Nexant Final Report Haiti 2011.pdf

Short Term Task Order – Fast Response Technical Expertise to EGAT/I&E

Final Report:

Assessment of

Haiti Alternative Cooking Technologies Program

NOVEMBER 2010

This publication was produced for review by the United States Agency for International Development. It was prepared by Nexant, Inc. under Contract No. EPP-I-03-03-00007-00 Sub Activity 14

Short Term Task Order – Fast Response Technical Expertise to EGAT/I&E

Final Report:

Assessment of Haiti Alternative Cooking Technologies Program

November 2010 This publication was produced for review by the United States Agency for International Development. It was prepared by Nexant, Inc. under Contract No. EPP-I-03-03-00007-00 Sub Activity 14

DISCLAIMER

The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government

Table of Contents

1 Executive Summary ............................................................................................................ - 1 - 2 Introduction ......................................................................................................................... - 7 - 3 Market Assessment ........................................................................................................... - 12 - 4 Technology ....................................................................................................................... - 26 - 5 Finance Options ................................................................................................................ - 31 - 6 Key Success Factors and Target Audience ....................................................................... - 34 -

Final Report: Assessment of Haiti Alternative Cooking Technologies Program, United States Agency for International Development Contract EPP-I-03-03-00007-00 Sub Activity 14

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1 EXECUTIVE SUMMARY

1.1 BACKGROUND

Every day, 500 million cooks in the developing world use biomass to prepare food for 3 billion people in developing countries around the world, including in Haiti. Smoke-filled kitchens from the use of high intensity carbon fuels such as charcoal and firewood represent a serious threat to human health and the natural environment. A growing awareness and interest in tackling the health and environmental problems associated with inefficient biomass-based cooking technologies has led to an increasing number of donor-funded programs throughout the world.

The U.S. Government has played a leadership role in this effort, including in Haiti.

Secretary of State Hillary Clinton recently announced the Global Alliance for Clean Cookstoves, a major new public-private partnership “to save lives, improves livelihoods, empower women, and combat climate change by creating a thriving global market for clean and efficient household cooking solutions.” The goal of the Alliance is for 100 million homes worldwide to adopt clean and efficient stoves and fuels by 2020. Many other donor nations and multi-lateral institutions, such as USAID, the World Bank, the United Nations and the InterAmerican Development Bank have been working on this issue in Africa, Asia and Latin America and the Caribbean.

In Haiti over the past decade, urban and wealthier households have started to shift away from the exclusive use of charcoal and firewood for cooking and have begun using cleaner liquid fuels such as kerosene or Liquefied Petroleum Gas (LPG). Rural populations have less access to cleaner fuels and continue to depend on traditional three stone open fires and/or inefficient biomass (charcoal or wood) cookstoves. In addition to significant financial barriers to adopting cleaner cooking technologies, socio-cultural issues associated with changing from fuel wood and charcoal as feedstocks to liquid fuels range from the taste obtained from food cooked with smoky biomass fuels to fear about safety issues.

The ubiquitous use of charcoal in Haiti for home cooking, by food vendors, and institutions is problematic for the country and its people for many reasons, including destruction of the natural environment due to gathering wood (including felling or pruning live trees) to produce charcoal, leading to a shortage of wood and increased import of charcoal, increasingly higher prices of charcoal from any source, and chronic health problems caused by air pollution from charcoal burning. The denuded forests of Haiti leave the country prone to severe soil erosion and catastrophic flooding from the frequent hurricanes and other rainstorms to which Haiti is subject, and reduce the capacity of the watersheds to supply clean water to the population. This deforestation is dramatically revealed by satellite photographs wherein the contrast can be seen with Haiti’s neighbor on Hispaniola, the Dominican Republic.

Decisions about fuel energy use in Haiti are influenced by many factors such as tradition, convenience, and availability of resources, accessibility to technologies, household income and the role of women in decision-making processes regarding household expenses. In some cases households that have greater flexible family income use cleaner fuel energy such as kerosene or LPG as opposed to wood or charcoal because it is a measure of affluence and prestige as well as

A| - 2 -providing real benefits in terms of ease of use and time savings. Poorer households use biomass as the main fuel due to both cultural preferences and the higher cost of other fuels.

It is particularly difficult to develop an effective alternative cooking technologies program in Haiti for several reasons. First, the mix of cooking requirements (beans, rice, sauces) requires both high heat, high speed modes and lower, consistent heat simmering modes. Few existing efficient charcoal stove technologies do both well while still maintaining high efficiency levels.

Secondly, fuel mixing is quite common, with people switching between charcoal, wood, kerosene and other fuels such as LPG. Sometimes this is driven by perceptions, ease of use or season (wood being harder to get and use in the rainy season). No known efficient stoves currently effectively handle a mixed fuel use scenario. They typically excel in utilizing one type of fuel, but perform poorly with others. These issues necessitate a mixed technology and fuel strategy, potentially leading to increased program costs and higher barriers to entry for the end user.

Haiti is the poorest country in the Western Hemisphere with extremely limited access to modern energy services (Annex A describes the macroeconomic condition of the country).

Approximately 70% of Haitian household energy needs are met using firewood and charcoal; at least 30% of family income is spent on charcoal for cooking in Port-au-Prince. Although charcoal is produced all over the countryside, speculators and wholesalers gather the product and resell it to retailers in Port-au-Prince and provincial towns. Recent reports suggest that the earthquake that struck Haiti on January 12, 2010 has led to increases in charcoal prices as wood for re-construction is now in high demand. Beyond the negative economic and environmental impacts of charcoal consumption, cooking with firewood and charcoal exposes women and young children to smoke or ‘indoor air pollution’ and associated health problems, especially respiratory disease, which is the second largest killer of children under the age of five in Haiti.

1.2 STUDY OBJECTIVES

The objectives of the current study are: 1) to assess the supply and use of charcoal for cooking in Haiti and the potential to use other fuels, such as Liquefied Petroleum Gas (LPG), and 2) to design a five-year replacement program to achieve large-scale reductions in charcoal consumption by households, food vendors, and other relevant fuel users identified (e.g., bakeries, laundries, schools, etc.).

1.3 KEY FINDINGS

1.3.1 Biomass Cookstove Findings

Extensive interviews, surveys and focus groups in Port-au-Prince, Cap Haitien and several other urban and rural areas over a six week period revealed the following key findings:

1. Traditional cooking practices and cultural norms are the most influential drivers of behavior with regard to the adoption and use of efficient cooking technologies and/or alternative fuels.

2. Barriers to reducing or eliminating charcoal as a primary cooking fuel are numerous and extremely high. Lack of abundant distribution channels, supply chain infrastructure and

A| - 3 -lack of consumer education are the largest barriers to alternative fuel adoption over the long-term.

3. SMEs selling food on the street are prolific and constitute a significant portion of charcoal demand and use in Haiti. An improved stoves, sustainable charcoal and/or fuel switching program targeted at this informal industry could have a significant and rapid impact on deforestation rates, user health and economic security.

4. Institutions such as schools and orphanages consume large quantities of charcoal and other biomass fuel in implementing vital feeding programs. An improved stoves and/or fuel switching program targeted at this industry could have a significant impact on deforestation rates, user health and reduce the strain on the institutions’ limited financial resources.

5. Urban SMEs such as bakeries and laundries are generally not consumers of charcoal or other biomass (many use diesel). Though rural bakeries are large consumers of wood, they do not utilize baking technologies that readily lend themselves to fuel switching or efficient replacement technologies.

6. Charcoal production is an important source of rural income and an unregulated industry fraught with corruption. An improved charcoal stove or alternative fuel supply chain would be perceived as a major threat to the industry and its beneficiaries, creating real challenges in convincing current beneficiaries to pursue employment in a new supply chain. Training opportunities and financial incentives will be the keys to overcoming this barrier.

1.3.2 LPG Findings

At USAID’s request, Nexant put extra effort into studying the LPG industry. Two LPG expert consultants were retained and, with Nexant fuels experts, conducted an exhaustive study of the sector, including interviews in Haiti over a two week period. The findings from this work reveal that broadly catalyzing the Haitian LPG market requires the following interventions:

1. Introduce LPG policies and legislation addressing technical and commercial standards and practices that ensure safety, discourage predatory commercial practices, and encourage investment, especially in cylinders and downstream distribution, by the LPG industry.

2. Review and potentially restructure LPG importation practices and distribution costs to increase the margins of retailers.

3. Develop an extensive network of retailers selling LPG through cylinder exchanges.

4. Subsidize cylinders and stoves to encourage LPG adoption.

5. Create awareness, promote benefits, and allay fears of LPG through broad and targeted marketing and education campaigns.

6. Provide appropriate financing facilities to retailers to purchase LPG inventory (depending on the size of the retailer this could be via microfinance or remittances).

Because legislation and price reform can significantly change the structure of industry, achieving agreement among governmental, industry, and donor stakeholders will be required and be expected to be challenging. Given the unpredictability of legislative and pricing reform, support should initially focus on investments, such as scaling LPG adoption by small-medium enterprise (SME) food vendors or “Manjekwits” that have a large impact and can succeed without

A| - 4 -legislative reform. In addition, LPG stoves could be introduced to schools supplied by the World Food Program.

The estimated addressable market for Manjekwits in Port-au-Prince is 10,000 individual vendors, of which 20 percent, or 2,000, are believed to be heavy charcoal consumers. The other 80 percent, or 8,000, are the small Manjekwits that occupy nearly every block in Port-au-Prince.

Considering the 12.5 percent lower cost of LPG versus charcoal per meal1, small Manjekwits could save between $308-$410 annually by switching to LPG2

. Though fuel pricing now favors LPG, aggressive subsidies on equipment and retailer development are still required to overcome initial cost barriers to purchasing LPG stoves and cylinders and to sustainably ensure the availability of supply. Reliable supply after increasing LPG adoption is extremely important to ensure ongoing customer trust. Given their existing supply relationships with Manjekwits, charcoal vendors should be considered prime candidates to become LPG retailers. An estimated equipment and loan funds budget to scale LPG adoption by Manjekwits would cost USAID approximately $1.7 million.

The World Food Program in Haiti feeds an estimated 800,000 students, cooking for whom is estimated to consume 8,000 tons of charcoal per year. A program introducing LPG stoves to the estimated 800-900 schools in Port-au-Prince would cost about $1 million and could be executed within a year of starting the program. It should be noted that the World Food Program is very interested in putting the ORKA/briquette system into their urban schools, which could be a planning conflict with LPG fuel switching and will require careful coordination.

The timeline for the above programs assumes no program activities before the 3rd quarter of 2011. The next three quarters (Q4 2011 – Q2 2012) are spent procuring cylinders and stoves, building capacity at MFIs, working with industry to develop a retail network, and pre-sales activities. Actual roll out to Manjekwits occur from Q2 2012 through 2015, although it could start earlier if donor funding is made available earlier in 2011. The roll out to schools could occur from 3Q 2011 – 2Q 2012. For activities related to legislation and pricing, activities would also start in Q3 2011 and are assumed to conclude by Q2 2012. If legislation can be introduced in that time frame, additional investments can be considered to broadly expand the use of LPG in Port-au-Prince and elsewhere in Haiti.

1.3.3 Other alternative fuel findings

Kerosene could complement LPG use in terms of charcoal replacement, due to cost, storage capacity and familiarity among many Haitian households with its use as a cooking fuel. Our team conducted Controlled Cooking Tests which demonstrated that kerosene stoves had cost savings similar to the best improved charcoal stoves and to LPG stoves. However, negative views by cooks concerning the negative effect kerosene has on taste will likely continue to limit its broad adoption in the marketplace.

Ethanol has longer-term promise as a viable cooking fuel in Haiti. Both alcohol-burning stoves and ethanol could be made domestically with sufficient private sector, government and donor

1 Johanna Matocha, Focus Group Discussion Report Nov 2010 (The Paradigm Project) p. 9 2 Michel Carl Simon, Analyse de la Situation du GPL en Haiti, Sept 2009

A| - 5 -support. However, a key barrier to using imported ethanol in the short-medium term would be the need to build new storage tanks for the imported ethanol – existing fuel storage tanks cannot be used. Thus a very large investment would be required to jumpstart ethanol use as a cookstove fuel. This is not the case for LPG, which has sufficient import tankage in place to support the initial phase of the proposed program.

Waste Paper Briquettes. Briquettes made from waste paper also show promise. Expansion of the use of briquettes made currently in Haiti from waste paper and cardboard should be encouraged.

The technology is within the grasp of relatively inexperienced and low-income people, and initial investments would be small. Multiple benefits can be leveraged to encourage donor funding of the required infrastructure to be built and training needed to expand production.

Solar cookers. A variety of solar cookers have been piloted in Haiti by NGOs and others. Solar cooking is probably not a viable option for Haiti in the short to medium term since it is fundamentally hindered by inconvenience, severe limitations on time of use (i.e. only works during periods of high sunlight), high investment cost, and unfamiliarity. Nonetheless, if carefully developed, solar could play a role in reducing cooking fuel use of all kinds, fossil and bio-based, or serve as a backup source of energy.

Biochar. Biochar is the residue left over from burning wood or agricultural waste in a pyrolitic (oxygen free) environment. Biochar itself is a fine-grained, highly porous charcoal that can be put back into the soil to help retain nutrients and water. Biochar is found in soils around the world as a result of vegetation fires and historic soil management practices. Intensive study of biochar-rich dark earths in the Amazon (terra preta), has led to a wider appreciation of biochar’s unique properties as a soil enhancer. The carbon in biochar resists degradation and can hold carbon in soils for hundreds to thousands of years, and thus represents a way to sequester CO2.

There are several kinds of crops grown in Haiti that produce large amounts of biomass (grassy or granular) as byproduct, including: coffee, rice, corn, oils, cocoa, and mangoes. These biomass byproducts consist of coffee hulls, rice straw, corn stover and cobs, oilseed meal, cocoa husks, and mango and other tree trimmings, which can be used in biochar stoves.

Unfortunately, Biochar-producing stoves are not yet a mature technology. Although biochar stoves have demonstrated positive results in the laboratory there is currently no documentation of a successfully implemented biochar stove project in the developing world. Given the challenges that exist in Haiti (instability, lack of resources, high cost of labor, etc) it would be more feasible to implement a biochar pilot project in a neighboring country that would not face the production and cultural hurdles that are present in Haiti.

It should be noted that a recent pilot project by WorldStoves - in partnership with a Haitian NGO, and a private Haitian company - attempted to bring its "Lucia" biochar stove designs to Haiti in the aftermath of the quake. Unfortunately, this partnership was not successful in establishing a viable production center in Port-Au-Prince, which was initially envisioned to make and distribute up to 2,000 stoves.

Biomass Pellets. Biomass pellets can be produced from agricultural waste or from forest products. Pellets are a carbon neutral fuel that can be burned to produce extremely low

A| - 6 -emissions (similar to LPG). Bagasse pellets have very strong energy balance (energy inputs needed to produce the fuel, versus energy contained in the fuel) which compares favorably to most other biofuels. A number of promising pellet stove designs currently exist: The Eco Ayiti stove, the BP Pellet Fan Stove, and the Top Lit Updraft (T-LUD) partial gasifier.

The development of a pellet stove program in Haiti requires a consistent and low-cost supply of biomass pellets. To achieve meaningful scale, the pellets must be made on an industrial level with a reliable supply of agricultural waste. Three supply options exist for further investigation:

1. Sugarcane waste (bagasse) from Haiti.

2. Sugarcane waste (bagasse) from Dominican Republic.

3. Agricultural waste or wood pellets from offshore producer (e.g. United States Brazil or

Canada)

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2 INTRODUCTION

2.1 STUDY OBJECTIVES

The purpose of this study is to assess the supply and use of charcoal for cooking in Haiti and the potential to use other fuels, such as Liquefied Petroleum Gas (LPG), and to design a five-year replacement program to achieve large-scale reductions in charcoal consumption by households, food vendors, and other relevant fuel users identified (e.g., schools, bakeries, laundries, etc.).

2.2 SCOPE OF WORK

Nexant was asked to produce the detailed design of a comprehensive alternative cooking technologies program in Haiti. The program will encourage households, food vendors and energy-intensive businesses such as laundries and bakeries to reduce their consumption of charcoal by utilizing cleaner and more efficient cooking technologies such as improved biomass cookstoves and/or switching to alternative fuels such as Liquefied Petroleum Gas (LPG). To achieve this, Nexant sought to answer the following questions:

Demand

1. What is the current profile of the charcoal market? E.g. number and description of consumers

(households, food vendors, energy-intensive businesses, etc), geographic demand, etc.

2. What improved cooking technologies and alternative fuels are currently available in Haiti or could be introduced given local conditions?

3. For each consumer group, what are the market barriers to increasing their uptake? E.g. high upfront costs, limited distribution networks, cooking preferences and practices, social norms, lack of product knowledge, etc?

4. What are the existing incentives for switching away from charcoal? E.g. price differentials between alternative fuels and charcoal, fuel attributes, etc.

5. Given revealed preferences (adoption rates, taste, etc), what combination of alternative cooking technologies and/or fuels would maximize reduction of charcoal consumption by each consumer group in Haiti?

6. What sustainable financing options, including incentive packages for households and businesses, would motivate consumers to adopt improved cooking technologies and/ or alternative fuels?

Supply

1. What is the current supply and distribution network for improved cooking technologies and alternative fuels? Is it adequate in reach and reliability to meet current demand? What is the capacity of suppliers, manufacturers and distributers of these to rapidly ramp up supply?

2. For alternative fuels such as LPG, what is the price history and reliability of supply over the last three years? What are prices and supply reliability likely to be over the next three-five years?

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3. What are the policy and regulatory issues that may need to be addressed to ensure that international standards for safety and quality control are adhered to in the supply, distribution and use of LPG?

4. What are the incentives and barriers to expanding the domestic manufacturing industry for stoves and other household energy technologies?

5. Can beneficiaries of the charcoal trade be brought into the supply chain?

2.3 METHODOLOGY

In answering these questions, Nexant conducted the following tasks:

(1) Conducted a review of past experiences with promoting improved cooking technologies and alternative fuels in Haiti and other developing countries with similar conditions, and presented a brief report on lessons learned. This report included lessons from past successes and failures and highlighted policy and/or program components that contributed to their success or failure.

(2) Conducted interviews with all stakeholders within and outside of Haiti, including LPG suppliers and retailers, consumers, Government of Haiti (GoH) authorities, donors and NGOs that were/ are active in alternative cooking technologies (UNEP, World Bank, CARE, etc).

(3) Conducted surveys and focus groups for each consumer group (households, food vendors and energy-intensive businesses such as laundries and bakeries) to further assess the incentives and barriers to utilizing improved cooking technologies and/ or alternative fuels.

(4) Conducted surveys and focus groups for those working in the charcoal trade to determine viability of employing them in new industries related to improved cooking technologies and alternative fuels.

2.3.1 Biomass cookstove data collection

Over 6 weeks from September 15 through October 31, 2010 The Paradigm Project (contracted by Nexant) conducted focus groups and surveys with households, food vendors and energy intensive businesses (bakeries and laundries), and those working in the charcoal trade. The final Paradigm report is attached as Annex B. A detailed report on the focus groups is presented in Annex C.

Interviews were conducted in four geographical areas: Port-au-Prince and its surrounding areas, Gran Goave Sections 5 and 6, Central Plateau in Papay and Hinche, and Cap Haitien and its nearby East Department. The primary focus of the study was Port-au-Prince. As the seat of both industry and population in Haiti, it provided a venue to better understand the continued impact of the earthquake and to explore viable options for improving the lives of those affected. Corail was selected as representative of permanent settlements on the outskirts of Port-au-Prince that will continue to grow as part of the reconstruction strategy. Cap Haitien was selected for its role as the ‘second city’ of Haiti. Gran Goave was selected as a rural community in which the resources

A| - 9 -of a locally-based NGO with a long established presence in the area could be used to provide access to representative rural communities members. The Central Plateau was selected primarily to work with Mouvement Paysan Papay (MPP), who has worked with MIT on briquette production, and who recently received a container of ~1,200 StoveTec household stoves and two types of institutional stoves from International Lifeline Fund (ILF).

Households, street vendors, laundries, bakeries, and charcoal sellers and makers were chosen at random in all geographic areas except for Gran Goave, where Plant with Purpose facilitated our visits to representative members of each of these groups. An emphasis was placed on middle to lower income households, as those that were most likely to be using charcoal or a mix of fuel, and thus those that represented the target group which would most benefit from improved cooking technology, given both the health and economic burdens of wood fuel-based cooking practices.

In Port-au-Prince, surveys were conducted around Petionville, Delmas, La Ville, Champs de Mars, Thomassin, Tabarre and Croix de Bouquets. Other areas of the city, most notably Cite Soleil were not explored due to security concerns; however it is presumed that these areas of extreme poverty could benefit greatly from an improved stove program. A special visit was made to Corail, the permanent settlement camp just outside of Port-au-Prince, to better understand the living conditions and environmental impact involved in the resettlement of IDPs.

All interviews were conducted based on the selection of a geographic area with distinct demographic qualities and interviewees from various groups were then randomly chosen based on their willingness to participate in the survey and their relative representativeness of the trends observed in that area.

Given the difficulty in finding and accessing institutions, schools and orphanages were not randomly selected, but rather facilitated through partner organizations. Orphanage visits were facilitated by Grassroots United from their distribution beneficiaries list. Schools visits were facilitated by the World Food Program for the School Feeding Program. Outside of the WFPs work in feeding school children, very few schools provide food to their students.

The 2007 ESMAP report 3from the World Bank and Haitian Bureau of Mines and Energy (BME), served as a rough baseline for evaluating current data and in providing the data from which findings were extrapolated in order to estimate scale. Much of the information provided in this report references earlier studies, some of them dating back to the 1980s. The Women’s Refugee Commission report produced in March 20104 was also used as a reference for post-earthquake activities in Port-au-Prince and the 2010 WINNER survey was utilized to supplement primary data and gain a better understanding of the activities of street vendors operating at various scales.

In addition to the surveys and focus groups, Controlled cooking tests (CCTs) were conducted for 24 different stoves to span all stove and fuels options currently available in Haiti (charcoal, wood, briquettes, LPG, Kerosene), and applications (household or institutional (schools and

3 Haiti: Strategy to Alleviate the Pressure of Fuel Demand on National Woodfuel Resources, ESMAP Technical Paper 112/07, April 2007 4 http://womensrefugeecommission.org/programs/reproductive-health/938-cooking-fuel-needs-in-haiti

A| - 10 -restaurants). The CCTs were conducted by 8 cooks over a 3 week time period from September to October 2010. The most efficient and readily accepted cookstoves were identified from the CCTs to inform USAID support for marketing and promotion efforts under the planned program.

An inventory of stoves available in Haiti is provided in Annex D.

2.3.2 LPG Data Collection

USAID requested that Nexant conduct a more detailed assessment of LPG expansion in Haiti than was done for the other alternative fuels to charcoal and wood. We contracted with inclusiV, an organization whose principals have provided consulting services to the LPG industry worldwide over the past 30 years, particularly in developing countries. Two inclusiV consultants worked closely with Nexant fuels experts to develop an industry overview and recommendations. Our LPG team spent two weeks on the ground in Haiti gathering information and meeting with LPG industry representatives, USAID, UNEP, other donors and Government of Haiti officials.

The final inclusiV report is attached as Annex E and their main conclusions are summarized below.

2.3.3 Other alternative fuel data collection

Nexant conducted a desktop study and supported some field work (including CCTs for kerosene stoves), to collect information on other alternatives fuels being tested or considered by various groups for expansion in Haiti, including ethanol, waste paper briquettes, solar, biochar, pellets and kerosene. The conclusions from this study are presented in Section 3.

2.4 DETAILED WORK PLAN

Nexant conducted the study according to the following detailed work plan.

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Table 1: Detailed Work Plan - Haiti

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3 MARKET ASSESSMENT

3.1 FUEL SUPPLY AND DEMAND

Nexant assessed all major fuel types, but focused on charcoal, wood and LPG as the most widespread and viable fuels in Haiti.

Summary of Surveys and Focus Groups

Eight survey types were created to capture information from the following groups:

1. Households in urban areas

2. Households in rural areas (both a short survey and a long, detailed survey were used)

3. Street Vendors (“Manjekwits”)

4. Institutions (school, orphanages, and other institutions cooking for large groups

5. Bakeries

6. Laundries

7. Charcoal Sellers

8. Charcoal Producers

The geographical focus for data collection was Port-au-Prince, with an emphasis on Delmas, Petionville, and Champs de Mars. Other areas visited were Section 5 of Gran Goave, Hinche and Papay in the Central Plateau, Cap Haitien and the East Department near the border with the Dominican Republic. The two maps below identify the study sites throughout Haiti and within Port-au-Prince (PaP).

Figure 1 Data collection sites throughout Haiti

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Figure 2: Data collection sites in Port-au-Prince

3.2 FUEL TYPES

3.2.1 Charcoal/Wood

It is estimated that Haitians use at least 4 million tons of wood annually, 33% of which is transformed into charcoal, chiefly for cooking purposes (2007 ESMAP). According to the ESMAP study, 37 million cubic meters of living wood and a 2% annual growth rate means that 474,000 tons of wood or 71,000 tons of charcoal could be produced sustainably from existing wood stocks in Haiti. The consumption rate of charcoal in Port-au-Prince alone is estimated to be approximately 413,000 tons/year, based on a population of 3.5 million with an average household size of 4.9 and a 70% charcoal usage rate. Clearly, the depleted Haitian forest resource base alone is not sufficient to meet current demand. Charcoal/Wood production is not regulated in Haiti. Recent information highlighted in a recent New York Times article5 revealed that there is a large illegal charcoal trade emanating from the Dominican Republic.

The average urban household interviewed during the course of this assessment consumes 2.27 kg of charcoal per day, or just under 2 marmite (can)/day. This represents 47.29gd/day (~$1.20 US) spent on fuel, which is 28% of the average income of respondents who are employed (average income is 170.11gd/day). Estimates show that rural households are consuming 1.5kg of wood per day (ESMAP 2007). Charcoal usage among rural households is difficult to judge because it is based on seasonal variations and is often sold in different quantities (such as macoute, or donkey sacks), but is likely around 2.18kg/day in the rainy season among wealthier households.

3.2.2 LPG

LPG consumption over the past 10 years is estimated to have been flat at around 15,000 tons annually, or about 1.7 kilogram (kg) per person based on a current population of approximately

5Environmental Destruction, Chaos Bleeding Across Haitian Border by Nahanial Gronewoldof of Greenwire published December 14, 2009, http://www.nytimes.com/gwire/2009/12/14/14greenwire-environmental-destruction-chaos-bleeding-acros-

35779.html?scp=1&sq=haiti%20charcoal%20dominican%20republic&st=cse

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8.3 million people. Eighty percent of LPG consumption is believed to be in Port-au-Prince.

Though Haiti does not maintain official figures for LPG imports, reliable figures come through interviews with the two LPG importers, Sodigaz and Total. Sodigaz is the LPG operation of Dinasa/National, a diversified Haitian petroleum company, and Total is part of the French oil major Total. Despite the steadily rising cost of biomass cooking fuels, such as charcoal, LPG consumption has not grown because of the lack of a required regulatory framework, the comparatively high initial cost to users of LPG equipment, a laissez-faire and anarchic market place, and insufficient investment, especially in cylinders and downstream distribution, by industry. The growth of the LPG market in Haiti continues to struggle despite higher cost of charcoal compared to LPG.

Haiti has no legislation or rules governing the LPG sector. The introduction of a regulatory framework governing technical and commercial standards is the most important foundation on which to base future LPG investment and growth in Haiti. It is also the most difficult issue to address. Most LPG companies in Haiti may be reluctant to accept new regulations because they have developed strategies, pricing, and practices, such as micro-filling and cross-filling of cylinders, that would be discouraged or not permitted under conventional technical and commercial LPG standards.

The lack of standards has also had an effect on the levels of trust that lower income consumers have for LPG distributors and products. Consumers noted that they were often unsure if they were getting value for money since they could not tell if their tanks were being fully filled by the distributors. Safety concerns were also raised related to the interchanging of fuel tanks (“cross-filling”) among LPG distributors - consumers with faulty tanks noted that it was difficult to secure proper service and maintenance of tanks when tanks were shared among LPG distributors.

Despite challenging structural and regulatory issues in the LPG sector, effective interventions not dependent on legislation can be introduced to significantly expand LPG consumption in Haiti.

For example, scaling up the activities currently under the WINNER program in Port-au-Prince alone could potentially reach an estimated 10,000 food vendors (“Manjekwit”) and increase LPG consumption by over 14,000 tons annually by 2015. This increase in LPG consumption would be a 95 percent increase over current consumption of 15,000 tons and would replace nearly 76,000 tons of charcoal annually by 2015 and over 150,000 tons through 2015. Converting kitchens at schools supplied by the World Food Program also represents another 8,000 tons annually of charcoal reductions or potentially over 26,000 tons over the same period.

The introduction of legislation and review of structural issues, such as pricing, should still be pursued. Successfully addressing these issues are required to expand LPG adoption in the broader market. However, given the uncertainties around legislation, a prudent investment approach would be to pursue interventions focused on Manjekwits and schools in parallel to pursuing the introduction of legislation. If legislation is successfully introduced, USAID would have the option to provide follow-on support that would leverage previous investments used to scale up LPG adoption of Manjekwits and schools and to develop retail channels.

LPG Industry Profile

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The LPG market in Haiti comprises three broad categories of companies: importers (Total and Sodigaz); large distributors (Canez Distribution and Ecogaz); and small distributors. The importers occupy the top of the hierarchy because they set LPG prices and can operate all along the value chain from LPG procurement to retailing. Although Sodigaz and Total import 60 percent and 40 percent of all LPG in Haiti, the large distributors Canez Distribution and Ecogaz, account for an estimated 70 percent of final distribution to customers, which include other smaller distributors.

The strategies pursued by each company vary by position in the value chain and access to resources. As seen in the table below, the largest four LPG companies in Haiti operate all along the value chain. Total, an exception, chose to focus on only bulk sales in 2008 when it removed its cylinders from the market in response to rampant cross-filling of its cylinders by the competition. Today, it sells primarily to Canez Distribution and to small bulk to business customers. It maintains a small cylinder business directly with end users. Ecogaz pursues the most entrepreneurial model, which is based on micro-filling sales and developing the operations of independent, smaller micro-filling operators. Ecogaz provides and installs micro-filling equipment in return for exclusive long-term supply contracts. Because it is a large volume purchaser from mainly Sodigaz, Ecogaz can reduce its procurement costs and resell to other micro-fillers.

LPG enters Haiti through Sodigaz and Total, which are the only two companies with port facilities to land LPG from the sea. The terminals combined have the capacity to handle potentially up to 50,000 tons annually depending on the frequency of resupply, and are sufficient for Haiti’s needs for the immediate to intermediate future.

Sodigaz accounts for 60 percent of imports or about 9,000 tons annually. Sodigaz has only 850 tons in total storage capacity, of which actual working capacity is 745 tons. Because of limited capacity, Sodigaz imports LPG by ship every 2-3 weeks. Total, which accounts for the remaining 40 percent of LPG imports, has 1,000 tons of working capacity and receives 900 tons of LPG every two months. If Total increased the frequency of imports to once every two weeks, it could increase the volume of LPG it receives to 26,000 tons. Total also has foundations for two additional 400 cubic meter tanks, which, if installed, would take working capacity to 1,260 tons and increase its annual imports to 32,760 tons.

LPG Regulatory Environment

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The lack of technical or commercial standards has created safety issues and allowed predatory business practices that have retarded the market. In particular, the uncontrolled development of micro-filling stations has led to installations and operating practices that do not adhere to any internationally recognized technical standards and to commercial practices, such as cross-filling, that has discouraged new investment, especially in cylinders, which is required to grow the market. In the case of Total, not only does it not invest in cylinders, it removed its cylinders from the market in 2008 because of uncontrolled cross filling of its cylinders by other distributors. In developing markets, LPG marketers often discount the cost of cylinders to customers, who cannot afford the full deposit. For example, Total was discounting the cost of a 6 kg cylinder, as part of a full cooking kit, by 50 percent. When another marketer fills that cylinder, that marketer is taking advantage of Total’s investment in the market.

Without new cylinders entering the market, no LPG strategy targeting domestic customers, whether through micro-filling or conventional cylinder exchanges, can succeed. The introduction and enforcement of technical and commercial standards is a prerequisite for growing the LPG market.

One challenge of introducing standards is determining which standards to apply. Technical standards should be appropriate to the level of development of Haiti and provide a reasonable level of safety while not being overly burdensome to importers and distributors in Haiti. At a minimum, Haiti should apply technical standards governing installations, civil works, storage tanks, cylinders, valves, and vehicles. Commercial standards need to require the licensing of LPG importers and marketers and facilitate the creation of contractually bound distribution networks that adhere to conventional standards of practices (e.g., no cross filling). Haiti should apply already developed standards best suited to their context. For example, most African countries simply apply the ISO standards for cylinders. Haiti can adopt standards in whole or in part from the European Community, United States, France, the United Kingdom, Germany, or South Africa.

LPG Pricing

Current LPG pricing in Haiti is unregulated and determined independently by Sodigaz and Total.

The components to Haitian LPG pricing are the following: Opis Mont Belvieu non-TET spot prices for LPG (56% of price); freight and supplier margins (15%); port duties and fees (4%);

importer through-put fees (19%); and distributor (4%) and retailer (2%) margins. Within this pricing framework, an importer can extract profits from all cost components excluding duties and fees. In particular, through-put fees of US$200-210 per ton appear high when compared to rates seen in other comparable countries, such as in Africa, where throughput fees range are closer to $120 per ton. The importers are extracting considerable profits in the current pricing structure and leave little margin (2%) for retailers to develop LPG dealerships.

Many developing countries, such as Morocco, Senegal, and Burkina Faso, apply some degree of price control on LPG for tax purposes initially, but also as a matter of a larger socio economic policy (e.g., expanding the use of LPG as widely as possible). In Senegal and the North African countries, for example, through-put fees, wholesale margins, and retailer margins are all

A| - 17 -controlled. In some countries, the LPG is cross-subsidized to lower the cost of LPG in small cylinders compared to larger cylinders used by wealthier people or businesses.

In a market with few importers such as exists in Haiti, free pricing can lead to a greater proportion of value being taken high in the value chain and retard growth downstream owing to a resultant squeeze in margins. In Tanzania, the sole importer sets prices that maximize upstream profits but also have resulted in no growth over the past decade.

Controlled pricing can balance the distribution of profit throughout the value chain but should be determined through agreement by all stakeholders in order to determine appropriate margins.

More mature LPG countries, such as Senegal or in North Africa, can be seen as models for a structured pricing approach.

3.2.3 Other Alternative Fuels

3.2.3.1 Kerosene

Kerosene has been used as a lamp, home heating, and cooking fuel since the mid-1800s, but these uses have been largely eclipsed in developed countries, and also in many developing countries by electricity, natural gas, and propane (LPG). Its widest use today is as jet fuel, to a lesser extent than as a heating fuel. In many places, the supply chain does not provide separate qualities, so jet fuel is kerosene.

Concerns are widespread in many countries over poisoning of children by accidental ingestion of kerosene. Kerosene poisoning is common in some countries, especially among small children in communities where kerosene is a major household fuel. The circumstance is usually that of accidental ingestion of kerosene probably mistaken for water.

Our surveys for this assignment revealed the importance of the taste of food in adopting improved cooking technology – and is illustrated in the limited uptake of kerosene in Haiti. Even though it is affordable, widely available, and considered a safe fuel, only six of 38 respondents were using kerosene and all but one were using charcoal concurrently. Kerosene can be difficult to ignite and maintain robust flames, and thus can generate black smoke when the fuel source gets low. Respondents complained that the taste of kerosene gets into the food, making it seem more detrimental to health than charcoal or wood.

Many NGOs and entrepreneurs are now championing biodiesel and even vegetable oil as renewable and indigenously produced substitutes for kerosene in cooking and heating applications in some developing economies. Jatropha and other such non-food, labor-intensive oil crops are the particular focus of this attention. Although they have advantages in terms of toxicity, sustainability, and usually, local production and rural development, these biofuels have many of the practical disadvantages of using kerosene in these applications. That is, because they are relatively non-volatile, kerosene as well as these biofuels are difficult to ignite and maintain robust flames, and thus can be smoky.

Several types of kerosene cooking stoves are available, including Brass Pressurized, Gravity fed wick, with fuel bottles (single, double, and triple-burner models), Multi-Wick stoves (e.g., with 10-22 cotton wicks in a circle, which can be raised or lowered to adjust heat output)

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Historically, kerosene was a dominant fossil fuel in households in Haiti, mainly for lighting in rural and suburban areas, and occasionally for daily cooking. Its annual consumption as of 2007 was about 150,000 tons, a relatively low figure compared to overall oil products imports, but an order of magnitude greater than LPG.6

However, according to ESMAP, twice as much kerosene than propane was used in urban households in 2007.

Typically, kerosene burners cost twice as much as charcoal stoves, but one-tenth or less than LPG systems. Kerosene is sold on a retail basis by gallons, liters and even in small 16 oz volumes. However, LPG is perceived as cleaner and easier to adjust for variable cooking needs.

Kerosene could complement LPG use in terms of charcoal replacement, due to cost, storage capacity and familiarity among many Haitian households with its use as a cooking fuel. Our Controlled Cooking Tests demonstrated that kerosene stoves had cost savings similar to the best improved charcoal stoves and to LPG stoves. However, cooks perceptions concerning the negative effect kerosene has on taste will likely continue to limit its broad adoption in the marketplace.

3.2.3.2 Ethanol

NGO efforts (most notably Project Gaia7

) in Haiti have been promoting ethanol and an alcohol based stove called the “CleanCook Stove” as an alternative to stoves that burn solid biomass (i.e.

wood, charcoal, and briquettes). Ethanol is as clean as LPG, much cleaner and cheaper than charcoal, safer than kerosene, more practical than solar, and has at least as beneficial and sustainable potential as waste paper briquettes. Project Gaia claims that in Africa, the CleanCook Stove has accumulated over 2 million days of cooking experience with without a single accident of any significance.

However, a major concern of government policy makers and NGO social entrepreneurs is whether the supply of ethanol would be sustainable, and where the supply would come from after donations ended. Project Gaia contends that there is high potential for Haiti to self-supply ethanol stove fuel. They point out that not only was Haiti once a leading sugar producer and a distiller of beverage ethanol for export as well as the local market, but it is also located on trade routes over which billions of liters of ethanol flow each year between producers and markets in the United States, Brazil, and tax-advantaged Caribbean processors. Today, the production is only a fraction of the former level as shown in Table 2. The hydrous ethanol from Brazil, which is perfectly useful as stove fuel, is generally the most competitively priced in the commodity market, is cheaper than kerosene, and could be used until Haiti builds up its own local production. The Brazilian Government has pledged to donate over 100,000 liters and an additional 400,000 liters over the next two years. However, a key barrier to using imported ethanol in Haiti would be the need to build new storage tanks for the imported ethanol – existing fuel storage tanks cannot be used.

6 Haiti: Strategy to Alleviate the Pressure of Fuel Demand on National Woodfuel Resources, ESMAP Technical Paper 112/07, April 2007 7 http://www.projectgaia.com/blog/2010/03/17/project-gaia-offers-haitian-relief/

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Table 2: Drop in sugar cane production in Haiti

For shorter and longer term domestic ethanol production, Haitians are experienced in sugarcane juice fermentation and alcohol distillation. According to Gaia, thousands of small mills and distilleries in Haiti are making beverage-grade ethanol: rum. Minor changes in processing rum could yield ethanol for cooking. In Leogane alone, over 200 small distilleries were in operation in 2007 before the earthquake. Many of the existing distilleries in Haiti, those shut down or still in operation, could be repaired and refurbished to produce fuel grade ethanol. Project Gaia claims to be in contact with an operating distillery that could upgrade to produce hydrous ethanol fuel and bring it to market in a few months.8

Figure 3 shows the Darbonne Sugar Mill and adjacent cane fields near Leogane, which is being partly sponsored…