fossil fuel cookstove

Solid Biofuel fired Improved Cook Stoves (ICS) in the Domestic Sector

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Solid Biofuel fired Improved Cook Stoves (ICS) in the Domestic Sector

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Renewable Resources and Alternative Energy
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Alternative Energy
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
> 25% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
< USD 50 million
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
< USD 500,000
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Affordable and Clean Energy (SDG 7)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Climate Action (SDG 13) Industry, Innovation and Infrastructure (SDG 9) Responsible Consumption and Production (SDG 12)

Business Model Description

Invest in or project financing for improved Biomass Energy Technologies (BETs) in the domestic sector for cooking applications (i.e. ICSs). The BETs in consideration are solid biofuel (Pellet, Chips, Charcoal) fired ICSs (direct combustion or gasification).

ICSs manufacturers: there are several ICS manufacturers, providing direct combustion and gasification technologies using wood cuts, pellets and charcoal (7). There are currently around 30 different ICS models, most of which are produced locally and use either charcoal, pellets fuel wood, or wood chips as fuel (8), though their performance characteristics are not established. Examples of Companies active in the IOA space:

Spectra Industries Lanka (Pvt) Ltd. Founded in 1983, manufactures small scale biomass energy conversion devices for thermal applications, including cook stoves and hot water boilers. Wood gasifier stove and pellet stove are among ICSs, of which the pellet stove is claimed to be 45% efficient, costing approximately USD 100/unit (8).

Innovative Cooking and Heating Technologies (Pvt) Ltd: This company in 2009 commercialized the EZ Turbo Charcoal Stove, an innovative design developed by them. It is equipped with a 12V DC power adaptor and a linear control fan. So far, around 100,000 units have been sold. The price of a unit is approximately USD 100 (10).

Burn Blast Stove: Marketed since 2018, this is an improved fuelwood and coconut shell rocket stove design developed in the country. The selling price of the stove is around USD 20 (35).

Janalipa Stove: Unveiled in 2022, this is an improved biomass stove that uses coconut shell charcoal, coconut shell, wood chips as fuel, and is equipped with a 12V DC power supply. The selling price of the stove is approximately USD 50/unit (12).

Expected Impact

Deployment of ICSs in households, utilizing renewable biofuels to replace imported fossils and conventional biomass, for energy security and environment sustainability

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Region
  • Sri Lanka: Western Province
  • Sri Lanka: North Western Province
  • Sri Lanka: Central Province
  • Sri Lanka: Sabaragamuwa Province
  • Sri Lanka: Southern Province
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Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

Renewable Resources and Alternative Energy

Development need
Sri Lanka's dependence on imported fossil fuels is a critical challenge for economic development given the adverse impact on energy security and the environment. Over 20% of the thermal energy is catered to by imported fossil fuels (5) and can be replaced by biomass as a low cost sustainable option. In addition it will help achieve 2050 carbon neutrality targets.

Policy priority
National Energy Policy & Strategies 2019 emphasizes assuring energy security; enhancing self-reliance, caring for the environment, and enhancing the share of indigenous RE forms of energy. Thus, the policy seeks to reduce the country's dependence on fossil fuels, that are 100% imported, while addressing adverse environmental impacts including climate change (2).

Gender inequalities and marginalization issues
Lack of access to modern energy services and technologies is a concern, which are crucial to women’s opportunities to engage in economic activities, reduce drudgery of household work and overll quality of life. Livelihoods dependent on Agriculture and other income generation activities would also benefit from better access to modern energy and technologies including RE (3).

Example; In 2016, the modern biomass dryer was provided for fish drying businesses in Tangalle and have cut short their production hours from ten to four hours a day and increased their production from 200 kgs to 800 kgs per month. It has also increased the living standards of these women working in the organization. It is a fine depiction of women entrepreneurship which has to be encouraged

Investment opportunities introduction
Ample availability of RE resources (Biomass resource map identify 92,600 ha)(1) and the need for the use of alternative, sustainable and indigenous energy sources provides investment opportunities across many end-use energy sectors (232,000 MSMEs in the manufacturing sector) (11). Further, demand for energy services is growing with the economic development.

Key bottlenecks introduction
As Sri Lanka is highly dependent on fossil fuels, the country faces a wide spectrum of challenges in the transition towards RE related to Capital and investment primarily related to Institutions and governance, Infrastructure and innovative business environment, Human capital and consumer participation (4).

Sub Sector

Alternative Energy

Development need
Biomass is the main source of thermal energy, contributing to 74.4% of the energy demand in industry and 57.2% of the household & commercial sector (5). It is only low cost thermal energy source for rural households. Thus, deployment of improved cook stoves (ICSs) and processed biofuels could contribute to oscio-economic benefits to a large percentage of the population.

Policy priority
National Energy Policy 2019 - The policy underlines that RE resources will be exploited based on a priority order arrived at, considering economics, technology and quality of each resource. It specifically mentions that Improved biomass conversion devices such as cook stoves will be introduced and promoted for household use (2).

Gender inequalities and marginalization issues
Women are primarily responsible for household responsibilities such as fetching fuelwood as part of their chores. The demands of women resulting from continuous reliance on fuelwood has received little attention especially from the perspective of health impacts. RE technologies, decentralized energy development are less explored and need more policy and programmatic attention (6).

Investment opportunities introduction
Biomass Energy Technology (BET) deployment in the domestic sector (i.e. Improved Cook Stoves - ICSs) provides opportunities for commercial investment for biofuel suppliers and BET companies (10 companies and 200 potters) with provision of building a larger local market.

Key bottlenecks introduction
The forest products transport regulations limits the supply of fuelwood to produce processed biofuels for ICSs. Uncertainties in both fossil fuel and fuelwood prices make it difficult for companies to get involved in the biomass supply chain. Another gap is the limited availability of data due to the informal nature of the biomass sector limiting the capabilities of the private sector be competitive

Industry

Biofuels

Pipeline Opportunity

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Investment Opportunity Area

Solid Biofuel fired Improved Cook Stoves (ICS) in the Domestic Sector

Business Model

Invest in or project financing for improved Biomass Energy Technologies (BETs) in the domestic sector for cooking applications (i.e. ICSs). The BETs in consideration are solid biofuel (Pellet, Chips, Charcoal) fired ICSs (direct combustion or gasification).

ICSs manufacturers: there are several ICS manufacturers, providing direct combustion and gasification technologies using wood cuts, pellets and charcoal (7). There are currently around 30 different ICS models, most of which are produced locally and use either charcoal, pellets fuel wood, or wood chips as fuel (8), though their performance characteristics are not established. Examples of Companies active in the IOA space:

Spectra Industries Lanka (Pvt) Ltd. Founded in 1983, manufactures small scale biomass energy conversion devices for thermal applications, including cook stoves and hot water boilers. Wood gasifier stove and pellet stove are among ICSs, of which the pellet stove is claimed to be 45% efficient, costing approximately USD 100/unit (8).

Innovative Cooking and Heating Technologies (Pvt) Ltd: This company in 2009 commercialized the EZ Turbo Charcoal Stove, an innovative design developed by them. It is equipped with a 12V DC power adaptor and a linear control fan. So far, around 100,000 units have been sold. The price of a unit is approximately USD 100 (10).

Burn Blast Stove: Marketed since 2018, this is an improved fuelwood and coconut shell rocket stove design developed in the country. The selling price of the stove is around USD 20 (35).

Janalipa Stove: Unveiled in 2022, this is an improved biomass stove that uses coconut shell charcoal, coconut shell, wood chips as fuel, and is equipped with a 12V DC power supply. The selling price of the stove is approximately USD 50/unit (12).

Business Case

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Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

< USD 50 million

CAGR
Describes the historical or expected annual growth of revenues in the IOA market.

15% - 20%

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

Deployment of 500,000 ICSs in the domestic sector within a 10-year period

Presently, 30% of the population uses LPG stoves and 1.3% kerosene (13), that need to be replaced by biomass-fired ICSs for energy security. The target percentage of replacement is 15% (250,000 LPG and 10,000 kerosene).

There are about 4 million households using biomass stoves, among which only 30% are using the better performing "Anagi stove" (14). This is equivalent to 1.2 million stoves. The balance are inefficient conventional stoves, 240,000 conventional stoves (6%) are to be replaced by ICSs.

Six Biomass Terminals will be established that could generate processed solid biofuels of 300 t/day by using the feedstock from sustainable fuelwood plantations (SFPs) for the domestic sector for cooking applications (catering for 300,000 ICSs). Additionally, processing of agro and fuelwood residues is expected to produce 200 t/day of densified biofuel (catering for 200,000 ICSs).

Indicative Return

IRR
Describes an expected annual rate of growth of the IOA investment.

> 25%

Total investment for the manufacture of 500,000 ICSs over a 10-year period, with an average unit production cost of USD 60/stove, is USD 30 million. Based on the cost and selling price present companies yield 31.6% IRR.

Cost of biofuel fired ICSs could vary from USD 20 to USD 100 (9), (10), (35), (12). In the analysis, an average selling price of USD 70/unit is taken.

Among 500,000 ICSs that are required, the processed fuelwood fired stoves are taken as 300,000, and the balance 200,000 are designed to be fired by densified biomass residues (paddy husk and sawdust pellets).

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Short Term (0–5 years)

Although the operational cost of biofuel-fired ICSs is much less, the relatively high initial cost of stoves (related to conventional biomass stoves) would be a challenge from a marketing standpoint. Thus the profit margin needs to be kept at a reasonably lower value (USD 10/unit). This leads to a medium-term timeframe.

Switching to biofuel fired ICSs would be gradual due to capacity limitations and market constraints. Hence a medium-term payback period is justified.

ICSs require improved biofuels (such as pellets and charcoal), which are not readily available at present. The market of biofuel too should grow with that of ICSs. Hence a medium-term payback period is justified.

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

< USD 500,000

Market Risks & Scale Obstacles

Business - Supply Chain Constraints

The choice for cooking fuels and technologies critically depends on the cost of energy and convenience. Price volatility of LPG is a critical factor. Uncertainty of the cost of energy make it difficult for companies to get involved in the biomass supply chain (15).

Market - Highly Regulated

Biomass energy sector is largely informal, and there is a lack of biofuel supply assurance. This is particularly significant in case of processed biofuels such as pellets and charcoal (16).

Uncertain and Informal

Biomass energy sector is influenced by a range of policies, regulations and institutions leading to issues in governance and institutional arrangements (17), (18).

Impact Case

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Sustainable Development Need

Energy security is a concern. Over 35% of the thermal energy demand in household & commercial sector are catered by imported fossil fuels (5), while sustainable supply of biomass is a challenge (15).

Limited access to affordable, reliable, sustainable and modern (clean and efficient) energy for all is a concern. This is further affected by present economic crisis (21), (22). Specifically, rural households depend heavily on conventional fuels & technologies for cooking (23), (24).

The energy sector impacts environmental sustainability, including the prevailing global climate crisis which is an urgent concern. Interventions are required to safeguard local environment as well as to mitigate global climate change (25) (26).

Gender & Marginalisation

Use of inefficient cook stoves and conventional biomass fuels lead to severe health implications resulting from indoor air pollution particularly impacting economically marginalized communities, especially women (27).

Biomass terminals will ensure provision of low cost and affordable fuel options for thermal energy applications, particularly for MSMEs and rural households in improving their economic outputs (14).

Expected Development Outcome

Biofuel ICSs could replace LPG and Kerosene stoves to reduce import dependency and enhance energy security, while mitigating GHG emissions (5), (29).

Biofuel ICSs could replace conventional biomass and inefficient stoves to improve indoor air quality and reduce health impacts.

Large scale deployment of ICSs will create new business opportunities in both stoves and biofuel supply chains, support innovation for clean energy solutions, while generating more local employment.

Gender & Marginalisation

Use of modern biofuels and ICSs will provide benefits for women and marginalized communities through a reduced reliance on conventional fuelwood and inefficient technology use, particularly by saving time for collection of fuelwood and improving the overall working environment (6), (28).

Large scale deployment of ICSs will create new business opportunities in both stoves and biofuel supply chains, especially with more economic opportunities for women and maginalized communities. Given large % of women and marginalised in the informal and MSME sector

Primary SDGs addressed

Affordable and Clean Energy (SDG 7)
7 - Affordable and Clean Energy

7.1.2 Proportion of population with primary reliance on clean fuels and technology

7.2.1 Renewable energy share in the total final energy consumption

Current Value

33% of the households use clean fuels & technologies for cooking (LPG, Electricity & advance solid biofuels). Note that Sustainable Development Council (SDC) reports unavailability of data for this indicator (30). However, approximations on cook stove users indicate that about 30% of the households use LPG and electric (13) and 20% of the households use improved biomass cook stoves (14), (8).

RE share in the total final energy consumption was 46.2% in 2019, in which 41.9% from biomass (thermal) and 4.3% from renewable electricity (hydro, wind, solar and biomass) (5).

Target Value

37% of the households use clean fuels & technologies for cooking (LPG, Electricity & advance solid biofuels). Note that, as at present, there is no specific national target. The IOA on biofuel fired improved cook stoves associated with this IOA (on Biomass Terminals) targets to replace 250,000 conventional kerosene and biomass stoves by advance solid biofuel stoves.

No specific target for RE share in the final energy consumption. However, there is a target for electricity sector to increase renewable energy mix to 70% by 2030 (26).In 2019, this was 34.47% (30).

Secondary SDGs addressed

Climate Action (SDG 13)
13 - Climate Action
Industry, Innovation and Infrastructure (SDG 9)
9 - Industry, Innovation and Infrastructure
Responsible Consumption and Production (SDG 12)
12 - Responsible Consumption and Production

Directly impacted stakeholders

People

260,000 LPG and Kerosene cook stove users in urban, semi-urban sector households who would opt for biofuel ICSs; Nearly 240,000 Conventional biomass cook stove users who would opt for cleaner and efficient biofuel ICSs

Gender inequality and/or marginalization

Provide employment opportunities and increase livelihoods of women and marginalised groups given a large number are in this informal sector

Planet

Will benefit with fuelwood plantation in degraded land, improving the environment, while utilization of biomass residues for biofuel production mitigates the adverse environmental impact of improper dumping and open burning.

Corporates

Private sector organization involved with the ICS industry and biofuel production (Biomass terminals)

Public sector

FD, CCI, RRISL and local government agencies involved with fuelwood plantations will get the opportunity to generate income through the supply of fuelwood to biomass terminals, which can be utilized for improved delivery of their services. Also, achieving NDC targets.

Indirectly impacted stakeholders

People

Those who are engage with the ICS and biofuel industry and their supply chains will benefit from improved income levels, including women and maginalized communities involved in the fuelwood plantations and supply chain

Gender inequality and/or marginalization

Benefit women and marginalized communities by reducing reliance on conventional fuelwood and low efficient technology use, particularly by saving time for collection of fuelwood, improving working environment and livelihoods

Planet

The Planet benefits by the replacement of LPG and Kerosene by sustainable biofuel thereby contributing to GHG mitigation.

Corporates

Fuelwood plantations of the RPC get an opportunity to supply raw materials for Biomass terminals that produce biofuel for ICSs, thus benefiting from the business opportunities created.

Public sector

Achieving NDC targets and reduced expenditure on welfare programmes and subsidies

Outcome Risks

There are regulatory barriers in relation to transportation and storage of fuelwood, affecting supply assurance of the biofuels needed for ICSs.

Fluctuations in the cost of biofuels as well as that of LPG and Kerosene will determine the financial viability of business models in this space, thereby impacting private sector participation.

Lack of experience in modern ICSs may result in uncertainties in the performance and operational issues for the users.

The lack of data and information due to the informal nature of the biomass energy sector may hinder the efficient planning and risk mitigation of the business (32).

Gender inequality and/or marginalization risk: Relatively high cost of ICSs and processed biomass fuel may hinder the adoption by women and marginalized and low income communities.

Impact Risks

Anticipated fuel switching critically depends on relative cost difference between energy sources. The fossil fuel subsidies may affect the financial feasibility, discouraging consumer acceptance and therefore the required behavior shifts to biofuels.

Failure to provide access to affordable, reliable, sustainable and modern (clean and efficient) energy (biofuels) for cooking, particularly to rural households will hinder social-economic development.

Failure in biofuel industry will have a significant impact on achieving climate targets that Sri Lanka has set out for itself. As set out in NDC targets and national climate change policy (2003)

Gender inequality and/or marginalization risk: Failure in biofuel industry will hinder empowerment of women and marginalized groups for national development, and improving livelihoods.

Impact Classification

C—Contribute to Solutions

What

ICSs are a critical output of the biofuels value chain, helping replace fossil fuels and ensuring energy security, environmental sustainability while also empowering primary users such as women and marginalized groups.

Who

Local entrepreneurs involved with ICSs and biofuel supply chain and associated government entities, plantation companies and local communities biofuel users (particularly MSMEs & rural households).

Risk

Regulatory barriers for transport and storage of fuelwood, financing gaps, price volatilities, data gaps and lack of competencies on ICSs may cause risks.

Contribution

Improve indoor air /quality; Reduce dependency on imported fossil fuels; and mitigate GHG emissions. Conversion of about 30% of the households that use LPG and electric solutions for cooking (29)

How Much

Deployment of 500,000 ICSs to replace 250,000 LPG stoves, 10,000 Kerosene stoves and 240,000 conventional biomass stoves.

Impact Thesis

Deployment of ICSs in households, utilizing renewable biofuels to replace imported fossils and conventional biomass, for energy security and environment sustainability

Enabling Environment

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Policy Environment

National Energy Policy and Strategies (2019): This policy document specifically mentions that Improved biomass conversion devices such as cook stoves will be introduced and promoted for household use (2).

National Climate Change Policy (2003): Refers to the energy sector through GHG mitigation, where the emphasis is given to (i) exploring the potential of clean and RE sources and enhancing their production, accessibility and affordability; (ii) economic incentives for less carbon-intensive fuels (31).

Financial Environment

Financial incentives: Though the National Energy Policy & Strategies 2019 states that innovative financing schemes and financial instruments will be introduced to encourage RE development, so far no specific financial incentives have been developed for biofuels or BETs (2).

Sri Lanka Green Finance Taxonomy (2022): It facilitates the disclosure of taxonomy-aligned activities and the offering of green finance products, such as loans, bonds, and funds, by market participants including local financial institutions and large corporations. It covers biomass processing (33).

Regulatory Environment

National Environmental (Protection and Quality) Regulations No. 1 of 2008: According to this regulation (and subsequent amendments), no person shall, discharge, deposit or emit waste into the environment or carry on any prescribed activity that cause or are likely to cause pollution (32).

SLSEA Act No. 35 of 2007: This provides the mandate for SLSEA to identify and manage appropriate RE conversion technologies (including BETs), conversion and utilization norms and practices including the preparation, maintenance and updating of an inventory of technologies with performance data (33).

Marketplace Participants

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Private Sector

Manufacturing of ICSs will be done by private companies such as Spectra Industries Lanka (Pvt) Ltd, EZ stove, Janalipa and Burn Blast Stove

Government

Forest Department (FD), Rubber Research Institute of Sri Lanka (RRISL), Coconut and Cultivation Board (CCB), as fuelwood suppliers; (ii) Sri Lanka Sustainable Energy Authority (SLSEA) as the facilitator and regulator of the biomass energy sector.

Multilaterals

UNDP, FAO, UNIDO for technical and financial assistances.

Non-Profit

In the upstream supply chain, Organizations (NGO) and Community-Based Organizations (CBO) as fuelwood growers, collectors and suppliers.

Public-Private Partnership

Multi-stakeholder partnerships among Government (FD, RRISL, CCB), Private sector RPCs and Local communities/CSOs with resource mobilization and cost/profit sharing for the supply of fuelwood for production of biofuels for ICSs at the Biomass Terminals,.

Target Locations

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country static map
semi-urban

Sri Lanka: Western Province

Locations of the ICS manufacturing industries are primarily based on demand centres (for ICSs), and availability and accessibility of the Biomass Terminals producing biofuels. The Western province is the main demand centre for ICSs (targeting LPG) and there is a Biomass Terminal within the province.
rural

Sri Lanka: North Western Province

North Western Province is a demand centre for ICSs (targeting LPG) and there will be a Biomass Terminal within the province based on SLSEA plan supported by UNDP/FAO/FD
rural

Sri Lanka: Central Province

Central Province is a demand centre for ICSs (targeting conventional biomass cook stoves in rural/estate sector) and there will be a Biomass Terminal within the province.
rural

Sri Lanka: Sabaragamuwa Province

Sabaragamuwa Province is a demand centre for ICSs (targeting conventional biomass cook stoves in rural/estate sector) and there will be a Biomass Terminal within the province.
rural

Sri Lanka: Southern Province

Southern Province is a demand centre for ICSs (targeting LPG and conventional biomass cook stoves in rural/estate sector) and there will be a Biomass Terminal within the province.

References

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