordinary miniature LEDs that incorporate a suitable series resistor

• Segment of plastics industry catering to components extraneous to the LED

• Manufacturers are contracted to make fittings and fixtures as per design by consumer-facing finished-product assemblers

• Assembly of ready-to-market integrated lighting unit

• Product assemblers design and create final products specifically targeting off-grid or under-electrified consumers

Business model

Value chain segment1

The core technology required for off-grid LED lighting fixtures is essentially identical to that required for higher-end applications

Some adaptation is required of the fittings/fixture segment…

…but innovation in product design is essential

Implications for DC LED lighting

90

Enabling technologies: Energy management systems can improve overall energy efficiency by controlling electricity supply and demand

Source: A Centralized Optimal Energy Management System for Microgrids, IEEE, 2011; Dalberg research; picture courtesy GE

Overview

• System consists of computer-aided tools to monitor, control, and optimize the performance of mini grids

• The need for energy management for a mini grid gains more relevance with the use of highly-variable renewable energy sources such as wind and solar, which require management of sudden load changes

Operating process

1. Central agent collects all the relevant information on the mini grid to determine the inputs to the energy management system (EMS)

2. Once all the input variables are gathered in the EMS, a multi-stage optimization is performed in order to determine the optimal dispatch of power units according to a defined cost function, over a pre-specified time

3. EMS regulates electricity supply by absorbing variations in power consumption within a grid

4. Detailed data on power consumption, gathered in the EMS, is transmitted to mini grid operators

1

2

3

4

Pros and cons

+ EMSs Improve overall energy efficiency by controlling electricity supply and demand, including absorbing variations in power consumption within a grid and minimizing the effects of these variations on the electricity network

+ EMSs collect detailed data on power consumption in buildings and houses and transmit such data to power utilities

− High capital costs for mini grid operators

Energy management system (EMS)

91

Enabling technologies: Pay-as-you-go models represent a technical solution to the BoP affordability crunch, by reducing or eliminating the up front cost

(1) The IFC estimates that for solar lighting products in the USD20-50 range, a 20% reduction in the up front cost increases the addressable market size by an equivalent 20% (“From Gap to Opportunity”, IFC, 2012).

Source: Azuri technologies; Simpa networks; Dalberg research

Overview

• Model combines mobile technology with solar technology, allowing customers to buy scratch cards to pay for energy, just as they would for mobile phones

• Customers who have paid off the cost of their original unit can upgrade to larger systems to cater to their expanding energy needs

• All hardware (panel, lights, wiring, control unit) is provided at lower upfront cost

1

2

3

4

Operating process

1. Customers purchase scratch cards (usually around USD 1) from local stores; scratch card is validated via SMS

2. Customers receive a one-time access code that is entered into the control unit, unlocking the SPL/SHS for a fixed amount of energy usage (typically equivalent to about one week of standard usage)

3. Solar panel is activated; electricity is produced

4. Customers light homes and charge phones until credit is exhausted, when another scratch card is purchased

1

2

3

4

Pros and cons

+ Size of addressable market increases substantially due to elimination of high up front costs1 and increased ease of trial-ability

+ Poorest customers provided access to quality and safe lighting that results in health and economic benefits

+ New users save up to 50% of weekly spend on lighting and mobile charging

− Higher capital costs for SPL operators

− Comprehensive distribution model required to achieve scale

Pay-as-you go model

92

Table of Contents



2.1. Clean water

2.2. Clean lighting

2.3. Clean cooking






Appendix

93

Over 3.1 billion people in the world depend on solid fuels such as wood, biomass, charcoal and coal for primary cooking needs

Global solid fuel usage % of total country population using solid fuels

Source: Dalberg country database drawing on WHO, MICS, DHS, National Census data

Legend

80 – 100%

60 – 80%

40 – 60%

20 – 40%

0 – 20%

10 countries with highest number of people who depend on solid fuel as primary cooking fuel In millions

40

60

60

80

100

120

120

130

800

839

Tanzania

Philippiness

DR Congo

Ethiopia

Indonesia

Nigeria

Pakistan

Bangladesh

China

India

NA

94

• Broad range of health conditions associated with indoor air pollution (IAP)

• Burns suffered by household members while cooking

• Chronic and acute physical firewood collection injuries/ailments and violence suffered during firewood collection

• Disproportional effects on women and young girls

The cumulative negative impact of inefficient solid fuel cooking on households, economies, and the global environment is large and cross-cutting

Source: Dalberg proprietary databases; Global and Indian Burdens of Disease from Household Air Pollution the GBD 2010 Study; HAP Expert Group and Indian Institute of Technology; Dalberg analysis

Economic impact

Social impact Environmental impact

• Avoidable green house gas emissions resulting from inefficient fuel production and consumption

• Catalytic warming effects of black carbon emissions

• Forest degradation and deforestation

• Foregone agricultural productivity due to habitat degradation and combustion of dung as fuel

• Cooking fuel spending constituting a significant share of household expenditures, particularly for urban poor, that could be avoided through reliance on more efficient fuels and stoves

• Lost opportunities for income generation from time spent on fuel collection and cooking

Household air pollution from solid fuels is a leading cause of disability-adjusted life years

Primary causes of disability-adjusted life years in South Asia (% of total DALYs in 2010)

Tobacco smoking

4% Childhood underweight

Diet low in fruits

6%

Household air pollution from solid fuels

7%

5% High blood presure

3%

95

Annual spending on cooking fuels in developing countries is USD 110 billon with spending on coal, charcoal and modern fuels, e.g. LPG, set to expand rapidly

Household spending on cooking fuels, in developing countries1

In USD billions

• Price growth has been observed across all fuels over the last decade and is expected to continue: Fuel efficiency should be a key factor in stove purchase decisions

• Across all fuels, population growth is also partially driving the growth in household cooking fuel spending

• Wood growth focused in SSA and SA

• Coal growth focused in China and driven by more than twofold price increase

• Liquefied petroleum gas (LPG) spend more than doubling in most regions, as a result of increasing prices and increasing penetration. Largest growth in LA and SEA

(1) Includes 72 developing countries 2 Liquefied petroleum gas

Note: Inertial scenario which assumes no major shifts in fuel use patterns toward modern or renewable fuels. Excludes use of fuel for non-cooking purposes (e.g., space heating) and excludes non-residential fuel use (e.g., charcoal use by small industry and commercial sector). Accounts only for primary household fuel.

Source: Dalberg SSA cooking fuel market-sizing and forecast model

42

81 12

20

5

6

16

24

13

42

7

19

2020 (e)

194

2010

97

LPG2

Electricity

Kerosene

Natural gas

Wood

Coal

Charcoal

CAGR

2010-20

10%

12%

4%

7%

2%

5%

7%

96

276 292 289 288 87 82 82 81

1,051 1,140 1,162 1,195

755 824 873 917

Number of people living in households where the primary fuel is solid fuel In million people

SEA LA & Car.

892

2015 (e)

3,193

788

2010

3,039

700

2000

2,715

546

3,373

2020 (e)

SSA

EA

SA

∆ 2010-2020 in millions

+ 192

+93

+ 55

- 1

- 4

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

Solid fuel use drivers • Population growth

• Urbanization

• Inertial fuel adoption trends

• Incomes

• Price differential between fuels

• Gov’t policy changes

Solid fuel dependence will persist for years, serving as a long-term driver for demand for improved solid fuel stoves and clean fuel alternatives

97

There are two broad categories of improvements over traditional solid fuel cooking practices: improved stove technology and improved fuel usage

Improved stove technology for solid

fuels

Improved/clean fuel usage

Legacy and Basic ICS1

Intermediate ICS1

Advanced ICS1

Advanced/ Processed fuel

Modern/ Clean fuel

Renewable fuel/energy

sources

• Includes chimney stoves with minimal/moderate improvements over traditional stoves, as well as unvented stoves with slightly higher performance levels as compared to traditional “legacy” stoves. Many of these stoves have traditionally been distributed by national or NGO-led stove programs

• Stoves with significant improvements in fuel efficiency but limited health and

environment outcomes in comparison to advanced/modern fuel stoves • These are built on “rocket” principles for wood/biomass stoves or other design

features to improve thermal efficiency/emissions

• Solid fuel stoves which achieve significant fuel savings and have emissions features that approach the performance of modern fuel and biofuel cooking

• Includes natural and forced draft biomass gasifier stoves that are typically manufactured using industrial or semi-industrial methods

• Includes wood, other biomass and charcoal processed into pellets/briquettes to enhance fuel efficiency

• Are typically used as feed for advanced ICS

• Petro-chemical fuel (LPG, natural gas, kerosene) and electric stoves that typically are high performing fuels in terms of efficiency and clean burning

• Biofuel stoves powered by ethanol, jatropha, and other plant-based oils or gels; biogas stoves; solar cookers, and retained heat cooking devices

• Many of these solutions perform at the level of modern fuel stoves or even exceed modern fuel stove performance along the environmental impact dimension due to their very low emissions/reliance on renewable fuel sources

• Renewable cooking solutions are supplementary in nature and do not make for primary fuel usage

(1) ICS refers to improved cooking stoves

Source: Dalberg Global Clean Cookstoves Landscape Report; Dalberg Analysis

98

Landscape of cookstove technologies (1/2) St

ove

typ

es

Des

crip

tio

n

Legacy and Basic ICS

Small functional improvements over baseline technologies, e.g. closed firebox, insulation; typically made by local artisans / owners from local materials

• Legacy stoves

• Basic efficient charcoal

• Basic efficient wood

Intermediate ICS

Improved efficiency of combustion of fuel and emission gases, typically with rocket principles and (often) higher end materials

• Portable wood rocket

• Built-in rocket chimney

• High end charcoal stoves

• Intermediate coal stoves

Advanced ICS

Significantly improved burning efficiency. Gasifier biomass stoves using natural draft principles or with fans, some biochar producing; emerging TEG/charging features

• Natural draft gasifier (TLUD or side load)

• TChar stoves

• Fan gasifiers

Only moderate environmental benefits, few meaningful positive health effects. Stoves require regular maintenance

Performance highly dependent on the skills of mason; most require ongoing maintenance

Some require pre-processed fuels; fan gasifiers are made with advanced materials/design and therefore expensive

Traditional cookstoves

• Three stone fire

• Traditional biomass stove

• Traditional coal / charcoal stove

Baseline technology with no chimney and insulation. Typically made from readily available materials, e.g. stones

Inefficient burning, producing harmful particulate matter / high levels of smoke

Dra

wb

acks


99

Landscape of cookstove technologies (2/2)

Processed fuel stoves

Wood, biomass or charcoal processed into dense, solid form to enhance fuel efficiency. Typically used in an advanced ICS

• Biomass briquettes / pellets

• Charcoal briquettes / pellets

Modern fuel stoves

Non-biomass stoves relying on liquid / gas fossil fuels or electricity. Efficient burning and reduction in particulate emission.

• LPG stove

• Natural gas stove

• Electricity stove

• Kerosene stove

Renewable fuel stoves

Sustainable stove solutions that rely on renewable energy sources. Often part of stove/fuel system.

• Biogas digesters & stoves

• Biofuels / ethanol stove

• Solar / retained heat cookers

Dependency on pellet supply chain, which can be subject to price shocks. Production requires careful quality control and technical knowledge

Dependency on fuel supply chain/grid, high cost of fuels, highly flammable nature of fuels

Dependency on fuel supply chain or sunlight, high cost of fuels, lack of fit with traditional cooking practices, high level of maintenance required for biogas digesters

Des

crip

tio

n

Dra

wb

acks

St

ove

typ

es


100 Source: Dalberg fuel database; ICS penetration database with data for 72 countries from national program, donor, CDM, and individual manufacturer data;

WHO chimney stove penetration database; Global Alliance Market Assessments; Dalberg analysis

Clean cooking technology mix by region

% of households, millions of households

Majority of households in Africa and South Asia still rely on traditional solid fuel stoves; penetration of more efficient stoves remains low

71%66%

41%

25%

10%

31%

17%29%

49%35%

83%

6%

4%

8%

1%

4%

1%

3%

3%

7%

0%5%0%1%0%

110 m

Latin America and the

Caribbean

390 m

East Asia

170 m

Sub-Saharan Africa

330 m 130 m

South East Asia South Asia

Renewable energy stoves

Basic chimney stove

Modern fuelstoves

Efficient solid fuel stoves

Traditional solid fuel stoves

101

Technology trends include low-cost production and design, customization to varying user needs and bundling of additional functionality

Source: Press releases; Dalberg interviews; Online resources; Dalberg analysis

In-built basic and intermediate biomass ICS Portable biomass cookstove

• Low-cost design through stripped down architecture

• Climate-appropriate design such as introduction of tapered wind guard built to withstand windy or sandy climates

• Modular cooking attachments such as pressure cookers, grill attachments, pot skirts, double pot attachments

• Non-cooking functions such as electricity generation, LED lighting, onboard data logging

• Self-assembly kit-based stoves with reduced price

Forced draft and natural draft gasifier Modern fuel and renewable fuel stove

• LPG and Kerosene: Smaller cylinders with integrated burners eliminating the need for separate stove purchase and allowing less expensive partial re-fills

• Biogas digesters: Cost reduction and more kit-based models

• Solar cooker: Bundling of cookstove with heater and generator

• Ethanol: Micro-distilleries designed as cogeneration plants

• Briquettes: Low cost, locally fabricated motorized machines

• Side-load designs that make preparing fuel and adding fuel more convenient

• Low-cost options achieved through frugal design and manufacturing innovation

• Bundling of cookstove with electricity source: Conversion of heat into electricity enables the fan to autonomously run, and surplus electricity can be used to charge mobile phones, etc.

• Use of renewable fuels as input fuel e.g. jatropha

Key trends across industry

Key trends include accelerating technological innovation across the full spectrum of cooking fuels and technologies; the rise of frugal design, localized production, and domestic assembly to lower improved cooking appliance costs; the emergence of promising new distribution and financing models for reaching the rural consumer; and a growing number of entrepreneurs across all segments of the clean fuel and improved stove value chains

• Customization of design, e.g. enabling simultaneous cooking of bread and other food without use of additional fuel

• Utilization of higher quality materials, e.g. adding a prefabricated, fixed liner, made from fired clay, inside the combustion chamber

• Application of rocket design principles to in-built stoves

102

Table of Contents



2.1. Clean water

2.2. Clean lighting

2.3. Clean cooking






Appendix

103

Indicative health and climate impact by stove type

(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

Note: Tiers shown in figure are indicative and do not yet represent consensus on exact ISO IWA tiers; Health and climate impact of technologies based on mean values with considerable impact variation within technologies, depending on usage

Source: Berkeley Air Monitoring Stove Performance Inventory Report (October 2012); Grieshop et al (2011); Dalberg stove database; Dalberg analysis

Health impact2

DIRECTIONAL ONLY

Mapped by health and climate impact, most traditional and basic efficient technologies fall into unclean and/or unhealthy categories

Green Technologies

Modern fuelSolid fuelRenewable

Ethanol

Solar / RH

Traditional coal

Biogasdig.

Built-in rocket Portable rocket

Natural draft gasifier Fan gasifier

Basic efficient wood

High-end charcoal Three stone fire

Basic efficient charcoal

Kerosene

LPG

Traditional charcoal

Electric

4 3 2 1 0

Clim

ate

Imp

act1

Clean

Pollu

tin

g G

ree

n

Unhealthy

104

Up-front costs of clean cooking solutions vary but are mostly under USD 55; overall, the cost of cooking is driven by the fuel costs

Note: Some stoves have wide range of prices and annual costs; Fuel usage based on consumption required to satisfy a 320 MJ diet (2.5 meals per day); For less commonly used fuels such as electricity and LPG, average costs are calculated only for countries where usage of fuel is significant; Biogas digester price includes price of stove

Source: Dalberg cookstove analysis; Manufacturer interviews; Press searches

Up-front cost Avg. unsubsidized price of cooking solution in SSA, in USD

Running cost per year Avg. annual cost of cooking fuel in SSA, in USD per year

• Total cost of ownership is driven by fuel cost, as the price of the cooking solution is almost always less than the annual cost of fuel

• Improved cookstoves tend to have higher upfront costs compared to traditional options. However, most intermediate and advanced ICSs pay for themselves in less than a year. For example, a high-end charcoal stove costs on average just 30 USD and results in fuel cost savings of about 125 USD per year as compared with a traditional charcoal stove

• For households currently collecting wood for fuel, any purchase of alternative fuel will represent a significant new cost

3

3

8

9

23

24

30

32

46

52

55

Open fire (wood)




Portable rocket

Built-in rocket

Electric

High-end charcoal ICS

Advanced ICS

Ethanol

LPG

Biogas digester 950

180

257

126

191

90

90

304

128

90

182

225

0

Electric

High-end charcoal ICS

Advanced ICS

Ethanol

LPG

Biogas digester

Open fire (wood)




Portable rocket

Built-in rocket

105

For intermediate and advanced ICSs, higher upfront costs translate into lower running costs. However, electric, LPG and ethanol remain expensive

Ru

nn

ing

cost

(a

vera

ge a

nn

ual

co

st o

f u

sin

g co

oki

ng

fuel

in S

SA, i

n U

SD)

60 65 5

LPG

Ethanol

0


Built-in rocket

High-end charcoal

Advanced ICS

0

400

30 25



40 45 50 55

350

Electric

150

50

100

200

35

300

10 15 20

250

Up-front cost (average unsubsidized price of SSA cooking solutions, in USD)

Low up-front cost, High running costs

High up-front cost, High running costs

High up-front cost, Low running costs

Low up-front cost, Low running costs

Up-front cost versus running cost

(1) Not always limited to charcoal and wood, but most commonly used with these fuels

Note: Some stoves have wide range of prices and annual costs. Fuel usage based on consumption required to satisfy a 320 MJ diet (2.5 meals per day); For less commonly used fuels e.g. electricity and LPG, average costs are calculated only from countries where usage of fuel is significant

Source: Dalberg cookstove analysis; Manufacturer interviews; Press searches

• Majority of BoP households in South Asia and SSA use inefficient traditional and basic cookstoves with low up-front costs

• Many of these households could achieve a decreased total cost of ownership by switching to intermediate or advanced ICSs

Open fire (wood)

Portable rocket

Charcoal options1

Wood options1

950

Biogas digester

106

Table of Contents



2.1. Clean water

2.2. Clean lighting

2.3. Clean cooking






Appendix

107

Providers of finance / CDM

Examples of key players across the global clean and improved cooking energy ecosystem

Coordinating platforms

Testing centres/providers

Fuel and stove suppliers

Government agency/program

Donors and programs

National/International NGOs

SeTAR Centre

Global LPG Partnership

Source: Organization websites; Literature review

108 Source: Interviews with industry experts; Secondary analysis; Dalberg analysis

Few multinational firms have focused on clean cooking solutions for the BoP; sector is dominated by local companies and social enterprises

Organization Type Nature of solution Geography

Awamu Biomass Social Enterprise Designs, manufactures and distributes biomass-based Top-Lit Up Draft (TLUD) gasifier stoves

Uganda

Biolite Social Enterprise Designs, manufacturers and sells rocket stoves that convert excess heat energy into electricity

Global

Clean Star Mozambique

Social Enterprise Manufactures and sells renewable fuel cookstoves that use ethanol-based fuel

Mozambique

CookClean Social Enterprise Designs, manufacturers and distributes basic ICSs Ghana

Envirofit Social Enterprise Designs, manufacturers and distributes intermediate and advanced ICSs

Global

First Energy Social Enterprise Designs, manufacturers and distributes the Oorja advanced ICS that works on gasification technology, using biomass pellets

South Asia

GreenTech Social Enterprise Manufactures and distributes biomass waste-based briquettes Gambia

Greenway Grameen Infra

Social Enterprise Designs, manufacturers and distributes portable rocket stoves that operate on all solid fuels

India

Living Goods Social Enterprise Distributes and sells improved cookstoves through its network of door-to-door sales agents

Uganda

Philips Corporate Designs and manufacturers wood-based improved cookstoves Global

Project Gaia NGO Designs and manufactures cookstoves for use with an ethanol-based fuel. Operates micro distilleries for ethanol production

Global

Servals Social Enterprise Designs, manufacturers and distributes energy efficient kerosene stoves and wood-based TLUD stoves

India

Solar Cookers International

NGO Designs and manufactures CooKit solar cooker Global


109

Building off its strength in in-house product design, Envirofit has sold over 500,000 stoves worldwide

The Envirofit G-330 costs USD 25-40. Shell Foundation Envirofit Carbon Fund offers tailor-made solution to make sale and purchase of the stoves affordable. Carbon credits can bring down the cost of the stoves, an example would be reducing the price in India by USD 10. Envirofit has partnered with research centres for individual design/innovation elements like Oakridge National Research Lab, Colorado State. Other partners include Shell Foundation, US-EPA, GIZ, World Vision, Eco Securities, etc.

Over 500,000 stoves have been sold, translating to over USD 8mn in cumulative fuel savings and over 360,000 MT of averted CO2 emissions.

Source: Dalberg research; Envirofit online resources

Model

Cost to consumers

Scale

Technology used

Innovation

A diverse selection of wood and charcoal stove models designed for different cooking contexts. Primary products are the G-3300 (wood) – pictured left, CH-2200 (charcoal), HM-1000 Plancha (wood) and EFI-100L (institutional). Offered stove types include wood rocket stoves, built-in wood stoves and high-end charcoal stoves. All reduce smoke and harmful gases, fuel used and cooking time.

Challenges

Product prices are high and stoves are often sold at subsidized rates through institutional channels. The standard design of stove might not always be customizable to the local context.

Established as a U.S. tax-exempt corporation, Envirofit uses donations and institutional support to fund product development and early stage commercialization, and then uses operating income to develop and expand. Stoves are manufactured in large-scale modern factories, and often imported to purchasing countries. Various distribution channels are utilized such as international/local third party distributors, institutional buyers etc.

Envirofit has developed designs that are standardized, but locally customizable through minimal add-ons, allowing for different functionality and price points. EnviroFit offers a variety of add-ons products, including a pressure cooker, a grill attachment, pot skirts, and a double pot attachment accessory with a chimney. Envirofit has experimented with new alloys to increase durability of the stove (e.g. with the CH4400). Envirofit launched a local manufacturing facility in Kenya in 2012 and plans to launch a West African facility.

110

Grameen Infra advocates a co-creation process through which user needs are identified and incorporated into stove design

A for-profit social enterprise driven by young entrepreneurs. Greenway manufactures ICSs for sale and has a target group of the rural Indian population living above the poverty line. Stoves are produced at a central warehouse near Delhi and then distributed to local retailors.

Stove cost of ~USD 30. Fuel savings are to be anticipated as the stove increases efficiency as compared to a more traditional stove. Further price decreases difficult because the primary cost driver is the raw material costs, and all intermediaries in the value chain already have low margins. Greenway is working with the Ministry of New and Renewable Energy of India to develop carbon-financed sales, but future of the carbon market remains unclear.

As of February 2013, approximately 25,000 cookstoves have been sold and current sales rates were 8-10k stoves/month. Focus on rural India with highest sales in southern Karnataka.

Source: Interview with COO Ankit Mathur; Grameen Infra online resources; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

The product has been designed specifically to suit the needs of rural BoP population – low-cost production, high convenience, ability to function with multiple unprocessed solid fuels. Design and manufacturing process has relied heavily on co-creation with customers, user prototype testing and iterative feedback cycles. Team is planning on-going innovations with potential upcoming innovations including projects in the pipeline for a heat to electricity converter and a gasifier fan model.

Greenway smart stoves are portable rocket stoves that operate on all solid fuels. The design uses up to 65% less fuel and produces up to 80% less smoke than traditional mud cookstoves. The stove also enables front-loading of fuel, so users don't have to change their cooking habits. With no moving parts, the stove has high durability.

Challenges

In Karnataka – a relatively prosperous region where women are relatively more involved in household decision making, the stove has gained traction. However, the stove was originally designed for Northern India, but has yet to achieve as much traction in this region despite Greenway involving traders and appearing at exhibitions.

111

Using carbon finance and multiple distribution channels, CookClean sells improved charcoal stoves along with other BoP products

Price is approximately ~USD 15. Carbon credits allow for the sale of the cookstove at a lower price. ClimateCare has a working agreement with CookClean Ghana to develop and manage the carbon assets of CookClean’s project in Ghana and West Africa.

CookClean intends to sell 15,000 stoves in 2012; 30,000 in 2013; 45,000 in 2014. They have a 7 year horizon for reaching a million families and creating 3,000 jobs (both for water filter and clean cookstove technologies). As a next step, the project intends to disseminate heat retention cookers and small-scale biogas units, and develop renewable fuels such as “green briquettes” made from crop residue and produced in community factories.

Source: CookClean online resources; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

CookClean has developed a stove that reduces fuel usage and negative health effects of traditional cookstoves and is simultaneously attractive to users, lightweight and durable. Pay back period of initial investment is less than three months. Women sales agents add to the livelihoods and gender impact created by CookClean.

The “Cookmate” (a basic efficient charcoal stove) is tailored to local Ghanaian needs. Independent testing has shown reduced cooking time and a fuel saving of 50% compared to the traditional charcoal stove used in Ghana, called the “coal pot”.

Challenges

Revenues from sales are not enough for a sustainable model. Competitors sell heavily subsidized stoves and traditional stove producers have very low prices (USD 1-5) which makes it difficult for CookClean to sell at a higher price – especially to the poorest potential consumers, who have a liquidity constraint. The uncertainty of carbon price in the future is a major concern.

CookClean is a social entrepreneurship focused on improving conditions for low-income families in Ghana. Industrial research is conducted in Ghana, and product testing is conducted by Oxford University. CookClean has an in-house manufacturing model with three production facilities in Ghana. A variety of distribution models are used: proprietary distribution, door-to-door sales, and institutional distributors. Subsidy and retailer margins are financed through carbon credits. In addition to cookstoves, CookClean has also developed water filters.

112

Limited distribution channels for biomass pellets pose a burden to First Energy to manage both stove and fuel supply in BoP markets

Oorja stove is priced at USD 25 - 30 and fuel pellets cost USD cents 30 – 40 per kg.

First Energy has sold over 450,000 stoves (commercial and residential). The company's revenue is ~USD 3 million and it plans to increase its revenue to USD 20 million in the next years. First Energy is currently looking to expand to other countries such as Sri Lanka, Bangladesh, Indonesia, Vietnam and also some Latin American and African countries.

Source: FirstEnergy online resources; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

Pellets used in stoves burn 3 times more efficiently than regular firewood and emit less smoke. First Energy’s sales and distribution team consists of over 2,500 women entrepreneurs, called “jyoti”, who demonstrate and sell the stove in their communities.

Oorja stoves are advanced ICSs, working on forced draft gasification technology. Pellets made from agricultural biomass residue are used as fuel and a small fan delivers air to the burning pellets.

Challenges

Supply chain issues as well as price increases in raw material used for biomass pellet fuel are major barriers to user adoption. Pellets used in Oorja stoves are not widely available in local markets, which poses a burden on First Energy to manage both fuel and stove supply.

First Energy designs and distributes clean and improved cookstoves that can be used for household and commercial kitchens. First Energy sells its cookstoves through a network of over 35 distributors who cater to more than 2500 dealers. It also has a network of service centres and service engineers in small towns as well as remote areas to provide after sales services.

113

Living Goods is a sustainable distribution platform that uses community engagement models and effective marketing to improve stove adoption

Bringing a proven direct-selling model to the poor, Living Goods drives down costs by cutting out middlemen and creating buying power through scale, resulting in retail prices that are 10-40% below market. Sales agents sell a wide array of products and are encouraged to cross-subsidize prices especially for critical health products - dropping prices on key impact items while making the margin up elsewhere.

Living Goods distributes ~11,280 Ugastoves, 120 JikoPoa stoves and 420 Envirofit stoves annually. Living Goods distributes 50% of the improved cookstoves in Uganda and is the only distributor with a current scale of reach – with a network of 600 sales agents all over Uganda.

Source: Living Good online resources; Dalberg analysis

Model

Cost to consumers

Scale

Technology used

Innovation

Living Goods sells ~70 products ranging from fortified foods and medicine to solar lanterns and cookstoves, making it possible to cater to a range of customers and allowing for cross-subsidization of products. Distribution costs are lower and the door-to-door sales model helps enable sales of products at below-market rates. Living Goods employs best practice marketing strategies from companies like P&G and Avon. Since sales agents are women, they can easily connect with the female customer buying the cookstoves.

Living Goods is not a stove producer. They sell Envirofit stoves, Jiko Poa stoves and Ugastoves in the Ugandan market. Offered stove types are wood rocket stoves and basic efficient charcoal stoves.

Challenges

Transportation to remote areas is difficult, and manufacturing capacity is also weak. There are no programs that help manufacturers with working capital, which is important in order to avoid delays and straddled orders.

Living Goods is a non-profit organization headquartered in the US and currently operating in Uganda. Living Goods operates networks of independent entrepreneurs who make a living by selling products door-to-door. Living Goods has a micro-franchise model, and its main strength is its sustainable distribution platform for a wide spectrum of pro-poor products.

114

Successful cookstove solutions display characteristics that help overcome the obstacles of lack of affordability, low awareness and inconvenience

Focus on fuel supply chain

Relevant, local distribution and

marketing channels

User-centric product development

Affordable up-front price point &

financing options

Across clean cookstove families, affordability is consistently a key barrier to achieving greater adoption. An affordable up-front price point together with financing options are critical sales drivers

• Invest in low-tech “frugal design” innovation • Adopt in-country production to avoid higher costs

abroad and costs associated with importing • Substitute lower cost raw materials and streamline

material usage, without sacrificing quality • Offer well-structured financing options

Main criteria for consumer purchase decisions beyond price and performance include convenience and durability. Contact with the customer is essential for understanding the user’s current habits and needs. Also important is realistically assessing the consumer’s constraints with respect to fuel type

• Adopt local prototyping of the product in the field • Offer standardized solutions that can then be

customized through add-ons • Test price points with the consumer • Factor BoP consumers’ dependence on solid fuels

while assessing market needs

Distribution and lack of customer awareness/demand are often key bottlenecks for scaling up adoption. Goal should be to maximize exposure to customers while minimizing the cost to reach them

• Build knowledge about consumer characteristics • Engage in targeted marketing campaigns and

generate community awareness, particularly by involving women within their communities

• Offer products through pre-established local distribution channels and provide after sales-service

Customer may be deterred from original purchase if there is uncertainty around availability or price level of fuel supply (e.g. ethanol, pellets)

• Expand business model to supply fuel where fuel is not readily available

• Offer reliable supply of fuel at predictable price point • Invest in BoP-relevant innovation (e.g. community

micro-distilleries; local, low-cost briquette machinery; smaller cylinders that can be partially re-filled)

Source: Insights from Dalberg interviews with industry experts; Case studies of key players; Dalberg analysis

Findings Implications Key characteristics of successful solutions

115

Source: Insights from Dalberg interviews with industry experts; Secondary research; Dalberg analysis

“We achieved a lower price without compromising on quality through a material substitution and a move of production from Slovakia to South Africa. Further material substitution and moving production to Nigeria could help make our product more affordable and drive more sales. Our cross-subsidy financing model is also working to drive sales. We offer the stove at a very discounted price and sell the fuel at a slight mark-up to recover costs.” – Joe Obueh, Project Gaia

“Raw material costs are the dominant cost, and it is hard to bring those down. There are a few options, though: reduce labor costs or substitute different materials … When financing is available, our products are flying off the shelves.” – Ankit Mathur, Grameen Infra

“We did not see success in our first product idea which, although it worked well technically, was not appreciated by customers.” – Ankit Mathur, Grameen Infra

“We wanted Envirofit to address IAP at scale; the engineer wanted to produce lovely products, but this was not what consumers wanted; we were always sitting at their board telling them to focus on simplicity, durability, aesthetics and low cost” – Pradeep Pursnani, Shell Foundation

“The learning from the Mwoto stove is that the tin smiths themselves cannot be the sole marketers. We now pursue an intentional word of mouth strategy – going to specific communities with goal of achieving a saturation capacity. We view education on how to cook with the stove as a critical component.” – Paul Anderson, Awamu Mwoto Quad Stove

“We distribute to local points of sale as customers have more faith in existing points of sale. Establishing aspiration is the most important factor for driving scale.” -Ankit Mathur, Grameen Infra

Cookstove technologies: Highlights from interviews

“Accessing available local fuel sources is absolutely critical in deciding whether or not to manufacture a new type of stove.” – Ethan Kay, Biolite

“We have an integrated model in Nigeria through which we sell the stove as well as the ethanol fuel. The fuel is produced at micro-distilleries that can serve about 1,000 households. We expect the price of our ethanol, made from non-food feedstock, to steadily decline over time.” – Joe Obueh, Project Gaia

“A next step could be a stove that uses fuel-efficient pellets. However, customers are scared of being locked-in to the pellets and potentially having to spend more and more. Giving communities a way to make their own pellets could be interesting.” -Ankit Mathur, Grameen Infra

Focus on fuel supply chain

Relevant, local distribution and

marketing channels

User-centric product development

Affordable up-front price point &

financing options

116

Table of Contents



2.1. Clean water

2.2. Clean lighting

2.3. Clean cooking


2.1.2. Technology comparison




Appendix

117

With wide applicability and high socio-cultural acceptability, intermediate and advanced ICSs are generally the most attractive cookstove technologies

Note: Technologies have been ranked across various criteria from high-level perspective; importance of individual criterion will vary depending on local conditions, practices, socio-economic characteristics of the target market and exact product/solution characteristics. These factors will be studied in years 2 & 3 of the project. Some not applicable criteria have been excluded in analysis of cookstove technologies. Electric stoves have been excluded due to dependence on electricity grid which keeps this cooking solution from being relevant for the majority of BoP households

Source: Interviews with industry experts; Berkeley Air Monitoring data, Secondary sources; Dalberg analysis

Category Criteria Built in rocket

Port. rocket

High end charcoal

Natural draft gasifier

Fan gasifier

LPG Kerosene Ethanol Biogas digester

Solar

Potential market size

Wide applicability / low reliance on specialized inputs

Economic, environment and social impact


Low emissions / wastage

High safety levels

High job creation potential


Limited skill required for operations



Low running costs




High degree of fit with current practices

High Low

118

• Given the relatively simple designs of most stoves, there is an upper limit on the level of achievable cost-cutting

• The most important drivers of future prices are inflation in sub-components such as labor and raw materials

• Aiming to keep prices affordable in the face of rising sub-component costs, suppliers are currently pursuing means of producing cheaper products and there is appetite in the market for cost-cutting innovations

21 23

2 3

32

6

2010

30

7

2020

3235

2020

63

20

8

2010

59

21

6

113

2

2020

7

4

2010

7

3

10 10

3 47

2020

21

7

2010

19

Advanced ICS

Forecast prices and costs by stove type, 2010-2020 Forecast average, in real USD; stove purchase in SSA

Intermediate ICS, imported to SSA

Intermediate ICS, manufactured in SSA

Basic ICS

Raw materials

Labor

Other (distribution costs, shipping, local transport, taxes, margin)

Note: Calculated based on average cost data for 2-10 stoves in each production method; forecast based on anticipated changes to international and SSA prices of major cost components (e.g. steel, ceramic, labor) Source: Dalberg stove price database

In the value chain for improved cookstoves, raw materials and labor represent between 30 – 55% of costs across various stove types

119

Thermoelectric technology enables an improved cookstove to power an internal fan and charge mobile phones and LED lights

Source: Picture courtesy BioLite; Business Insider; Dalberg analysis

Overview

• Fan gasifier or rocket stoves generate secondary draft of air, through an internal fan, which force feeds additional oxygen onto the flame, eliminating smoke, and leading to the near complete combustion of the fuel

• Thermoelectric-powered rocket stoves do not require an external power source because they use a thermoelectric generator (TEG) to convert heat from the fire into electricity

• Thermoelectric technology enables the stove to both autonomously power an internal fan and generate surplus electricity to charge mobile phones and LED lights

Operating process

1. Wood, biomass, charcoal or briquettes are burnt as fuel

2. Excess heat is converted into electricity by the thermoelectric generator (TEG)

3. Electricity is used to power a fan which oxygenates the fire and increases burning efficiency

4. Excess electricity can be used to charge mobile phones and LED lights

1

2

3

4

Pros and cons

+ Reduces fuel consumption by roughly 50% compared to open fire and also cuts emissions by up to 95%

+ Charges electronic devices such as mobile phones and LED lights in under- or un-electrified regions

+ Ultra-portable as it is made of light weight material

− Fans/ electronic components increase price (e.g. Biolite products have USD 45-100 end-user prices) and may reduce durability

− Large amount of time taken to charge electrical appliances

− Instructions must be closely followed to realize efficiency gains

1

2 3

4

Thermoelectric technology-based stoves

120

Table of Contents




Appendix

121

Japanese participation in BoP market has been historically low, due to lack of adequate channels and limited knowledge of BoP market needs

Source: Japan Management Association “Survey of Management Studies”, 2010; Fujitsu Research Institute

5%4%

8%

Not currently targeting market

Surveying market

Considering entering market

Already active in market

No response to question

71%

12%

Lack of adequate channels for BoP market participation. Japanese companies have had limited channels through which to connect to BoP markets in developing countries. Only over the last couple of years are more companies trying to build strong partnerships with public agencies and NGOs to target the BoP market in developing countries Limited knowledge and experience. Few Japanese organizations have experience working in the BoP market and limited research has been undertaken by Japanese organizations to understand BoP household constraints, habits and preferences Negative impact on brand. Japanese organizations known for high quality, have been wary of the negative impact of associating their brand with BoP products that are often considered “low cost, low quality” goods and services

Japanese companies’ participation in the BoP market Key reasons for limited participation in the BoP market

n = 632 companies

122

Involvement of Japanese private sector players with the BoP has increased since 2009 with support from programs initiated by several public agencies

Source: JETRO; JICA; Nomura Research Institute, “Does BoP business approach fit in the Japanese framework?: Developing BoP Business as the Principal Strategy in Emerging and Developing Economies”, 2012

• Supports feasibility studies, conducted by private companies, in BoP markets. Currently supporting 65 projects, largely in Asia and Africa

• Connects private entities with local governments, NGOs and other development partners • Provides technical assistance for strengthening public-private partnership legal/regulatory

frameworks • Provides debt and equity financing for BoP-focused projects of private companies

• Provides funding to private companies for conducting feasibility studies in developing countries for BoP-related business

• Connects private companies with potential local partners in developing countries • Researches BoP related business in the context of public-private partnerships • Raises awareness about inclusive business concepts through forums, symposiums and seminars

• Supports Japanese companies in developing their BoP-targeted businesses in developing countries through its BoP consultation service desk

• Dispatches business missions to developing countries to understand the lifestyle and needs of the BoP segment and investigates potential for developing BoP-focused business models

• Introduces potential local business partners to private companies • Supports test marketing and trial development of products and services in BoP markets

JICA

METI

JETRO

123 Source: Dalberg research; Nomura Research Institute, “Does BoP business approach fit in the Japanese framework?: Developing BoP Business as the Principal Strategy in Emerging and Developing Economies”, 2012

Increasing participation of Japanese companies in developing household and community-level clean water solutions for the BoP market

Vietnam

Shikoku Chemicals

Kanematsu Corporation, Nikken

Yachiyo Engineering

Bangladesh

India

Yamaha Motor Co.

Toray Industries Indonesia

Indonesia, Vietnam, Sri Lanka, Myanmar, Laos, Cambodia, Senegal

Preparatory Survey on BoP business on water supply with "POU" water purification system

Establishment of safe water supply chain

Portable water supply with solar power system and small water desalination units

Small-scale water purification and water supply systems using physical filtration, bio filtration, chlorine disinfection

Development of water project with a water purification system loaded on a bicycle

JICA

UNDP, METI, NEDO, JICA

JICA

JICA

JICA

n/a

2008

n/a

n/a

2011

Poriguru International

India

Nippon Basic Co. Bangladesh

Preparatory Survey on BoP business on drinking water supply with flocculants

Microfiltration/carbon filtration based water purification system mounted on a bicycle

JICA

JICA

2011

2011

Co

mm

un

ity-

leve

l so

luti

on

s H

ou

seh

old

-lev

el s

olu

tio

ns

Organization Description of initiative Public agency Region Year initiated


Increasing participation of Japanese companies in developing household and community-level solar-based lighting solutions for the BoP market

Bangladesh

Mitsui

The Kaiteki Institute

Japan Jatropha Inc. Tanzania

Mozambique

Sony

Hitachi Indonesia

India

Lightweight flexible solar panels

Solar power generation systems

Solar power generation facilities

Small-scale decentralized power generation/battery storage systems

Processing biofuels from Jatropha

METI

METI

UNDP, Growing Sustainable Business (GSB)

JICA

JICA

2009

2009

2009

2010

2011

Mitsubishi Chemical Holdings

Bangladesh

Sanyo India, Uganda, Kenya

Lightweight flexible solar panels used for solar home systems

Solar lanterns METI, MOE, UNDP, JICA

JICA

2009

2011

Co

mm

un

ity-

leve

l so

luti

on

s H

ou

seh

old

-lev

el

solu

tio

ns

Nidec Corporation Indonesia Small wind power generators and generating systems

NEDO 2011

Japan Jatropha

Organization Description of initiative Region Year initiated Public agency


Few Japanese companies involved in developing household-level clean cooking solutions for the BoP market

Organization Description of initiative Region

ALCEDO Corporation

Isolite, ALCEDO Corporation

Nepal

Nepal

Preparatory survey on BoP business on insulating firebrick cookstove

High energy cookstoves

JICA

JICA

Year initiated

n/a

2011

Ho

use

ho

ld-l

evel

so

luti

on

s

Toshiba Investment in clean cookstove project Kenya - n/a

Public agency

126

Based on learnings from previous Japanese efforts, partnering with established local organizations has been identified as a key success factor

Source: Does BoP business approach fit in the Japanese framework?; Developing BoP Business as the Principal Strategy in Emerging and Developing Economies, Nomura Research Institute

Developing a separate BoP business model

Understanding local market environment

Partnering with established local organizations

Leveraging enabling environment organizations

Companies need to develop a separate business model for targeting the BoP market that takes into consideration local needs and market environment

Companies need to understand the BoP market through research and pilot programs and incorporate learnings into their business model

Companies need to partner with established local organizations, which not only understand market needs but also have enabling ecosystems already in place. Local organizations should be selected that can implement business plans effectively, help manage risks and increase market reach

Companies need to leverage the established network and knowledge of public agencies, NGOs and multinational organizations to navigate the BoP market

127

Across sectors, focus on upstream activities and forging partnerships is the logical entry point for Japanese involvement

Source: Dalberg analysis based on expert interviews

Potential areas for Japanese involvement

Key activities

Research and development

Production Assembly Distribution Marketing and

after sales service

• Support core and enabling technologies

• Test the market in partnership with local partners with enabling ecosystems in place

• Cultivate IP

• Design; Component development; Engineering

• Raw material purchase; Component manufacturing

• Assembly of components; Importing when applicable

• Consumer awareness activities; After sales support; Monitoring

• Distribution to end retailer; importing when applicable

• Lower potential for differentiation and value-add

• Higher costs

• Higher short term risk

Proposed focus area

128

Within sectors, Japanese companies can focus on a handful of promising technologies in each sector


Sector Focus technologies Rationale

Safe water • RO • The fastest-growing technology in community water

systems for the BoP

Lighting

• Integrated technologies: Solar portable lanterns

• Generation: Solar • Illumination: LEDs

• Solar is cost-effective, robust and well-adapted • Future cost and performance trends identify LEDs as the

most effective and efficient illumination solution for the BoP

• Strong demand for SPLs which can help charge other devices and play a catalytic development role

Cooking • Intermediate and advanced ICSs • Wide applicability and affordability

Cross-sector enabling technologies

• Remote monitoring and metering • Payment solutions • Decentralized power solutions • Water testing

• Remote monitoring, metering and payment solutions are needed across sectors, and potential customers include utilities as well as social entrepreneurs

• Decentralized power solutions are an enabler for both lighting solutions and some water solutions

• Water testing capabilities remain an important yet weak component of the water ecosystem

129

Relevant Japanese companies

Potential pilot projects

Safe water: Based on identification of RO as most promising technology, several directions for potential pilot projects have been identified

Relevant players serving BoP market

Source: Organization websites; Literature review; Dalberg analysis

• Partnership with water kiosk operator in developing more sturdy RO membranes with longer life spans and/or ability to withstand poor maintenance practices

• Partnership with water kiosk operator to enable remote water quality monitoring and automated kiosk management information

• Partnership with water kiosk operator in developing solar-powered water dispensing and cooling solutions

• Partnership with water kiosk operator in developing solar-powered solutions for communities without access to electricity

130

Clean lighting: Potential pilot projects have been identified based on high potential of SPL, LED and solar mini grid technologies





• Partnership with SPL providers in developing batteries such as lithium ferrous phosphate (LFP) batteries, which are more durable and have a higher storage capacity

• Partnership with SPL providers and mini grid operators in developing business enabling technologies such as metering and payment systems

• Partnership with mini grid operators in developing DC power-compatible LED chips

• Partnership with mini grid operators in developing smart grid technology for operating and managing mini grids

131

Cooking: Potential pilots have been identified based on sector needs and trends, including inclusion of thermoelectric generators and optimized stove design





• Partnership with improved cookstove manufacturer in developing affordable thermoelectric generators and low-power fans to be used in gasifier cookstoves

• Partnership with improved cookstove manufacturer to optimize stove design for durability, burning efficiency and low cost production

• Partnership with improved cookstove manufacturer to provide machinery for efficient production (e.g. machinery to enable automated production, dies for improved steel handling)

132

Table of Contents




Appendix

133

List of interviewees

Sector Name Designation Organization Key activity

Water Subramanian COO Earth Water Group Water treatment solution service provider (India)

Water Amit Jain Founder Healthpoint Solutions Community water purification operator (India)

Water Mukund V. MD - India Pentair Water treatment component supplier (Global)

Water Ravi Sewak Country Director Safe Water Network Water treatment solution provider (Global)

Water Anuj Sharma CEO Sarvajal Community water purification operator (India)

Water Skand Saksena Head – R&D Pureit Unilever Household water purification system seller (Global)

Lighting Anish Thakkar CEO Greenlight Planet Solar lantern marketer (India, Africa)

Lighting Patrick Walsh CTO Greenlight Planet Solar lantern marketer (India, Africa)

Lighting Gyanesh Pandey CEO Husk Power Systems Rice husk-based mini-grid player (India)

Lighting Par Almqvist Chief Mktg. Officer OMC Power Solar mini-grid player (India)

Lighting Abhimanyu Sahu Head-Strategy and Innovation

Schneider Electric Solar home system seller (South Asia, Africa)

Lighting Mark Macharg Co-founder Simpa Networks Solar home system seller (India)

Cooking Ethan Kay MD- Emerging Mkts Biolite Advanced cookstoves manufacturer (Global)

Cooking Ankit Mathur Founder Grameen Infra Improved rocket stoves manufacturer (India)

Cooking Paul Anderson Professor Illinois State Univ. Expert and promoter of advanced cookstoves (Africa)

Cooking Jonathan Otto Co-founder JetCityStoveworks Advanced gasifier stove manufacturer (Africa)

Cooking Joe Obueh Head – West Africa Project Gaia Advanced renewable-based stoves manufacturer (Africa)

134

Bibliography (1/2)

• Aquaya, The Market for Water Treatment and Vending Enterprises in Kenya, 2011: IFC

• Bank of America Merrill Lynch, ESG & Sustainability Report, December 2012

• Berkeley Air Monitoring Group, Evaluation of Manufactured Wood-burning Stoves in Dadaab Refugee Camps, 2010: USAID

• Berkeley Air Monitoring, Stove Inventory Report, s.l., , 2012: Global Alliance for Clean Cookstoves

• Country Market Assessments, 2010 – 2012: Global Alliance for Clean Cookstoves

• ESMAP, Technical and Economic Assessment of Off-grid, Mini-grid and Grid Electrification Technologies, 2007

• Global Burden of Disease, Global and Indian Burdens of Disease from Household Air Pollution, 2010: WHO

• Hystra and Ashoka, Access to Energy for the Base of the Pyramid, 2009

• Hystra and Ashoka, Access to Safe Water for the Base of the Pyramid, 2011

• IEEE, A Centralized Optimal Energy Management System for Microgrids, 2011

• IFC and World Bank, Solar Lighting for the Base of the Pyramid - Overview of an Emerging Market, 2010

• IFC, From Gap to Opportunity: Business Models for Scaling Up Energy Access, 2012

• IFC, Lighting Asia: Solar Off-Grid Lighting, 2012

• IFC, Safe Water for All, 2009

• IMG Inc., Cambodia Community Water Program: Utilizing Japanese Water Purification Technologies, 2012: UNDP

• International Energy Agency, World Energy Outlook, 2011

• Japan Management Associations, Survey of Management Studies, 2010

• Kirk R. Smith, MPH, PhD, UC Berkeley, Global and Indian Burdens of Disease from Household Air Pollution: the GBD 2010 Study, 2013

135

Bibliography (2/2)

• Lawrence Berkeley National Laboratory, Technical and Economic Performance Analysis of Kerosene Lamps and Alternative Approaches to Illumination in Developing Countries, 2003

• METI, Inclusive Business Support Measures and Specific Initiative from the Japanese Government, 2010

• Nomura Research Institute, Does BoP Business Approach Fit in the Japanese framework?: Developing BoP Business as the Principal Strategy in Emerging and Developing Economies, 2012

• UN Water, Making Water a Part of Economic Development, 2004 – 05: Stockholm International Water Institute

• UNICEF and WHO, Progress on Drinking Water and Sanitation, 2012

• United Nations, World Water Development Report 3 (WWDR3): Water in a Changing World, 2009: UNESCO

• University of Michigan, Water For All: Sustainable Solutions for Reducing and Utilizing Sarvajal’s Reverse Osmosis Brine in Northwestern India, 2011

• World Bank, The Economics of Renewable Energy Expansion in Rural Sub-Saharan Africa, 2010

• WHO, Scaling Up Household Water Treatment: Looking Back, Seeing Forward, 2008

• WRI, The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid, 2007

136

Technology Product Company Region of operation

Reverse Osmosis RO system HUL (Pureit Marvella RO) India

Eureka Forbes (Aquasure Nano RO) India

Kent (Pearl) India

Nano-filtration Nano-silver based product Tata Swach (2 products: Smart and La Vita) India

Living Guard filter India

Ultra Filtration Household filter with UF as the primary technology

Advanced: Permionics (Pureflo) India

Basic: Vestergaard Frandsen (LifeStraw Family)

Africa, Global

Ultra Violet Household filter with UV as the primary technology

Philips (Pure Water UV) Global

HUL (Pureit Marvella UV) India

Coagulants / flocculants plus chlorine disinfection

Coagulant powder/liquid sachets including coagulation technology and chlorine disinfection

P&G (Pur) Global

Nippon (PolyGlu) Global

Chlorine Disinfection Chlorine solutions / tablets Antenna Water Africa

PSI Medentech Aquatabs Africa

PSI Waterguard Global

Ceramic Filtration Household ceramic filter Hydrologic (Basic Tunsai) Cambodia

Potters for Peace Central America

Product proxies for analysis of costs and qualitative features of household water purification technologies

Household-level solutions

Source: Secondary research, Dalberg analysis

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