Through an analysis of the Clean Cooking Working Capital Fund, a concessional loan facility for early-stage clean cooking businesses, a new report from the Global Alliance for Clean Cookstoves and Accenture explores lessons learned to enable companies and financiers to drive sector growth across global markets.
More than 80 million cleaner, more efficient cookstoves have been distributed by Alliance partners globally since 2010. While this reflects a significant achievement, market penetration remains low, and adoption and consistent use remains a challenge. User experience and cost, both of which must overcome entrenched preferences for traditional cooking methods, continue to limit consumer demand and loyalty.
Yet, despite the well-documented challenges, the last several years indicate accelerating progress. Increasingly professional management teams are focused on viable models targeting realistic market opportunities. Companies are delivering solutions with real consumer value propositions through commercial approaches. Technology integration, improved product design and adaptation to local preferences are driving greater product appeal. And payment options such as pay-as-you-go, and innovative distribution and aftersales models that encourage behavior change, are poised to make clean cooking solutions far more attractive in the coming years, particularly against a backdrop of increasing charcoal and wood prices.
The Alliance / Accenture report calls for a scaling-up of appropriate financing mechanisms, particularly if the Sustainable Development Goals and universal access to affordable and clean energy are to be achieved. In the near-term, grants, equity risk capital, and concessional debt must all play a role in establishing a pipeline of businesses that will ultimately leverage much larger volumes of commercial capital.
The report also outlines the importance of better data generation and transparency at every level (from consumer to business to sector) to enable investment and company growth. It highlights innovative new businesses models that generate more rich data to drive consumer demand and improve business margins and sustainability. It also explores how investors and market-builders must align their efforts with the needs of enterprises and deploy risk-tolerant capital through mezzanine investment structures such as subordinated debt and quasi-equity.
The next several years of the clean cooking sector’s development are critical. Innovation is happening faster today than 2-3 years ago, and there is an opportunity to accelerate businesses with a high degree of potential for viability and scale – but that are still struggling to access broader impact and commercial capital markets given their risk/return profile. This report illustrates how and why grant support and appropriate investment can build a portfolio of companies with scalable models which can ultimately be expanded and replicated to reach 3 billion people globally.