This blog is written by Lucie Klarsfeld McGrath and the Hystra team
In Hystra’s previous report on energy access in 2009, improved cook stoves (ICS) and solar lanterns had been grouped together into one cluster of ‘clean energy devices’. At that time, both industries were at relatively similar levels of development: a few global players emerging, a lot of investment into R&D to create locally adapted products for less than US$50, and commercial sales of a few hundred thousand units for the largest players.
Today, solar lanterns like d.light and Greenlight Planet have sold over 10 million units, while only Envirofit has crossed into the 1 million unit cap in the ICS market, which remains fragmented and largely driven by subsidies. How can we explain this drastic difference?
1) The unique fragmentation of cooking habits makes the ICS market more complex to serve
Cooking is culture-specific: people will not buy a product that does not cook local staple food easily and with the same taste. In other words, all ICS need to adapt to geographies and fuels, unlike solar lanterns where a single design is universal. This adaptability factor requires companies to raise donor money in order to fund R&D and design multiple products that meet the cultural requirements of consumers in various regions (e.g. Envirofit has developed adapted products for Asia, Africa and Latin America). Some companies have taken a different approach, concentrating on one market at a time (e.g. BURN focused first on charcoal ICS in Kenya, then on expansion in the region and a firewood ICS). The fragmentation of cooking habits might explain why fewer global players have emerged in the ICS space than in the lighting space: the global market is simply more complex and the market potential for each product much smaller than that of a globally acceptable solar light.
2) Marketing ICS has often proved more complex than marketing lanterns
The majority of solid fuel users are fuel collectors. These 350 million households have little economic reason to buy an ICS, leaving ICS marketers deprived of their most convincing argument.
ICS benefits are less visible and tangible than those of solar lights, in two ways:
Taken together, these components make the task of selling these products more complicated, and the likelihood of a company succeeding in selling those products sustainably thinner. This might explain why no company in the ICS space has yet reached the scale of the leaders of the solar light industry, who sell several million lanterns per year each. Their turn will probably come, but will require a bit more patience.
3) VAT and tariffs exemptions:
As Ethan Kay, Managing Director Emerging Markets at BioLite, explains: “One major barrier to scale is on the regulatory side. Import tariffs and VAT are substantially higher in Sub-Saharan Africa and India for cook stoves than for solar lanterns – even though cookstoves have greater health and climate impact. These taxes fundamentally skew the viability of clean cook stoves for low income households.”
Want to know more? Check out the full report on energy here
This blog is a part of the July 2017 series on energy access in partnership with Hystra.
Read the full series for more lessons from practitioners, trends in business models, market penetration and understanding and measuring impact in the energy sector.