Clean cooking: Models still emerging, but scale needed
Lack of clean cooking is a critical aspect of energy poverty in Africa. Charcoal use in inefficient cooking appliances, in particular, is responsible for significant health impacts and deforestation. Cooking on the continent can be expensive. In some regions, it is one of the primary daily household expenditures.
Improved access to clean cooking has lagged behind other aspects of energy poverty alleviation. The Sustainable Development Goal 7 Energy Progress Report 2022 estimated that only 17% of people in SSA have access to clean cooking technology. In its 2022 industry snapshot, the Clean Cooking Alliance (CCA) estimated that 2.6 billion people worldwide still lack access to clean cooking.
CCA found that investment in clean cooking companies remains in the tens of millions of dollars, far short of what is needed, despite an annualised growth rate of 20% between 2014 and 2020. CCA said that, at the current growth rate, annual investment will not surpass EUR 0.98 billion (USD 1 billion) until 2036. However, investment is being raised, primarily from the private sector – CCA estimates that 88% of capital invested in clean cooking companies was private in 2019-20 – although public in¬vestment by development finance institutions is also growing.
The Spark+ Africa Fund is an important financing milestone as the world’s first impact fund dedicated to clean cooking. The fund is investing debt and mezzanine capital in companies active across the clean cooking spectrum, whether using biomass, biogas, ethanol, electricity, or liquefied petroleum gas LPG), taking the view that different solutions are required for different environments. The fund is a joint venture between its manager, Switzerland-based Enabling Qapital, and TA partner Netherlands-based Stichting Modern Cooking, and its development was backed by the CCA. The fund achieved a first close of USD 41 million in March 2022, and a second close at USD 54 million in July.
Among the investors in the fund, AfDB is the lead finance institution with a USD 10 million commitment to the junior equity tranche via its Sustainable Energy Fund for Africa (SEFA) multi-donor trust fund. The European Union has also contributed EUR 10 million to the junior equity tranche via the Danish DFI IFU, which it says will absorb potential losses and is critical to crowd-in other development finance institutions and private investors including four pension funds to date.
Several business models are emerging. Bioethanol is showing promise in regions with strong sugar industries, with companies like Koko Networks making progress in Kenya and Rwanda. The model uses carbon credits to reduce the upfront cost of the appliance, with a margin then made on fuel supply. The approach is carbon-neutral and more affordable than LPG, the main competing model.
“We’re a fuel retailer of liquid ethanol cooking fuel, which we sell through a dense network of high-tech fuel ATMs located in small shops in Kenyan cities,” Koko Networks chief executive and co-founder, Greg Murray, said. “We have 1,200 shops in Kenya which serve about 400,000 households daily.”
LPG is being pioneered by a range of industry players, from traditional fuel distributors to start-ups and SHS companies. SHS companies can utilise much of the pay-as-you-go technology to support LPG business lines, as well as leveraging their growing sales networks and financing mechanisms. “The starting point is lower but clean cooking is the fastest growing segment in Bboxx today,” SHS company, Bboxx’s chief executive Mansoor Hamayun said. Bboxx has been deploying clean cooking systems in Goma in the Democratic Republic of Congo, and is now applying that experience to other countries.