Urban heat: the low-hanging fruit of “energy access”

Emerging market cities are growing fast, and current and forecast rates of urbanisation will only see that trend continue.

KOKO is preparing to launch its first clean fuel Network in Nairobi.  Across Africa, urban populations already number around 400 million, and are estimated to rise by a further 200 million in the course of a decade.

Urban incomes tend to be 2-3x higher than rural areas; to put it another way, 40% of Africa’s collective GDP stems from its largest 50 cities - although they account for only 13% of the continent’s population.  Mobile money is ubiquitous, while mobile, smartphone and internet penetration are rising all the time.

With more reliable electricity connections than ever before, technology adoption is rife, while extensive efforts are being made to extend the reach of the grid, and to offer financed solar home systems to rural and peri-urban households.  These efforts are certainly transformative, and can deliver major quality of life and environmental improvements.

And yet, despite rising disposable incomes, so many urban consumers continue to cook with dirty fuel sources.  It's a wooly mammoth in the room, not just the traditional elephant!

Cooking fuel use demonstrates a major disconnect in modern urban life: consumers, quite rightly, demand modern solutions to all aspects of their lives, and access to quality products.  In Nairobi, for example, the majority of households now have a television, sound system and smartphone.  That the same households cook with charcoal and kerosene is quite jarringly out of place with their rapid embrace of other life-improving technologies.  The consumer demand and spending power exists, but the hard reality is that consumers are badly underserved by limited options in the cooking fuel market.

Humans lived in the dark for centuries before the advent of electricity, but yet we have always found ways to put heat energy into food.  Cooking fuel is one of our most fundamental human needs.  It’s a non-discretionary, non-cyclical spend category for every household, rich or poor.

Urban cooking fuel is a huge market, worth more than $20bn annually in Africa’s 40 biggest cities alone, and customers shouldn’t be priced out of a modern, clean and safe solution.  We estimate that urban households in Africa typically spend about $20-25 per month on cooking fuel, 2-3x more than on mobile.  More than three quarters of consumers use dirty fuels and want to upgrade to a modern solution.

That’s no surprise.  The problems of charcoal for cooking are extensive: dirty to handle; slow to light; a major cause of indoor air pollution that kills millions globally every year; creator of soot and smoke; and increasingly expensive as forests retreat further and further from cities and towns.

In many cities, such as Lagos, Johannesburg and Nairobi, kerosene has entered the bottom end of the market as a direct response to rising charcoal prices.  In some ways, this is an even more deadly option, causing toxic, carcinogenic fumes and a terrible smell that is irritating to skin and eyes, and causes clothes, hair and food to stink of paraffin.

Despite the infrastructure advantages of a liquid fuel vs a compressed gas, kerosene retail points - local refilling pumps that bypass formal fuel stations, with little to no safety standards - are also incredibly unsafe, and a major cause of slum fires. But, with vast levels of charcoal-based deforestation, many sub-Saharan African cities face a future that looks like kerosene for cooking.

Charcoal and kerosene are clearly not the answer to the rising demand for modern, clean and safe cooking fuel.

Even LPG, which presents a clean, modern cooking experience, is not without its challenges.  Since it is a pressurised gas, the infrastructure costs associated with scaling LPG cooking to the mass-market are extremely high, requiring significant government subsidies to achieve scale, as occurred in wealthier emerging markets like India, Indonesia or Brazil.  Indeed, a recent study by Dalberg Global Development Advisors found that the system-wide capex requirements for scaling LPG are 18 times greater than those for scaling liquid bioethanol when using existing liquid fuels infrastructure and best-in-class technology.

As a consequence of high infrastructure and macro costs, the upfront and ongoing customer costs of using LPG are often prohibitively high.  By the time a user has purchased a 2-burner gas cooker, gas cylinder (including deposit), plus a regulator, pipe and valve, they’re looking at more than $100.  Meanwhile, it is not yet possible at scale to purchase gas in the small daily quantities that customers prefer.

LPG can also risk a “brand” reputation issue around safety.  The illegal refilling of gas cylinders is rife in Kenya - experts estimate it to be anywhere between 50-80%.  This is extremely dangerous, since cylinders are not ‘revalidated’ (i.e. they do not go through the very important safety and maintenance checks that are prerequisite for the safe retail and household use of LPG).  Cylinder degradation is a major issue, and customers are anxious. Many of our pilot KOKO Fuel customers in Nairobi, for example, are fathers who worry about their family’s safety with using LPG - not because LPG is fundamentally unsafe, but because the widespread illegal refilling that occurs is damaging the safety brand of LPG.

Liquid bioethanol is a proven new consumer fuel that delivers on the core consumer demands of cleanliness, modernity, safety, convenience and affordability.  Combined with KOKO’s world-first technologies, which are being proven in Nairobi, it is now the most competitive fuel for mass-market consumers, with the potential to be scaled far beyond Kenya.

The home solar industry has seen enormous growth.  There is now, using innovations like KOKO’s, a significant opportunity to positively disrupt the huge market for urban heat in Africa and elsewhere, where tens of millions of consumers are underserved.

It’s time to stop overlooking the “low-hanging fruit” of energy access.