Annex-1 Assessment of the Improved Stove Market in Bangladesh.pdf

EN E R G Y EF F I C I EN C Y A N D RE N E W A B L E EN E R G Y PR O G R A M

(EEREP) IN C R EA S I N G A D O PT I ON O F RE N E W A B LE EN E R G Y

LE A D E R W I T H A S S O C I A T E S

COOPERATIVE AGREEMENT NUMBER: AID-OAA-L-11-00002

Assessment of the Improved Stove Market in Bangladesh

JANUARY 2012

Submitted to

United States Agency for International Development

Submitted by

Winrock International and E+Co

The Bangladesh Cookstove Sector: Current State and Future Opportunities

Executive Summary

Improved Cook Stove (ICS) programs have long been promoted (since 1988) in Bangladesh, but efforts to create a sustainable market, driven by demand, have so far been scarce, ICS reaching a mere 1.7 % market share. Nevertheless, one vendor, Grameen Shakti, has been able to demonstrate an exponential growth in sales1 of ICS in the last two years and it is possible for other organizations and enterprises to achieve similar results if previous successes with other renewable energy (RE) technologies, notably solar PV, are any indication.

Taking the example of PV, Bangladesh represents one of the most successful examples of market development for solar home systems (SHS) through an enterprise-based program2. More than 1.1 million households have purchased SHS from NGOs and SMEs, bringing electricity to off-grid rural areas and decreasing the use of fossil fuels (kerosene). The utilization of an autonomous Government of

Bangladesh (GOB) non-banking financial institution, the Infrastructure Development Company, Ltd

(IDCOL3), to provide end user refinancing, institutional development support, and extensive monitoring of system installation, has allowed for the rapid development of a solar energy market and opened up a whole range of opportunities for other RE technologies, such as biogas digesters and, potentially, ICS.

Bangladesh was selected as the target market for this study because of its potential to demonstrate rapid deployment of ICS given its unique position at the forefront of SHS commercialization and other off-grid renewables, its previous efforts in promoting ICS, as well as the government’s interest in increasing adoption of ICS through market development.

USAID wishes to understand the bottlenecks of the ICS sector in order to help develop effective models for the commercialization of efficient cookstoves and, in doing so, make a major contribution to meeting the targets of the Global Alliance for Clean Cookstoves.

The main conclusions from this study are the following:

Findings Hypotheses

. Sto ve

D esign

The choice is limited at present to one dominant design.

Opening up choices to a wider range of designs including portable stoves is needed to reach larger numbers of users. (See also row 4.2.)

Grameen Shakti (main reference in ICS sales in Bangladesh) expects to sell around 300,000 Bondhu Chulha stoves in 2011 compared to around 150,000 sold in 2010 and 30,000 in 2009.

The analysis suggests that success of this initiative was driven by reliable, quality technology, trained technicians, microfinance to end-users, and a comprehensive legal and financial framework established by GOB (Practical Action, “Poor’s people energy outlook 2010”).

http://www.idcol.org/

. So cial

M arketin g

Bangladesh has a history of social marketing which has proven successful in family planning, oral rehydration and sanitation.

These techniques would be valuable for increasing demand for stoves through awareness about the health and fuel savings benefits of improved stoves.

. Existin g O rgan izatio n s

The vast majority of enterprises and

NGOs engaged in the ICS market are small POs of GIZ. Larger Enterprises

(NGOs and SME ‘Partner Organizations’

(POs)) are experienced in selling domestic biogas and solar home systems under the IDCOL program. At least one of them, Grameen Shakti, can market and distribute ICS (currently

25,000 stoves each month from some

200 retail outlets).

An enabling environment to facilitate entry of larger enterprises and NGOs, including IDCOL

POs currently engaged in SHS and biogas sales, could substantially accelerate the deployment of stoves in Bangladesh.

. Stan d ard s an d testin g

There is currently no national level agency that establishes quality standards for stoves and conducts

M&E.

Creation of such an agency or the assignment of tasks to an existing agency will support the scaled dissemination of quality stoves.

.1

Carbon financed stoves, in particular, require well equipped testing centers and benefit from strong M&E institutions.

Putting into place strong testing and monitoring resources will support faster, cheaper, and more reliable monitoring and verification processes.

.2

Promoters have yet to carry out a rigorous assessment of improved cook stoves which users are prepared to purchase.

A central entity tasked and empowered with conducting research and testing, establishing standards, disseminating information and promoting compliance will support the scaling of stove sales without an accompanying

“market destroying” deterioration in quality.

(Link to activities in Row 1.)

. C arb o n

Fin an ce

Carbon finance has brought in external private capital, expanded production and retail outlets, and increased sales.

However its durability is uncertain.

The upcoming first verification of the JP

Morgan CDM project will test if the monitoring is sufficiently rigorous to generate the expected carbon credits.

. A ccess to

Fin an ce

Many POs currently have limited access to financing to expand their operations.

Increased access to financing (possibly through

IDCOL or commercial banks ) will help scale current production and marketing activities.

Recommendations: Based on: 1) the country’s sizable demand for improved cookstoves, and 2) its history of successfully commercializing other clean energy technologies, the authors believe that Bangladesh is a suitable candidate for a USAID-sponsored improved cookstove program.

Such a program should seek to leverage, expand and adapt existing assets to accommodate more stove-oriented activities. These existing assets include:

Proven social marketing practices;

Operational architecture being used to sell other clean energy technologies, (e.g., solar, biogas);

Financial architecture being used to sell other clean energy technologies;

Enabling environment already supporting the dissemination of clean energy technologies;

USAID environmental programs focusing on biodiversity and conservation;

The existence of global carbon markets; and last but certainly not least, The group of actors already significantly involved in commercialization of improved stoves (Grameen Shakti, GIZ and their 200 POs, and JP Morgan).

Such a program should also take a broad-based, foundation-building approach to market development.

Given the market’s relatively nascent stage, investing resources in building the right foundation is critical to future success. Attempts to bypass this step will likely result in reduced impact. Examples of broad-based sector building to be considered include:

Raising consumer awareness about stove availability, benefits, and proper use and maintenance;

Investing in the identification, transfer to the Bangladeshi market, and promotion of appropriate stove designs that combine high efficiency and emissions performance with cultural acceptability and affordability;

Building local capacity to provide affordable and timely market and performance data, and testing and M&E services to stove sector actors; and

Assisting in the creation of enabling environments to promote commercial stove sector activities, notably facilitating access to finance but also maintaining transparent and fair policy frameworks.

Due to the interrelated and interdependent nature of all the activities to be pursued, the authors believe it is unwise to consider carving off a single focus area for attention. It is recommended that any market development support program be holistic in nature and exhibit tight coordination between work programs.

Table of Contents The Bangladesh Cookstove Sector: Current State and Future Opportunities

Executive Summary

Acronyms

Bangladesh Stove Sector At-A-Glance

Introduction and Methodology

History

Findings

Potential Market Size

Estimates of Stoves in Use

Carbon Finance

Stove Production and Marketing

Stove Pricing, Subsidy Levels, and Role of Carbon

Stove Performance and Monitoring

Stove Design

Main Actors

Market Drivers

Trends

Obstacles to market development

Recommendations

Appendix 1: Illustrative Distribution Companies

Appendix 2: Market Players

Appendix 3: Barrier Analysis

Appendix 4: Interviewees

Appendix 5: Stove Types Most Used in Bangladesh

Appendix 6: Main results from the EPA (PCIA)-sponsored Bangladesh WBT/CCT (Water Boiling Test/

Controlled Cooking Test) training workshop, led Aprovecho Research Center and facilitated by Winrock

International at the VERC Center (Savar, Bangladesh), December 2011

Appendix 7: Opportunity Analysis

Acronyms

BCSIR Bangladesh Council of Scientific and Industrial Research (BCSIR)

BDT Bangladeshi Taka

CCT Controlled Cooking Test

CCTF Climate Change Trust Fund

CDM Clean Development Mechanism

CPA CDM Program Activity

EPA United States Environmental Protection Agency

GDP Gross Domestic Product

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit

(German Agency for International Cooperation)

GOB Government of Bangladesh

GS Grameen Shakti

The Alliance Global Alliance for Clean Cookstoves

GVEP Global Village Energy Partnership

IAP Indoor Air Pollution

ICS Improved Cook Stoves

IDCOL Infrastructure Development Company Limited

IFC International Finance Corporation

JPMVEC J.P. Morgan Venture Energy Corporation

KFW Kreditanstalt für Wiederaufbau

KPT Kitchen Performance Test

LGED Local Government Engineering Department

NGO Non-Governmental Organization

ODA Official Development Assistance

PCIA Partnership for Clean Indoor Air

PO Partner Organization

POA Program of Activities

SHS Solar Home System

SME Small and Medium Enterprise

UNICEF United Nations Children's Fund

USAID United States Agency for International Development

VER Verified Emission Reductions

VERC Village Education Resource Center

WB World Bank

WBT Water Boiling Test

Bangladesh Stove Sector At-A-Glance

DEMOGRAPHICS

o Population of Bangladesh = 160 Million4

Urban population = 28% (or 45 Million people in 10 Million households; 4.4 people per household)

Rural population = 72% (or 115 Million people in 24 million households; 4.6 people per household)

The urbanization rate is 3.5% o Bangladesh is the country with highest population density o Population below poverty line: 40% (2010 est.)5

ECONOMICS

o GDP Per Capita = $1,700 PPP (2010 est.) (IndexMundi.com) o Real GDP growth rate = 6% (2010 est.) (IndexMundi.com) o Average annual inflation = 4% (1990-2009) (UNICEF.org) o The labor force is divided among agriculture (45%), industry (25%) and services (30%)

(IndexMundi.com)

FUEL CONSUMPTION

o Biomass supply/demand: accounts for 68% of primary energy consumption, and over

90% of household energy needs o Annual household biomass consumption = 44 Million tons, or 79% of the country’s total biomass consumption (LGED, 2006) (that’s over 1 ton per household) o In rural areas6:

95% of households use biomass to cook all or part of their meals Fuelwood constitutes 41% of total biomass cooking energy with some 84% of households using fuelwood for cooking Agricultural residues, leaves, and grass account for 39% of cooking energy with

76% of households using some form of ‘leafy biomass’ to cook Animal dung makes up around 17% of the cooking energy with around 55% of households using dung cakes and sticks for cooking About 40% of all fuelwood is purchased from local markets; HED Consulting Ltd estimated that the % of fuelwood purchased had increased to 50% by 2008.

At the household level fuelwood accounts for 44% of total energy use and 38% of the cost; this comes to an annual cost of fuelwood of around USD $32.70 in 2004.

The price of dry woody biomass is approx. 5 to 8 BDT per kg, depending on the quality

The price of charcoal is approx. 6-10 BDT per kg o In urban areas:

Commercial operations (hotels, food shops, bakeries etc.) mostly use rice husk and saw dust briquettes

Street food vendors use twigs, cowdung cake, leafy biomass, briquettes Fuelwood traders sell wood in bundles (50-60kg) costing around 250-400 BDT

IndexMundi.com, accessed 2011

CIA World Fact book, accessed 2011

Based on WB/ESMAP 2010 study using data from 2004 Survey o In the slums of Dhaka:

60% of 5.58 Million people use firewood and twigs for their daily cooking

COOKSTOVE MARKET

o Total potential improved cookstove market = 29 Million stoves (GIZ)

24 Million rural households 3 Million urban households 2 Million institutions o Estimated number of functioning improved cookstoves in market = ~500,000 (1.7% of total cookstove market) (2011 est.)

o Surveyed use rates: 0.9-1.5% (estimate)7

ICS are used more in the monsoon months when more cooking is conducted inside the home.

Introduction and Methodology

The Global Alliance for Clean Cookstoves8 (the Alliance), a public-private partnership led by the United

Nations Foundation, focuses on creating a “thriving global market for clean and efficient household solutions.” USAID, as a founding partner of the Alliance, has commissioned this study, through Winrock

International, to develop and document innovative models for the creation of a commercial cookstove market in Bangladesh, with a focus on getting to scale. This is consistent with the Alliance’s overarching goal of reaching the global target of “100 by 20,” i.e. 100 million homes to adopt clean and efficient stoves and fuels by 2020.

The purpose of this study was to identify locally operating organizations in Bangladesh involved in improved cookstove activities and programs with significant capacity of achieving scale, as well as to propose areas of intervention where USAID funding could help eliminate clearly identified obstacles to scaling up. Potentially replicable commercialization models in other energy sectors (solar home systems and biogas plants) were closely studied.

Bangladesh, a market of more than 29 million households9, has been selected as a potential target for activity (1) due to its remarkable success in commercializing solar home systems, due in part to the role played by IDCOL, a GOB non-banking financial institution, in end user refinancing, (2) because the grounds for innovative market-based interventions have been set up by its decade long efforts to develop the ICS sector, and (3) Bangladesh’s remarkable success in driving social change through public awareness and social marketing campaigns for deeply enrooted traditional behaviors (e.g., sanitation, oral rehydration, and family planning).

Winrock International conducted the study from November through December 2011 with assistance from a subcontractor, E+Co, and USAID. The research agenda included a short desk study that sought to highlight the major market players and trends as well as drivers in the sector. Through the desk study, organizations and individuals were identified and contacted. The field visit was organized so as to coincide with the Partnership for Clean Indoor Air (PCIA)-sponsored Stove Design and Testing Workshop led by Aprovecho Research Center and facilitated by Winrock International (Dhaka, Bangladesh, November 30 –December 3, 2011), which brought together many of the key stove players in Bangladesh and gave the study team the opportunity to do on site interviews as well as collect useful information on the efficiency of improved stoves currently being sold in Bangladesh.

http://cleancookstoves.org/

Source: GIZ interview and presentation on ICS, 2011.

History

In Bangladesh, development and promotion of improved cookstove programs can be divided roughly into three stages. During the 1970s and early 1980s research and development for efficient energy usage was started to curb deforestation. The Bangladesh Council of Scientific and Industrial Research

(BCSIR) mainly led this work. What resulted was over 30 different cookstove designs aimed at reducing growing pressure on insufficient biomass fuel resources in the country. The stoves’ higher efficiency in fuel burning (almost 50% less biomass consumption than in a traditional stove) was expected to be promoted by all development stakeholders.

The late 1980s and 1990s (the second stage) saw a marked shift in focus from saving trees to saving people’s lives and improving health and welfare. Programs led by BCSIR that disseminated improved cookstoves to thousands of households throughout the country were then viewed as a means to reduce indoor air pollution (IAP), identified as a major source of health hazards among rural women and children. Phase I (1989-1991) and Phase II (1991-2001) of the BCSIR stove program took place in this context.

BCSIR’s major contributions to the sector included developing stove designs suitable for Bangladesh, the same basic designs with slight modifications that are still used by all the major ongoing initiatives, and elevating the priority of improved stoves within the GOB. BCSIR, in its early phases, however, did not promote a fully market-based approach to stove dissemination; customers were only asked to contribute clay for their stoves.

In the past few years (the third stage) the focus of household energy programs has shifted to employing increasingly commercial approaches. There was increased marketing and promotion of improved cookstoves by NGOs and private entrepreneurs. German Agency for International Cooperation (GIZ), and NGOs such as VERC and Grameen Shakti are now the main organizations promoting improved cookstoves in Bangladesh.

GIZ efforts began in 2004 as part of the Sustainable Energy for Development Program (2004–2011) with a substantial funding commitment along with partnership arrangements with a large number of NGOs and small companies. The program has focused efforts on identifying locally acceptable and reliable technology and designs, and developing systems for marketing and maintenance. The stove models promoted by them are called ‘Bondhu Chulha,’ which are slightly modified versions of the BCSIR stove models and are now made of concrete rather than clay, for better durability.

GIZ has supported 200 partner organizations (POs), mainly NGOs and small enterprises, as primary players in promoting improved stoves throughout Bangladesh. The POs are in direct contact with the consumers and have a strong community presence. Training and institutional support is a key component of the GIZ program. GIZ has trained stove technicians, NGO workers and private entrepreneurs who have constructed more than 175,000 improved cookstoves to date. Partner organizations receive financial support from GIZ to expand production, market their products and carry out after sales services. Although GIZ discourages the practice, a number of POs interviewed were found to be subsidizing sales of stoves using the institutional development funds they were receiving from GIZ.

Around this same time, there were a number of other improved stoves programs coming into existence which focused on building the capability of entrepreneurs to enter the market. One group of actors included Winrock International, VERC, and Concern Worldwide Bangladesh, who jointly implemented the USAID-funded Project entitled “Reduction of Exposure to Indoor Air Pollution through Household

Energy and Behavioral Improvements.” This project took place between 2005-2007 in the urban slums in the northwest of Bangladesh, resulting in 580 stoves during the project period. A second group was

Practical Action which has trained several dozen entrepreneurs that are currently engaged either full or part time in the construction of stoves. UNDP and UN-Habitat came into the sector in 2011 with a focus on ultra-poor populations vulnerable to natural disasters, such as cyclones and floods, and provided around 90% subsidy to users (40,000 stoves). For more information about these programs, refer to

Appendix 2.

In the last three years, the trajectory of the stove market changed again with the introduction of carbon finance. In 2008, JP Morgan, after its acquisition of Climate Care, initiated the development of a CDM

Program of Activities (PoA) to expand the sales of both domestic and institutional improved wood burning stoves in partnership with GIZ (then GTZ). GIZ supported the launch of a private sector company, SZ consultancy, which would, for a decreasing percentage of the carbon revenue (40- 25-20% during the first three years and 20% throughout the remaining 25 years), manage the aggregation, monitoring and reporting on stoves installed by GIZ’s 200 Partner Organizations. A second CDM Program

Activity (CPA) managed by Grameen Shakti, which started its ICS program in 2006, was subsequently added to the PoA. The PoA was officially registered under the UNFCCC in September 2011 with JP

Morgan Venture Energy Corporation as the Coordinating/ Managing Entity (CME). The first certified emission reductions (CERs) are expected to be issued after official verification in 2012. VERC has also registered an ICS carbon finance project in the voluntary market.

Findings

Potential Market Size

The potential size of the Bangladesh cookstove market is estimated by GIZ to be around 29 million customers: 24 million rural households, 3 million urban households, and 2 million institutions like restaurants and hotels10 (See Figure 1). These customers represent the 90% of Bangladesh families that use traditional cookstoves for cooking and heating.11

GIZ Presentation

“Promotion of Improved Cookstove in Rural Bangladesh”, Working Paper No. 22, BRAC Report, May 2011 (herein known as

“BRAC Report”).

Figure 1. Cookstove Market Size by Sector

Estimates of Stoves in Use

The World Bank reports that BCSIR installed 300,000 ICS models up to the completion of their Improved

Cookstove Program in 200112 (See Figure 2). After that, the stoves began to disappear as they broke at a faster rate than they were replaced. As of 2006, ICS use among rural Bangladesh households was at

0.8% during the rainy season and 0.5% of households during the dry season.13

However, the market picked up again with the commencement of the GIZ program. With ICS sales growing rapidly, the number of ICS in-use is much larger than it was just last year. A rough estimate of market size suggests that as of April, 2011 there were as many as 510,000 ICS in-use compared to

424,000 in June, 2010 (see figure2). Grameen Shakti alone expects to sell around 300,000 Bondhu

Chulha stoves in 2011 compared to around 150,000 sold in 2010 and 30,000 in 200914.

In all, about 900,000 improved cookstoves are estimated to have been installed, but because stoves, even with proper maintenance, do not last forever, only 510,000 stoves are estimated to still be in use today. It is not known how extensively the installed improved stoves are used but we can assume that their usage is lower during the dry winter months when many rural households cook outside, by a similar ratio as was documented for 2006 by the BRAC (2011) study.

“WB Report”. Alternatively, installation numbers by phase show 62,848 ICS installed during Phase I from 1994 to 1997 and 117,573 ICS installed during Phase II from 1998 to 2001 (Source: Hossain. “Improved Cookstove and Biogas Programmes in Bangladesh” Energy for Sustainable Development, June 2003)

BRAC Report

Numbers were eventually revised to 440,000 units in 2011.

Figure 2. Number of ICS In-Use in Bangladesh through April, 2011

These estimates suggest that the market for cookstoves is capable of and, in fact, poised for continued dynamic growth if the right enabling environment conditions are met.

Carbon Finance

Provided the global market for carbon credits remains strong, the sales of ICS within registered programs continue to grow as planned, and the upcoming verification of the PoA is successful, the generation of carbon revenue could provide a substantial boost to the expansion of the market for improved cook stoves by attracting external private capital to the space.

Although exact amounts are not shared publicly, revenue from forward sales of carbon credits have already been used to expand the sales network of Grameen Shakti and have also found their way to a number of the SZ/GIZ Partner Organizations. VERC’s carbon finance ICS project in the voluntary market was successfully verified in 2010 and has received payment of around $8,000 in 2011 for the resulting

Verified Emission Reductions (VERs). Success in generating substantial carbon revenue by these pioneers will no doubt encourage other initiatives to follow either under the voluntary Gold Standard or CDM.

Stove Production and Marketing

The stove market is generally typified by a lack of branding and product differentiation. Marketing for stoves is mostly conducted using demonstrations and word-of-mouth. The bulk of stove manufacturing is conducted in small manufacturing plants, although two factors create confidence in the sector’s capacity to supply an increasing demand: (1) manufacturing plants have great flexibility in adapting their production capacity and (2) some larger manufacturers working with RE technologies (solar, biogas) have capacity to increase production quickly if needed. Areas of dynamic market growth in the future will likely center around upgrading marketing and distribution processes.

Stove Pricing, Subsidy Levels, and Role of Carbon

The Bondhu Chulha is currently priced within the following ranges depending on location and supplier:

1-pot: BDT 800 to 900 (USD $10.67 to $12.00)

2-pot: BDT 1,000 to 1,100 (USD $13.33 to $14.67)

3-pot: BDT 1,200 to 1,300 (USD $16.00 to $17.33)

The prices include stove installation and warranty15.

GIZ has been providing financial support to each of its active POs, based on signed contracts for a fixed number of stoves, to partially cover costs for both manufacturing and marketing of ICS. Typical support amounts for a contract covering 1,000 stoves are:

Market development: BDT 100 (USD $1.33) per stove;

Manufacturing Support (to keep technicians employed): BDT 250 (USD $3.33) per stove;

Training of technicians: lump sum BDT 100,000 (USD $1,333); and

Marketing support: lump sum of BDT 40,000 (USD $533).

First contracts are generally for 300 stoves followed by a second contract for 1,000 stoves with successful POs, and the average amount of support provided by GIZ has been USD $4,000 in its current phase.

In return for this support, GIZ asks its POs to report on stove sales, monitor the stoves for performance, and provide needed maintenance to users. GIZ asks POs not to pass on financial incentives by reducing the selling price of stoves to customers, in order to avoid creating any market distortions. However, it was learned through interviews that POs do often provide discounts to customers. This puts pressure on other suppliers such as Grameen Shakti who feel that they cannot increase prices to cover their full costs of marketing and selling stoves in these same markets. GIZ sees the need to continue to provide this level of financial support to POs until the anticipated carbon revenue begins to flow and expects that a similar level of support can be continued to POs after that happens.

Grameen Shakti sells its Bondhu Chulha stoves to customers at similar prices as that listed above and has been partially covering its internal costs for marketing and for expanding its manufacturing centers and retail outlets, to achieve rapid expansion in sales, from carbon revenue received as advance payment from JPMVEC. Given some anticipated uncertainty in the flow of carbon revenue, Grameen

Shakti considers its ICS operations as currently loss making and needing to be cross subsidized by its more established and profitable business selling solar home systems.

It is interesting to compare the level of support above for GIZ POs selling ICS to that provided by IDCOL to its POs for sales of solar home systems16:

POs are required to provide a guarantee to their customers of one year for the stove plus a commitment to provide free maintenance for 5 years in case of breakdown, other than for materials.

Refinancing per SHS: USD $285 max (68% of system cost17), Grant A (system buy down) per system: USD $25, Grant B (PO Institutional Development) per system: USD $318.

There are some similarities between the manner in which GIZ is supporting its POs which are selling

Bondhu Chulhas and how IDCOL has structured support to POs participating in the SHS and biogas markets. This is particularly true of marketing and institutional support grants to POs. At the same time the major difference is that there is no end-user financing required for the Chulhas, which cost a fraction of what the SHS or biogas digesters cost and are too small to require loans to purchase, and hence there is no requirement for refinancing, which constitutes the bulk of the financial support currently being provided by IDCOL. A second difference is that the GIZ program supports small NGOs and SME POs and is not designed to supply the funding needs of large NGOs or SMEs, such as Grameen Shakti.

Enterprises engaged in the ICS sector do have a requirement for credit which is currently unmet. The credit is required, not to refinance the vendor financing, which is generally not needed for stoves , but to expand their own operations. Enterprises seeking to expand their sales require working capital for increasing manufacturing centers and storage sheds, opening additional retail outlets, purchasing trucks to transport stoves, advertising their products, and carrying out house to house marketing. The support provided under the GIZ stoves program meets many of these needs for small NGOs and small companies but is not designed to meet the needs of larger SMEs and NGO players. IDCOL does not have a mechanism to provide working capital to its SHS and domestic biogas POs either. Grameen Shakti reported that they have had to finance the expansion of their ICS operations internally after unsuccessfully requesting credit from IDCOL to expand.

Stove Performance and Monitoring

Stove testing has been a somewhat neglected area in the past few years by most of the organizations implementing stove programs in Bangladesh. In the 1970’s, when the stove models were first developed and disseminated, testing was done in the laboratory for thermal efficiency and emissions. In recent years, standard testing protocols have been developed and adopted by the international ICS community

(see text box below for the standard tests); in addition the demands of carbon finance have increased the level and rigor of field testing to ensure the validity of offsets. These protocols have yet to be effectively incorporated into the stove sector in Bangladesh.

A similar formula is applied by IDCOL for financing domestic biogas plants where purchasers must make a minimum down payment of 15% and IDCOL refinances up to Euro 190 per digester. BDT 9,000 (USD $120) is provided as an incentive to the buyer to buy down the cost.

Financing formula for SHS: 15% has to be paid by purchaser as down payment with 85% provided as vendor finance. Of this 85%, up to 80% is refinanced by IDCOL: 80% of 85% = 68%.

Due to the rapid expansion of the SHS market, IDCOL is planning to phase out the Institutional Development grant to established POs from 2012 and have it available only for new POs.

The three standard tests which are used globally to evaluate stove performance are given in the box below:

Despite not having an active ICS program anymore, BCSIR’s Institute for Fuel Research and Development is still the most credible laboratory for testing stove performance in the country. GIZ used the BCSIR laboratory to compare performance between clay and concrete Bondhu Chulhas using the WBT, preceding the switchover to promotion of the concrete version. By their own account, the BCSIR laboratory needs updating, training of research staff, and new equipment to continue to perform testing functions. Updating and equipping the laboratory would also allow BCSIR to carry out emission testing, which is not currently available for stoves in Bangladesh. No institution in Bangladesh currently has the mandate to set technical standards for stoves at present. One of the questions which should be addressed as part of an investment into a national stoves program is if BCSIR should have this mandate or be limited to managing the laboratory that can carry out high quality stove performance and emission tests.

The relatively low cost of setting up a stove testing laboratory, typically several thousand dollars, has meant that a number of institutions in the country have begun to invest in such facilities or intend to do so shortly. Following the stove testing training in December 2011 at its premises, described below, VERC has plans to invest in a testing and training center to be able to train many more technicians so that they can conduct the CCT and WBT on stoves in the field for their own large stove dissemination program and for others.

For monitoring, GIZ requires its 200 partners to undertake visual monitoring of stove performance and to carry out sample surveys as a condition of the support provided to them. A number of the individual partners have received training on conducting WBT and CCT tests but they are not required to carry them out under the program at present. Following the December 2011 training at VERC, GIZ intends to

The Water Boiling Test (WBT) -- a laboratory test that compares stove performance while completing a standard task in a controlled environment to investigate the heat transfer and combustion efficiency of the stove.

The Controlled Cooking Test (CCT) -- a field test that measures stove performance in comparison to traditional methods when a cook prepares a local meal to investigate stove performance using local fuels, pots, and practice.

The Kitchen Performance Test (KPT) -- a community field test that measures fuel use in homes after stoves have been distributed to ensure real-world savings and use.

http://www.aprovecho.org/lab/work/testingandeval/testprotocol repeat similar stove testing training more widely among its POs, invest in better testing facilities, and review its monitoring requirements to include regular testing.

Grameen Shakti has a simple testing laboratory in Komila district where they conduct the WBT tests.

After receiving training on the CCT and WBT at the workshop conducted by Aprovecho and Winrock

International at VERC in December 2011, they intend to start training their technicians in all the districts.

They also intend to better equip the lab in Komila and open more testing labs as their operations expand. As project participants under the CDM Program of Activities registered by JPMVEC, Grameen

Shakti and GIZ/SZ consultancy are highly motivated to regularly test and monitor performance of stoves being disseminated under their programs.

In December 2011, Winrock International and Aprovecho Research Center organized a PCIA-sponsored

Stove Design and Testing Workshop in Dhaka, Bangladesh. The venue of the workshop was the VERC office premises. About 15 organizations participated in the stove testing workshop.

The workshop gave an opportunity to test some of the popular stove models in Bangladesh. The stove models tested were as follows:

1. Bondhu 1 Pot Chulha (with chimney) made with cement

2. VERC 2 Pot Chulha (with chimney) made with clay

3. Traditional clay stove without chimney constructed in situ by VERC employees.

The results (Appendix 6) show that both the 1 pot cement model of Bondhu Chulha and the clay model of the 2 pot VERC stove perform much better than the traditional stove, with specific fuel consumption reduced by 34% and 59%, respectively. 19 The Bondhu Chulha took the least time to boil 2.5 L of water, around 18 minutes, while the VERC Chulha took 25 minutes, compared to 31 minutes taken by the traditional stove. The specific fuel consumption was least and thermal efficiency was highest for the

VERC Chulha model. Although the performance test results of the improved cook stoves being promoted in Bangladesh seem reasonable, there were concerns expressed by some of the participants about difficulties with cleaning chimneys, which could result in smoke coming back into the kitchen and lead to users abandoning the stoves. The international trainers noted the limited variety in stove designs currently promoted in the Bangladesh market and wondered if they presented sufficient choice to meet the needs of the whole market.

Stove Design

The traditional stove in Bangladesh is partly underground single pot cook stove (Appendix 5). Round bottomed cooking vessels, most commonly used in Bangladesh cooking, fit into the stove. These stoves do not have a grate or chimney so they have only about 10% thermal efficiency, produce a lot of smoke, The particular traditional stove that was tested was quite different in terms of design principles (the diameter and depth of the combustion chamber and the width of the pot channel gaps) compared to the usual traditional stoves found in Bangladesh.

Hence, comparisons between either of the improved stoves and this traditional one, which was not entirely dry, should be considered suspect. Further testing is recommended in order to refine the results.

soot and un-burnt volatile organic matter that pollute the indoor air and adversely affect the health of the householders.

The improved stove models that are promoted in Bangladesh are currently limited to:

BCSIR stove models: The fixed mud stoves with chimney which may be 1 pot, 2 pot, or 3 pot.

These stoves had been originally designed by BCSIR and are now being promoted by VERC.

These stoves are built in situ by trained technicians using a fabricated mold. The characteristic features of these stoves are: a) cast iron grate, b) single piece chimney pipe made of clay or cement with a chimney cap.

Bondhu Chulha: The fixed cement stove with chimney which may be 1 pot, 2 pot, or 3 pot. These stoves are the concrete models of the same BCSIR stove models mentioned above. These stoves are being promoted by Grameen Shakti and GIZ partner organizations. The characteristic features of these stoves are the same as the BCSIR stoves with a concrete grate sometimes used in place of the cast iron grate the chimney made of two parts with a collar joining the two for ease of cleaning. A ‘T’ shaped connector is provided in case the chimney needs to be removed for cleaning.

The testing carried out during the PCIA training in December 2011 demonstrated that these designs do significantly reduce fuel consumption (see Appendix 6) compared to the traditional stove. However, there were questions raised, particularly by international and regional stove experts at the training, on whether these two designs provided sufficient choice to potential future consumers. The lack of continued R&D in stove design and absence of new initiatives to introduce well designed portable stove models can be a major obstacle to reaching the full potential market of ICS users at a time when there is interest from a range of parties, including the GOB, Alliance and USAID, for commercialization and scale up of the Bangladesh stove market.

Implementers of ICS programs have assumed that the existing designs fully meet local cooking needs and that prospective users in Bangladesh will either not find the new designs acceptable or will be unable to afford them. Countries, such as China, India, and Kenya, which have large dynamic stove markets all provide consumers a range of stoves to choose between. It is interesting in the context of this assessment to examine the experience with market development of portable stove models that are selling well in neighboring India.

It is instructive to note that India’s National Program on Improved Cookstoves, which ended in the year

2000, also started out with only fixed stove designs with a chimney. The private sector was found to be successfully selling high quality portable stoves of a variety of designs once that program ended. This encouraged India’s ongoing National Biomass Cookstove Initiative to promote portable domestic stoves which are able to pass the performance standards set by the Bureau of Indian standards.

The Indian experience has demonstrated that the main advantage of portable stoves is that they are very suitable for commercialization. They are easy to brand and tend to have consistent high performance both in terms of low emissions and high fuel efficiency since they are mass produced in a factory setting as per specification. Their attractive designs and range of quality and price transform them into aspirational products rather than basic necessities. One reason portable stoves could be particularly attractive in the case of Bangladesh is that they can easily be moved inside the house during the monsoon season; and during natural calamities (floods and cyclones) the stoves can be carried along with the other household items if there is a need to relocate.

Similarities between the two countries in terms of climate, cuisine and cooking habits, fuel and cooking vessels used makes the India experience instructive for Bangladesh. Appendix 5 lists portable stoves which are most popular in India in both urban and rural settings. It will make sense to pilot some of these best-selling stove models in Bangladesh to test if they should be offered as part of a future national stoves program.

Institutional Stoves

Institutional stoves are used by tea stalls, street food vendors and small restaurants, as well as by hospitals, schools and madrassas in Bangladesh. These are usually one or two-pot ICS of bigger dimension, compared to the domestic models, and are made with bricks and clay. The models used originate from the BCSIR Institutional Stove models with a metal grate and a chimney. In Dhaka, street food vendors use wood for cooking whereas vendors in peri-urban areas use twigs, cow dung cakes, and leafy biomass. Larger restaurants and bakeries use briquettes in their institutional stoves. Institutional stoves also use rice husk as fuel – these tend to be the 1 pot model.

Institutional stoves are part of the JPMVEC Program of Activities, where they are referred to as “non-domestic” ICS. So Grameen Shakti, and GIZ Partner Organizations do supply these stoves. GIZ provides

BDT 4,000 per stove to its POs to cover their institutional development and marketing costs. The market is relatively small at present. However, given that the expected annual carbon abatement is around

27.5T of CO2 per stove compared to around 1T for domestic stoves, they may be promoted strongly by carbon finance projects.

Main Actors

Below is a list of generalizations of the main actors involved in the stove sector. For more details, see

Appendix 2: Market Players.

1. End Users – End-users are being asked to substitute an ICS product for traditional stoves, which are either self-built (free) or cost a tenth of the price of an ICS. Therefore, it is quite clear that

ICS needs to be more attractive to the end-user, become an aspirational product so that a higher price will be paid. Also, increasing pressure on biomass should lead to higher fuel prices, so fuel efficiency will play an important role in the purchase decision20. More variety in the ICS market may be needed, since there is no one single stove that can satisfy all the needs of users.

The market requires a number of different technology options and price points to accommodate the heterogeneity of end users and fuels. The experience from India which could also be

For fuel saving results, see Appendix relevant in Bangladesh is that portable stoves could be attractive to large numbers of users, both urban and rural.

2. Government –Although BCSIR, a government agency, has played a crucial role in introducing ICS and disseminating the technology, the GOB’s current commitment to subsidize additional stoves through BCSIR under the Climate Change Trust Fund may be counter-productive and have potentially market contaminating effects now that more commercially oriented distribution models are in place. The GOB for the most part has not played a significant role at a policy/regulation level, particularly in regards to standards, certification and testing protocols setting. The Ministry of Power, Energy and Mineral Resources in 2009 did, however, introduce its first Renewable Energy Policy which included provisions for stimulating market development for cookstoves. It has yet to be seen whether the policy’s implementation will be effective.

3. IDCOL – IDCOL does not have a program to support ICS at present. However, its central role in the remarkable scale up of the SHS market in Bangladesh and the successful addition of a second program in its portfolio for promoting domestic biogas naturally brings up the question about IDCOL’s role in a future ICS program. This assessment argues for the establishment of a national ICS program which establishes technical and quality control standards, a protocol for independent monitoring of installations carried out by POs, supports an awareness program, and establishes a mechanism for providing financing and business development support to POs to expand their market. Since similar elements already exist in IDCOL’s ongoing SHS and biogas programs with technical and financial support from a number of donor organizations, it would be natural to look to IDCOL to add ICS as a third technology program area. The main difference between the existing programs and ICS would be in the financing mechanism. IDCOL currently provides POs with refinancing for each SHS and biogas installation on concessionary terms. POs use this money and additional support they are given for organizational development and marketing to expand their businesses. IDCOL also receives a fee from donors and GOB for each installation to cover its transaction costs. While this arrangement has worked well for SHS and biogas which are priced in the range of USD $400-500 and most users participate in an installment payment plan, it would not work for a USD $12 ICS for which micro credit is too expensive to administer and typically not required and the fees currently charged by IDCOL per system would be prohibitive. POs participating in an ICS program require working capital to expand their operations. They also require funds for marketing and organizational development.

For IDCOL to coordinate the scale up of Bangladesh’s ICS sector, a novel system needs to be developed which allows it to meet these needs while covering its own costs.

4. Donor Projects – Donor supported efforts have been dispersed to date and standards and policies have not been agreed upon. This has resulted in conflicting approaches particularly in terms of program design. The GIZ program supports the commercialization of the stove sector in

Bangladesh unlike UNDP and UN Habitat which have provided heavy subsidies for the purchase of stoves by vulnerable sections of the population. Although most POs consider that there has currently not been significant ‘leakage’ from the subsidized to the commercial market, this could change with UNDP/ UN Habitat’s planned expansion of their program to supply some 400,000 subsidized stoves. Despite its commitment and significant contribution to commercialization of the sector, GIZ’s continued support to a limited set of partners, has both created a sense of dependency among the participating POs, and also distorted the market for growing enterprises such as Grameen Shakti which are trying to sell to a commercial market. Technology standards have not been specified and agreed upon across donor funded programs and there has been insufficient testing of efficiency of the stoves being sold. Both of these issues can be addressed by putting in place a national program endorsed by the GOB, with consistent policies for market development and technology standards, similar to what IDCOL is currently providing for the SHS and domestic biogas sectors. On the standards, any future national stoves program in

Bangladesh can benefit from a current effort being led by the Partnership for Clean Indoor Air and the Global Alliance for Clean Cookstoves to develop international voluntary standards for improved stoves, through an ISO International Workshop Agreement, which is planned to be developed in the coming months.

5. Private Sector Stove Suppliers

Small NGO and SME POs of GIZ – they represent some 80% of business players competing in the ICS sector and have been financially supported either by BCSIR or the GIZ program, or both. They’re generally tied to a smaller, specific geographic area. Currently relying on transitioning to carbon finance, most of them have failed to create viable entities capable of sustainably participating in an ICS market. In the absence of subsidies and/or carbon finance, they would not be able to face costs of marketing and sales.

Medium to Large Sized Vertically Integrated NGOs –Grameen Shakti has successfully adopted market-based strategies to promote its stoves, vertically integrating its value chain and obtaining full control from production to sales. Although its operations are smaller, VERC has also developed a vertically integrated supply chain with quality control and monitoring mechanisms for stove products installed by its branches following the requirements of its carbon finance project. These larger NGOs, which have terminated their partnership with GIZ, do face bottlenecks created by insufficient funds to expand production and marketing. Carbon credits could mean substantive entry of capital that should allow them to significantly expand operations or recover investments made to scale up operations. Even if the carbon revenue does not materialize to the extent it is anticipated, the fact that they have established an extensive network means they could flourish if they had access to concessionary financing similar to that being received by POs under IDCOL’s

SHS and domestic biogas programs. Because of their existing networks and developed capacity to…