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BOX 11: INNOVATIVE BUSINESS MODELS IN CLEAN COOKING
Metering technologies: The use of metering tech- nologies for various fuel types (e.g. electric, LPG, biogas) has increased hugely within clean cook- ing in recent years. Meters allow for detailed track- ing of stove and fuel usage and generate valuable data on usage volumes and patterns. This data is key to making use of carbon finance and other re- sults-based finance, because it provides a reliable and efficient way of verifying usage. 113 Pay-As-You-Go (PAYG): Metering also facilitates in- cremental payment for fuel purchases using pay-as- you-go approaches. Smaller payments increase af- fordability for low-income households, copying the expenditure patterns common for traditional fuels such as buying charcoal every few days. Payments can often be made with mobile money, which max- imizes convenience for customers. Companies us- ing pay-as-you-go business models typically pro- vide warranties to ensure the long-term functioning of their equipment and often deliver fuel replenish- ments directly to households, reducing motivation and access barriers. Pay-as-you-go adds to the cost of doing business and is generally best suited to firms operating at scale or those that can make use of carbon finance to offset their costs. “Tool and Fuel”: Another business model that has gained traction in recent years is the “tool and fuel” approach, which is similar to the “razor and blade” model where a company sells the base product at a low margin and then sells the consumable goods at a higher margin. In clean cooking this often in- volves bundling the cost of upfront equipment with ongoing fuel costs through fuel purchase contracts. This enables consumers to reduce the high upfront cost by spreading the burden over time. This model typically involves taking a very small margin on the “tool” and then recovering the revenues through margins on the sale of the cooking fuel over sever- al years.
Integration with non-cooking offerings: A num- ber of firms are bundling clean cooking products with other services, such as household solar pow- er systems, allowing lower upfront costs. For exam- ple, BBOXX, a longstanding player in the off-grid solar sector, has added pay-as-you-go LPG to their portfolio. This allows them to leverage their existing last-mile distribution networks, partnerships with telecom companies and experience with mobile money payments and the ability to invest in prod- uct research and development. Diversification of product offerings: Another ap- proach taken by many clean cooking companies is to expand their product offerings to serve multi- ple customer segments and fuel types. This allows them to increase their customer base and enter new markets, while leveraging existing resources such as manufacturing infrastructure, distribution networks or pay-as-you-go intellectual property. It can help firms to diversify by offering low margins on new products, offset by higher margins on more established ones. For example, BURN Manufactur- ing – traditionally a charcoal stove manufacturer – has recently launched electric pressure cookers for grid-connected customers in Kenya. ATEC, origi- nally a biodigester company operating in Cambo- dia and Bangladesh, has added magnetic induction cookers as an offering. Broader consumer finance offerings: Companies have been exploring other solutions to affordabil- ity barriers through non-PAYG consumer finance, including instalment and payment plans managed in-house or partnering with financial institutions to implement payment plans. For example, the Indian cookstove manufacturer Greenway has partnered with its last mile micro-entrepreneurs and agents – who are mostly women – to share a portion of car- bon revenues with them, creating healthy econom- ics through the value chain.
113 Clean Cooking Alliance (2022) Accelerating clean cooking as a nature-based climate solution, https://cleancooking.org/reports-and-tools/accelerating-clean-cooking-as-a-nature-based-climate-solution/
AN OPEC FUND KNOWLEDGE SERIES REPORT 2024
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