Market study biomass advanced cookstove in vietnam

MARKET STUDY Biomass Advanced Cookstove in Vietnam Nguyen Hong Hanh, Steven Von Eije February 2016 Abbreviations ADB ALRI CARE COPD DARD GACC GDP GIZ Asian Development Bank Acute Lower Respiratory Infection Cooperative for American Remittances to Europe Vietnam Chronic Obstructive Pulmonary Disease Department of Agriculture and Rural Development Global Alliance Clean Cookstove Gross Domestic Product Deutsche Gesellschaft für Internationale Zusammenarbeit, GmbH (German: German Society for InternationalCooperation) HHs Households ICS Improved Cookstove IE Institute of Energy LCASP Low Carbon Support Agriculture Project LEAF Lowering Emission in Asia’s Forest LIFSAP Livestock Foodstuffs Safety Project LPG Liquified Petrolium Gas MARD Ministry of Agriculture and Rural Development MOIT Ministry of Industry and Trade NGO Non Governmental Organization PCIA Partnership for Clean Indoor Air PED Population, Environment and Development Center QSEAP Livestock Foodstuffs Safety Project RBF Result Based Finance RENMI Renewable Energy and New Materials Institute SHEER School of Heat Engineering and Refrigeration SNV SNV The Netherlands Development Organization VFD Vietnam Forest and Delta project (SNV Vietnam) VNGO Vietnamese Non Goverment Organization VWU Vietnamese Women’s Union WWF World Widelife Fund Table of Contents I Introduction A Objective B Methodology II Summary III Overview IV Market size and trends V Market potential and opportunity VI A Target customer profile B Target market areas .9 Characteristics by fuel users Firewood user 10 Agriculture residue user 11 Wood pellet and briquette users 11 LPG user 11 VII Cookstove market 11 VIII Policy relating to cookstove 21 IX Companies and product in the market 21 Stove companies and their products in Vietnam 21 Quality control 24 Manufacturing capacity 27 Transportation capacity 28 Retailer system 28 Main barriers to the market 29 Willingness to pay versus high quality of cookstoves 29 Behavior change barrier 29 Limited business management capacity and financial constraint 30 Willingness to participate in SNV ICS product 30 X Conclusion 30 Acknowledgements This report would not have been possible without the interview participation of cookstove producers and researchers Special thanks to my talented colleagues in renewable energy team for their support We also thank Resy Vermeltfoort and Theo Shand for their help in text editing General Introduction I Introduction A Objective SNV is implementing the project: “Acceleration of sustainable market for advanced cookstoves in Mekong Sub-region” in Vietnam For the Vietnamese market this is the first longterm project (4 years) focused on the industry of Improved Cookstove (referred here after as ICS) The project objective is to sustain the market by incentivizing companies to produce and sell stoves that meet international standards and reduce the emissions from the combustion of solid biomass fuels in order to reduce negative effects on human health The overarching development objective is contribute to socio-economic development of the local and global environmental protection This market study was performed to evaluate the current market for cookstoves in Vietnam in order to be able to design a contextualized approach for Vietnam while aligning with the regional project B Methodology - Initial desk review of existing reports from Global Alliance for Clean Cookstove (GACC) of which SNV is a fouding member; GIZ, SNV Vietnam and other reference (specified later) The GACC reports of Vietnam Sector Mapping and Intervention Options were made in 2012 in close cooperation with the renewable energy team of SNV Vietnam To date, they are the most comprehensive reports on the cookstove industry in Vietnam, therefore they have served as the basis for this report SNV Vietnam has performed several cookstove projects in which it executed studies related to cookstove usage and build up a considerable network with several cookstove producers This information has been analyzed and included in this report - Phone based interviews:: 32 producers, suppliers and institute of energy were identified and contacted by phone 34 of them were able to provide information Others were not available at the time they were contacted The list used to contact the stove companies and retailers was crated based on an online research Stove producers with whom SNV previously had contact were also included in this list A semi-structured questionnaire was designed and used to guide the interview II Summary The study was designed to address key questions listed below: - What is the potential of the Vietnamese market for using Advanced Clean Cookstoves (ACCS)? - What are the current cookstoves used in Vietnam and their market penetration? - What is the available fuel in the market? - How many stove manufactures are active in the market? Can their products meet customer requirements? Are there barriers to market entry? - What is the consumer profile? How much will potential clients pay for an ACCS? III Overview Vietnam is well on its way to becoming a middle-income country by 2020, having made incredible economic strides across the board in the past decades with GDP increases of 18% per year In 2012, GACC carried out an assessment of the Vietnamese market that resulted in a report which provided sector mapping and intervention options According to the report, since 1980, migration to clean cooking has happened naturally as a result of economic growth (accounting for 96%) and purposefully through dissemination by two major players: SNV and Vietnam Women’s Union (accounting for 4% with the combination of other smaller funded programs) Despite these significant gains, 46.4% of people still rely on solid fuel for cooking, causing 10,600 deaths per year (1) There have been many programs to promote ICS, however they are all small in scale and not funded end-to-end by either Government or NGOs Realizing the importance of cookstove components to the renewable energy, deforestation and food security/cropland salinization sectors, many researchers have been involved in biomass energy production, biochar production and sustainable forest initiatives but the challenge of creating a self-sustaining ACCS market in Vietnam remains (2) This survey pointed out the positive development that the number of private sector parties involved has been increasing dramatically since 2012 The survey identified that 95% of producers established from late 2011 to present Though some of them are small in scale, they are all private entrerprises and they provide ACCS models that aim to save fuel, reduce smoke and be affordable for rural households The map provided below illustrates the location of producers and their market penetration across the country The Northern part of Vietnam is covered by company branches providing improved cookstoves (ICS) in 20 provinces, while provinces are reached in the Center and provinces in the South Two companies exported their stoves to Lao PDR and Cambodia with consideration to transfer technology to local artisans One company exports ICS to Korea which is also the main market for the wood pellets they also produce Map 1: Mapping of stove companies’ market penetration in Vietnam (Blue represents producer companies’ main workshop, Green represents companies’ branches areas – source: interview stove companies) This map visually shows the potential market of ICS in Vietnam as private enterprises have presented in 34/63 provinces However, it also indicates the limitation of stove companies as just provinces around the workshop areas are targeted in order to keep the price low and the products affordable to the target group, while graph of solid fuel use by regions (Which is showed in point B, part V below) points out the potential market is also in the remaining provinces If SNV Vietnam succeeds with this project, stove companies will have extra financial resources to expand their businessamong other by expanding into more distant markets with high demand of ACCS The greatest identified challenge for producers is balancing between the quality of stove and the willingness to pay by the end user In general, users are willing to pay more for the better quality stove Many targeted customers however have a low income and use agriculture residue or fuelwood as the main fuel, don’t prefer to switch to a more expensive stove model Even in the low cost segment, end-users still expect a stove to last for at least years (SNV-VFD, 92015) While the ICS industry in Vietnam is developing there are no regulations related to ICS, and the process for achieving regulations and national standards is lengthy and challenging While regulation isl critical, it will not ensure people will actually comply with set standards (2) All ICS manufacturers’ claims that their stoves are highly efficient compared to traditional cooking methods and are continuously re-designing their products to meet the customer’s expectation In reality, it was found that only a few stove models were assessed by an official testing center The concept of quality testing is still new to the market and will require significant capacity development IV Market size and trends Current size The table below shows the method adopted to identify the number of potential target customers Potential target customer groups where defined by key distinctions:  Urban or Rural  Animal Farming Household or Non-Animal Farming Household  Existing use of Traditional or Modern Fuels  Above or below the recognised poverty line for Vietnam (under 1.25$/person/day) (5) The following assumptions where taken when breaking up the data:  Animal farmers not exist in the cities and all animal farmers are above the poverty line; due to research indicating animal farmers are generally richer than their nonanimal farming rural neighbours (SNV Biogas User Survey, 2012)  A minimum of cows or pigs is required to create biogas; the poorest segments of urbanites use traditional fuels Figure 1: Illustration of target market identification according to GACC, 2012 In summary, there are four very different markets with very divergent needs: rural animal farmers, inaccessible poor, rural leapfroggers and the lower-income urbanites The potential market for an ICS intervention in Vietnam is approximately 12.8 million households (GACC, 2012) Producers with gasification stoves which use agriculture residue and firewood fuel should focus on 4.4 million HHs raising animals and 4.6 million HHs without animals in the rural area Producers who are developing the gasifier stove to use wood pellet, briquette or charcoal should target the market of 1.1 million HHs in urban area To 2.8 million HHs using traditional fuel but classified as inaccessible disadvantaged, the approach of a market-based mechanism may be not suitable Growth rate There are no supporting figures at present to calculate or forecast the growth rate of demand for ICS in Vietnam but with 12.8 million potential identified HHs the market can be considered as a good opportunity for investors Trends Fuel usage is highly correlated to income, with the population moving decidedly to LPG as soon as they can afford it and solid fuel usage concentrated mainly in the bottom 50% of the population It is critical for ICS programs to reach the last mile and disadvantaged populations, as this is where the biggest persistent need will be when the population continues to get richer However, the reason for households using cleaner fuels is to increase their cooking options as an addition to rather than a replacement for, solid fuels and traditional stoves Parallel use of several fuels appears to be a common phenomenon to utilize the abundant fuel resources in terms of wood fuel and agriculture residue in rural areas V Market potential and opportunity A Target customer profile Figure shows the market identification All segments can in principle be targeted but programs will need to address radically different needs across the segments There are four different groups, rural and urban, as illustrated below: Rural area Rural leapfrogger Characteristic Has access to modern fuels such as LPG and electricity Has sufficient animals to justify bio digester investment Urban area Rural animal farmer Inaccessible disadvantaged Lower-income urbanite Has access to modern fuels but might not spend money on them In favor of portraying wealth through purchase of high cost electronics, etc Has limited or no access to modern fuels Is not near roads Primarily uses biomass (wood and agricultural residue) Has access to modern fuels such as LPG and electricity Increasing costs has forced a higher usage of coal Uses LPG for quick foods and electricity for rice cooker Size (million) 4.6 4.4 2.8 1.1 Profession Farmers, industry, service & salary workers Above poverty line Animal husbandry and farming Service and industrial workers Above poverty line Subsidence farmers, gatherers, ethnic Below poverty line Traditional fixed stove and portable cookstove Fuel: wood, crop residue Outdoors during summer Indoors during monsoon season Traditional fixed stove, gas stove Fuel: wood, LPG, biogas Traditional fixed stove, 3stones fire Fuel: wood, crop residue Traditional rocket stove Fuel: beehive coal Indoors in a separate building Mostly indoors for heat in winter, maybe go to a separate building or outdoor in summer Outdoors during warm season Indoors during winter (not allowed due to toxis SO fumes emitted by coal stove) 1-2 meals/day 2-3 meals/day Med 1-2 meals/day 2-3 meals/day High Med Income Cooking device and fuel Cooking location Cooking frequency IAP exposure High Below or near poverty line IAP awareness Environment impact Barriers to switch Low Med Low High High High (deforestation) Affordability Access to finance Awareness Access to modern fuel Med Willingness to pay Low-med High (manure disposal) Lack of capital Lack of enough animal Lack of construction area Medium – hard to pay out of pocket Med – can pay if fuel price decreases Purchase drivers Ease of use Perception Low, due to displacement costs from flooding Fuel cost Ease of use Affordability Access to finance Awareness Fuel saving Ease of use perception Table 1: Target customers characteristic (GACC, 2012) Affordability (prefer LPG) Fuel cost Ease of use The segment most in need of ICS are the highly inaccessible and largely ethnic groups in the North However, this segment is expensive to reach, relatively small and shrinking every day The true challenge is to reach the highly demanding million rural households and farmers that are leapfrogging to new living standards These consumers need stoves to be functional, affordable, and aspirational products that they are as proud to own as their new satellite TV End-user demand and product preference vary significantly across customer segments Although most consumer segments can be reached by market-based cooking solutions, affordability remains a major barrier B Target market areas Solid fuel use by regions 80% 70% 70% 60% 50% 40% 53% 55% 49% 38% 30% 20% 10% 0% 15% Based on the solid fuel use by region figure, the area that depends most on solid fuel is North Midland and Mountains with 70% dependency, followed by Mekong River delta and North Central with 55% and 53% respectively As this fuel is abundant in this area, it will be the main target for ICS The Central Highland also has high potential with 49% of people relying on solid fuel According to Map only one of these provinces is actually reached Compared to Map 1, producers are doing business in the first and the third ranked areas and the second and fourth ranked areas are still under served ● Figure 2: Solid fuel use by region (GACC, 2012) VI Characteristics by fuel users Energy consumption and fuel type are strongly influenced by accessibility, affordability and the convenience of the fuel These criteria are closely related to each other and also depend on household income The decision making process is complex with economic and technical aspects interlinked with social and cultural issues Cooking with wood fuel, for instance, is so deeply ingrained in many local cultures that other fuels have little appeal, even when the potential health and environmental threats are recognized by users Furthermore, the prevalence of fuelwood in many developing countries can be explained by the fact that it is still the most readily available, affordable or even cost-free cooking and heating fuel Table 2: Determinants of stove/fuel choice Social/cultural Economic Technical Family size Sex of household head Age of household head Education level Taste of food Cooking habits/customs Convenience of fuel Food preferences Household income Stove price Usage costs Fuel costs Fuel/ICS availability Use as “back-up” stove Efficiency Safety Emissions Stove quality/durability Functionality/Speed of cooking Convenience/portability Aesthetic features Source: (GIZ, 2014) (11) The prospects for switching fuels within households as well as for effective government interventions are markedly different for urban and rural areas Given the fact that fuelwood will continue to remain the primary practical option for rural households, the promotion of improved stoves should be given greater attention In urban settings, the availability of LPG, higher education levels and correspondingly higher levels of household income provide the momentum for switching to LPG However, households not simply substitute one fuel for another all at once but first begin by using multiple fuels, also known as fuel stacking Fuel stacking provides a sense of energy security, since compete dependence on a single fuel or technology would leave households vulnerable to price variations and unreliable service Firewood user Based on the methodology to analyze potential customers for the ICS, there are around 12.8 million households still using traditional fuel of which firewood is the main source Those households are living next to mountainous areas where they have an abundance of fuelwood or in remote area where other advanced types of fuel have not yet reached Firewood is either privately collected by households or is acquired at a firewood market (On average the price per 20 kg of firewood is between 15,000 VND – 30,000 VND depending on the quality of wood) (SNV, 2011 and field visit experience) (15) Evidence from reports show that firewood is the dominating source of cooking fuel There are more poor HHs using firewood as a main source comparing to better off HHs Almost all ethnic minority HHs use firewood as a main fuel source for cooking as well as for heating In the winter season in the North (from October to March - months), people keep the fire burning almost all day to warm the house This is an open fire, generally in house’s center and used for cooking The fire is often used by elderly and children to stay warm which can lead to serious health issues Therefore, it is necessary to have a dual function heating and cooking stove for people in this region The main point that will encourage firewood users to change their behavior of cooking will be the negative effects on the health of women and children It was found that there is very limited awareness about the harmful effects of smoke to human 10 22 Nghe An SNV/local WU LEAF 20122013 Total number of ICS promoted via projects Fixed stove 100 > 44,506 VIII Policy relating to cookstoves On 25 November 2015, the Prime Minister has approved the Decision on Vietnam’s Renewable Energy Development Strategy up to 2030 with an outlook to 2050 In the strategy objectives, the cookstove industry is standing out for the first time: “replace biomass-based conventional stoves and low-performing devices with advanced/high-performing items while utilizing traditional biomass for residential and industrial cooking purposes Increase the percentage of households using advanced/high-performing stoves from a negligible level at present to approx 30% in 2020; about 60% in 2025; and from 2030, high-performing/sanitary stoves shall be used by most of rural households” Since 2014, a total of 22 policies related to renewable energy were developed, as illustrated in the graph below: Figure 3: Renewable Energy Development in Vietnam (14) Besides these policies, the ICS programs could strongly contribute to policies of mitigating the emission of GHG to the atmosphere; diminishing the pressure on natural resources; energy security and improving health and livelihood for people living in rural areas IX Companies and products on the market Stove companies and their products in Vietnam 21 From intensive searching on online resources as well as from the acquainted stove companies a Type of identified Of which got total of 40 agencies were Identified factors information contacted for sourcing market Institute 6 information The reason to Stove producer 32 27 contact institutes (from the Supplier provinces in the South) is the Total 40 34 limited available information on producers in the Mekong provinces Their information Labels of reason No of shows that there are in fact no with no information reason stove companies operating in Don’t want to these provinces Only the Center cooperate (provide industrial level gasifier of Applied Science and stove) Technology, in An Giang province, implemented a project on gasifier Not available stoves in 2011 The project was a Grand Total pilot and had not been scaled up after the end date In Ca Mau province, there is currently an ongoing project by GreenID (VNGO) to support a model of the brick built fixed stove made by local woman Out of 32 identified producers, 11 did not provide all the information on the questionnaire, because they ceased conducting business in this sector The main reason these producers stopped their businesses was the declining market demand for gasifier stoves as compared to previous years Those producers were all small workshops They mentioned that the period when demand was highest was in 2011 and 2012 By then, realizing the promising market, many producers got involved and started producing competitive products with cheaper prices and cheaper quality, which was not durable This led to the market destruction by destroying the trust of customers The cheap products were called “counterfeit stoves” made by artisans Many of these artisans are from villages where they still supply metal materials to and process parts of stoves for other producers for final assembly in their own workshop Producers that stopped their business did not foresee the potential market in this sector for at least five years, because of the market destruction and the fact that people didn’t believe in the quality of gasification stoves and didn’t want to pay for that Another reason is the current cheaper price of LPG (Half of the market price as compared to 2012) Table 5: classification from the list of identification 22 In the final list, there was a total of 13 gasifier stove producers, direct burning stove producers, Vietnamese NGOs and retailer that provided full information in response to the questionnaire 38% Of these producers, only 38% focused 62% completely on disseminating gasifier stoves, while 62% combined it with other businesses, such as selling fuel (wood pellet, husk firewood), selling drying technologies for agriculture or promoting solar technology Within the 38%, half of Gasifier stove only With other business them produce both micro and large gasifiers for households as well as for industrial purposes, the other half focuses only on micro gasifier stoves for household use Companies main business As illustrated in Map 1, section (visual of head office and branch locations of producers), the region that has the highest number of producers is the North, while in the Center and the South, there is only one producer in each region Provinces around the head workshop are targeted to keep the price affordable In total, 34 of the 63 provinces are targeted areas Half of the companies is planning to reach the other 29 provinces in the next year All producers are providing different types of stoves, which can be classified by fuel use, application purpose, size or just the shape of the stove, as described in the following table: Table 6: Different models of gasifier stoves Models of gasifier stoves on the market Fuel use Using purpose Wood pellet Small size for 2-3 persons Rice husk Husk firewood Cob corn Biomass in general Medium size for >4 persons Type of gasifier Semi-gasifier Characteristic Air draft Batch cooking Micro-gasifier Continuous cooking Natural draft ICS Large gasifier Forced draft ICS Bigger size for a collective kitchen or commercial purpose One stove company in particular, has a market presence in more than 20 provinces of the North with 12 different models to meet the needs of each area, allowing easier product marketing and generating sales quickly 23 As a result of customer preferences all producers are often improving or designing new stoves to keep up with market demands and applications; This creates difficulties with ensuring consistent high quality control for finished products Quality control Thermal efficiency and emitted emission quality control All producers claim their stoves are the best ones on the current market in terms of fuel efficiency, however there is no strict internal quality control process implemented and regulated to verify this Generally, it was found that when a producer tests a prototype for efficiency it is measured by the time it takes to boil a set quantity of water (Liters) This is then compared to competitor stoves on the market or even with their own previous officially tested stoves If the observed flame was blue or orange and the time to boil the water was similar or shorter, the design was accepted by the company owners and moved into mass production The reason for this approach are the high costs of testing in the Lab Centre From the moment of mass production the quality of the stove is usually not checked Stove companies provide a warranty policy of changing to a new product if one is found faulty (within 3-6 months) This is fine in the current situation where there is no requirement from any government agency nor from the customers’ perspective This is also stated in the GACC report: “though there is a strong recognized need for standards, Vietnam does currently not have regulated IAP standards and testing facilities have been dismantled due to lack of use” SNV Vietnam, with a background in successfully implementing impact-oriented, large scale, multi-stakeholder renewable energy technology, has invested in the ICS sector to promote fixed stove models since 2007 and was actively involved in the international process to recognise the standard of stoves In 2012, GACC/PCIA financed a testing training with the Water Boiling Test in Hanoi and a field Controlled Cooking Test in Thai Nguyen province for SNV staff and local lab staff In 2014, GACC funded a project on enhancing capacity for Regional Knowledge and Testing Center, which took place in three countries: Vietnam, Laos and Cambodia After these actitivies, SNV supported a local lab, the Back Khoa Biomass Energy Lab (now better known as SHEER), to build up the capacity of testing stove performance regarding the thermal efficiency and emission Related staff of SNV and testing operators were equipped with knowledge and skills to conduct a stove testing protocol Internationally, the innovation on the technological front, and therefore the quality standard, will be mainly guided by the recent developments in ICS standardisation, namely the “Lima Consensus” and the International Workshop Agreement on ISO standards for ICS This global initiative is leading to an international standardisation of ICS, with specific parameters and performance indicatiors with Tiers: Parameters Explanation Indicative Performance Indicator Fuel Use Is the stove efficient? Tiers being defined in terms of  Thermal efficiency as 0≤15%; 1≤25%; 2≤35%; 3≤45% and 4≤55% 24  Emissions How much pollution is emitted by the stove? Indoor Air Quality Safety And specific fuel wood consumption Tiers being defined in terms of specific emission generation measured in:  Carbon monoxide  Particulate Matter Does the stove reduce indoor pollutant concentrations with a chimney or are the emissions so low that IAQ goals are achieved without a chimney? Tiers being defined in terms of specific emission generation measured in:  Carbon monoxide  Particulate Matter Does the stove reduce the risk of burns, poisoning, and other injuries? Tiers being defined in terms of a number of accidents and other risks Table 7: Perfomance Parameters of ISO standards for ICS The Tiers are defined in the table as follows: Remarks Tiers Explanation Tier No improvement over Open Fire/Baseline Tier Measureable improvement over Baseline Vietnam’s existing portable and fixed ICS falls under Tier Tier Substantial improvement over Baseline The programme targets Tier for the standard criteria Tier Currently achievable technology for Biomass Stoves The programme targets Tier for premium criteria Tier This is an aspirational goal and Goals for targeting ambitious health and existing technology does not meet environmental outcomes it Table 8: Tier Definitions of ISO Standards for ICS Out of 15 producers, identified for both gasifier and direct burning stoves, have had their stoves tested in SHEER – Ha Noi University of Science and Technology testing lab supported by SNV projects The other producers are willing to send their stoves to be tested, as long as the price is more affordable (currently it costs 800 USD per test) The SNV ICS team had a meeting with the lab director in December 2015 to discuss reducing the costs and it is believed that the potential testing in the new ICS project of SNV will be the motivation for them to make a decision Beside the SHEER lab, there was a testing facility in the Institute of Energy However, it ceased being operational a few years ago In practice, 25 just one company and two VNGOs follow the water boiling test protocol by their own initiative to see the thermal efficiency of their stoves, but they not have the facilities to carry out an accurate emissions and efficiency test The remaining companies, whether they are aware of the testing protocol or not, not practice or follow the protocol, as it is not necessary for them Below is the stove testing result from the lab center (both in Laos and Vietnam) Table 9: Stove testing results IWA PERFOR MANCE METRIC S High Power Thermal Efficiency Low Power Specific Fuel Consumption High Power CO Low Power CO High Power PM Low Power PM Indoor CO Emissions Indoor PM Emissions units Tested in RENMI 17 Dec 2014 Center of Creativity and Sustainabi lity Tested in SHEER on Jan 2015 Teste d in SHEE R on 13 Sep 2015 Tested in SHEER 20 May 2015 THX - GreenGen company Solar Serve company SPIN THX (Large) THX R14 3G (Medium ) 3G (Small ) Direct burning stove - Mr Hong (Phu Tho) TK90 TK90 (Small (Mediu ) m) % 1 1 MJ/(min ∙L) 1 0 0 g/MJ g/(min∙ L) 4 1 4 1 mg/MJ mg/(mi n∙L) 1 0 3 0 0 g/min N/A N/A N/A N/A mg/min 3 N/A N/A N/A N/A N/A was the missing data from the tests that could not be assessed The table shows the testing results of stoves from Vietnamese companies In general, stoves that are available on the market, which belong to THX, Solar Serve and Mr Hong companies, have a lower tier level While the stove of CCS (SPIN stove)as high tier level, it is just in the R&D process The CCS Centre (SPIN stove) has announced another successful prototype that they are aiming to have in mass production of 100,000 stoves, with an estimated shelf price of USD/stove However, there is a long way to go, because so far no investor has taken an interest to bear the risk This might bring us to the conclusion that the ability and willingness to pay from customers will decide the quality of the stove The project of accelerating a sustainable market of advanced cookstoves in the Mekong sub-region is seeing “gasifier” stoves, either natural fan or forced-air, defined by GACC as: "Gasifier stoves force the gases and smoke that result from incomplete combustion of biomass fuels back into the cookstove's flame, until almost complete combustion has 26 occurred, resulting in very few if any emissions Gasifier stoves are also known as Top Lit Updraft (TLUD) stoves, because some fuel is lit from the top of the stove, which forces combustible gases to pass through the flame Gasifier stoves can also include a fan, to improve mixing of flame, gas, and smoke and to reduce emissions." The process for producers to get their stove models eligible for the project is two stage The first stage requires them to submit independent lab reports, according to the WBT version 4.2.3 with IWA Tier classification with safety rating Expected result of the stove testing is tier or higher for thermal efficiency, tier or higher for total emission and tier or higher for safety To meet these criteria, producers need to send their stoves for official testing, but due to the current high cost many producers are unwilling to this The solution provided by the project is sending a technical advisor to work with the company to assess the quality of the stove primarily and conduct the safety test In addition, by analyzing the existing results it can be identified if further improvements are required for the stove to meet the criteria Therefore, all producers were asked to work with the technical advisor in this project Those who are interested in this project like the idea of working with a technical advisor as they can use the results to further promote their products Material of stove quality control For a producer to register their brand and protect it with a Copy Right, the names of the stoves must be sent to the Quality Assurance and Testing Center under the Directorate for Standard Metrology and Quality From the date of testing, it can take anywhere from months to year to obtain this certificate There are three types of stainless steel material that are commonly used for production: INOX 201, INOX 430 and INOX 304 Of which, INOX 304 is the highest quality material However, if one stove is totally made of INOX 304 it will make the stove unaffordable for the desired target market (from 600,000 VND/stove or higher depending on size) Also, if the stove is entirely made of INOX 304 it would be too heavy for transportation or use All producers stated they can easily manufacture with higher quality material as long as the customer is prepared to pay for it The compromise adopted is to produce the inner chamber with the higher quality material and the outer with lower quality material, as the inner chamber is the area subjected to the highest temperatures it deteriorates the quickest If designed correctly it can also be replaced easily, if it is damaged over time, but some still claim this solution surpasses the end-users’ willingness to pay Manufacturing capacity Producing ICS requires many types of machinery: rolling, welding, stamping etc Many producers tend to be artisanal or semi-industrial and opt not to buy these machines and instead order parts from the Rua village The Rua village is located in the Hanoi suburb Thanh Thuy, Thanh Oai and has an established reputation for manufacturing everything from nuts and bolts to automotive parts Outsourcing of parts helps to reduce the bottom line of the stove and raises the output capacity for workshops, as only final assembly and small/simple components are done in house The maximum output with this method by one identified producer is 7,000 stoves/month 27 The maximum number of workers in one workshop is 10 full time operatives, while the minimum is three It is said that the production and assembly of an ICS requires many human tasks, therefore or people would struggle greatly to effectively operate a workshop Workshops visited also double as the storage warehouse with areas ranging from 100 to 500m2 By keeping the final assembly in-house, it also assists the producers to limit the ease of copycat products going to market, which is especially damaging if they are of an inferior quality Table 10: Capacity of companies’ workshops Capacity of the workshop Min Max Average Human resources Size of the Capacity per month (person) workshop (m2) (stoves) 100 300 10 500 7000 5.5 330 3300 Transportation capacity There are a number of adopted methods for transport and distribution of stoves by companies Generally, it is found that for orders of 50 stoves or more a personal or rented car is used with the producer bearing the costs For orders of 50 or less, or orders from a 20km radius outside the workshop, an agreement is reached between the producer and retailer to share the costs (information sourced from existing producers that were contacted) Besides in-house transport services, the post office is quite a convenient alternative for both producers and retailers Contracts with the post office to pick up stoves at the workshop for transfer to remote areas and highland provinces can be easily put in place with costs of around 30,000 VND/stove Another popular method of transport in Vietnam is sending the product by bus, which is quicker, but costs more than other services (prices generally start at 40,000 VND per unit, but can be higher depending on the distance) When using the service of the bus, products must be personally delivered to the station, along with the contact details of the recipients for collection on arrival End-users of this method will usually, depending on the producerretailer agreement, transfer the payment for the stoves via a bank account before shipping and pay the shipping costs on arrival Retailer system 100% of the producers in this survey have had to set up their own distribution network of retailers For producers of ICS products only, the common approach for sales teams was to travel by truck along the national roads to access the Northern provinces to find suitable retailers Once established then they would consign a quantity of stoves to each retailer for initial product promotion 28 Some stove companies that have other businesses, typically selling fuel, adopted the above approach and also promoted the stoves via their existing retailers as they are usually complimentary to each other Retailers are bound to one producer product line All interviewed producers work with private retailers, with the producer with the highest number of retailers of 250 and the lowest of 30 It is the policy of nearly all producers not to allow retailers to pay after selling, except in the case of consigned stoves Only one stove producer, who has previous experience of working with SNV, has realized and acted upon the potential of having The Women’s Union as one of its retailers They are a “catalog retailer” of the producer and the producer helps them to collect the order via distributed catalogues and sends the requested order to them Women’s Union members in this case benefit from this, as the price they pay to the producer can be up to 20% less than the fixed price of the end-user The Motorbike Seller was an approach tried by some companies However, it was not effective The problems arose as they could not control the price given to the end-users and risked damaging the image of the brand By adopting to use only fixed private retailers, and in one case a “catalog retailer’, producers are able to control the costs and also offer a warranty policy to customers, generally of 3-6months for faulty products Main barriers to the market Willingness to pay versus high quality of cookstoves The end-user wants more versatility in the fuel usage, less time for cooking, greater fuel economy, less smoke and affordable prices Results from the report of the clean stove user’s survey of the VFD project in September 2015, show that the price users are willing to pay for ICS is one third of the actual price Even if the producer improves the stove according to customer preferences, the price that they are willing to pay is just two third of the actual price This shows the necessity of this project to narrow the gap between willingness to pay and the actual price Feedback from the interviewed companies shows that the main barrier for them to overcome the stove quality issue is willingness to pay They claim that they can produce a very high quality stove that lasts for more than years if needed as long as they can sell it The lowest price of a gasifier stove presently on the market is 150,000 VND (small) and the highest is 980,000 VND (large) and million for infrared gasifier stoves Interviews with companies who were selling infrared gasifier stoves, and stopped their business in this product, mentioned the reason that they did not sell because of the high retail cost This is very understandable, because, when compared to the price of an LGP stove, households could buy an imported product for that price, which can make them as proud as having a new satellite TV Behaviour change barrier The rural people are not really concerned about cooking with fuels and deforestation, mainly because of the abundance of fuel resources in their areas and/or lack of awareness of the negative impact on personal health and the environment There are three dimensions affecting the adoption of new products or services to the low income bracket that should be taken into account, namely motivation, affordability and engagement with producers The 29 engagement with the product is showed by their preference of rocket or continuous cooking stoves over gasification products However, these stoves are unlikely to meet the strict project criteria on efficiency and emissions Regarding the question “how can SNV support the company to increase stove efficiency”, all of them showed interest in changing support to marketing of the stove and/or conduct a communication campaign on the negative impact of smoke to the health of women and children, which is a good entrance for them to sell the stove Limited business management capacity and financial constraint Limitation on business management and financial constraints have been identified by producers and is seen as another barrier As they are all new into this sector, 90% of them were established after late 2012, they share the concern of capacity of business management, and 50% of them established the companies as start-ups by highly skilled workers They also lack financial resources to promote their stove to a broader range of customers or investigate other potential regions The main channels they are using to promote their stove is their website, YouTube channel or social network, which are all free of charge Some of them were introduced on national television or in the newspaper, which is said to be a very useful channel for them In the field, they need to conduct road shows or participate in village fairs Willingness to participate in SNV’s ICS product To meet project criteria, 13 gasifier stove producers were contacted and asked about their views on the intended mechanism with the approach of Result Based Finance (RBF) 12 of them set up appointments to visit for further discussion about the possibility of cooperation, of which companies are very interested in the project and willing to join One of the reasons for not joining the project is that the infrared gasifier stove is a product with no sales in 2015, others perceived that RBF is too risky for them X Conclusion Nearly half of the population of Vietnam still relies on solid fuel for cooking Therefore, the ICS programs promise to bring great benefits to local people, particularly to women and children It will contribute to protect the global environment by reducing the burden on forests, which will reduce environmental degradation and deforestation This market study has helped to provide an overview of the sector and answered critical questions on factors that effect the market This is a very good time for advanced cookstove intervention because the market is prepared in terms of demand and manufacture capacity But the lessons from previous projects should be taken into account, for example regarding the time for people to change their awareness and the market sustainability when users pay fully for their stoves The Vietnam cookstove market has many potential stove manufacturers, R&D and development centers that currently work in the sector Meeting the project criteria in terms of thermal efficiency and emitted emission is very promising with the support of this SNV ICS project The project came at the time when all the cheaper quality products broke down and those available on the market have been affected by the negative impact of these cheap stoves on the reputation of ICS in general The Government has announced a renewable energy development strategy with the outlook towards 2050, in which the number of households that use a more advanced cookstove is specified 30 To encourage producers involved in this project, the analysis of their main barriers to the market should be taken into consideration The project implementer may consider to work with a local lab to reduce the costs and/or compare the most effective way to test stove quality with other labs in the region Moreover, the project implementer may consider to implement a campaign to raise awareness on the negative impact of smoke on human health, which helps people to become aware and understand the danger associated with this and how to protect their families’ health At the same time it will provide a good entrance for stove companies The project may link with the Inclusive Business Accelerator, a project of SNV that helps start-up companies to access potential investors And the most important point is finalizing the RBF incentive and working mechanisms to prepare stove companies 31 Global Alliance for Clean Cookstove: Vietnam Market Assessment Sector mapping – 04/2012 http://cleancookstoves.org/resources/180.html Global Alliance for Clean Cookstove: Vietnam Market Assessment Intervention Option – 04/2012 http://cleancookstoves.org/resources/179.html SNV – VFD, 2015: Clean cookstove users’ survey report – Nguyen Thanh Quang http://www.biomassmagazine.com/articles/12542/southeast-asiaundefineds-low-costpellet-player micro-gasification manual from GIZ http://tietkiemnangluong.com.vn/tin-tuc/meo-tknl/t11583/an-giang-che-tao-thanh-congbep-dun-khi-hoa-trau.html http://www.worldbank.org/content/dam/Worldbank/document/vn_PA2012Executive_sum mary_EN.pdf http://apps.who.int/iris/bitstream/10665/200009/1/9789241565110_eng.pdf?ua=1 http://www.renewableenergy.org.vn/index.php?page=library 10 SNV – A review report of improved cookstoves in Vietnam 11 https://www.giz.de/fachexpertise/downloads/giz2015-en-report-wood-energy.pdf 12 http://vietbao.vn/vn/gia-ca-thi-truong/mat-hang-Gas-petrolimex-binh-12kg-van-ngang/ 13 Nguyễn Thu Hà, 2014: A review report of improved cookstove in Vietnam 14 Phan Thanh Tung, 2015 http://www.renewableenergy.org.vn/index.php?page=library 15 SNV, Cookstove usage survey in Northern region 2011 16 http://biogas.org.vn/english/Home.aspx 17 http://mediamart.vn/noi-com-dien/ 18 http://www.iob-evaluatie.nl/sites/iob-evaluatie.nl/files/Indepth%20report%20on%20SNV's%20biogas%20programme%20in%20Vietnam.pdf 19 http://www.lcasp.org.vn/Tin-tuc/Su-kien-Hoi-thao/detail-740.html 20 http://www.slideshare.net/HaiAnhTran2/20150922household-biogas-digesters-53140848 32 Questionnaire to ICS Producer/company Introduction Hello I am Hanh from the Netherlands Development Organization (SNV) I am calling you in the framework of SNV's improved cook stove project, which aims to accelerate the sustainable market of ICS in the Mekong subregion This project gives us a consideration to offer an incentive for the stove producer and retailer I would like to know more about your company and your stove product, as this knowledge will help us a lot in the design phase of the project - Would you mind to spend about 15 minutes for me? Basic information Name of the company: Address: Field of business: Production location: Product Product in detail What type of ICS are you producing (gasification or semi-gasification stove)? How many stove sizes? What is the material of the stove ? What kind of fuels does the stove use? Do you sell fuel for cookstoves? Do you produce other products? Qualification control Do you have an internal quality control procedure, if so, please explain Have your stoves undergone external testing regarding: - Quality - Efficiency - Emissions - Etc Which organisation performed the tests? Can you share the testing result? Ambitions Are you aware of any available ICS standards? If yes, what are they? Do you know the efficiency of your stove? What is that? Do you consider to improve the efficiency of your stove? If so, why, if not, why not? What barriers you foresee in developing a ICS market? What support you need from SNV to increase your efficiency? Manufacturing capacity How many people you employ to produce the cookstove? How large is your company workshop? What is your maximum capacity? (specific per month/year) Is your input material source stable? Business Business information When did you start selling/producing ICS? Where is your ICS market? (area/region) How many stoves have you sold up to now? 33 How many stoves did you sell in 2015? Which distribution channel did you use to sell your product? How many % of ale in market based and % of sale under project/program? Retail capacity Do you have your own distribution network? Do you sell your products to external retailers? How you transport the stoves to households/retail locations? Do you use mobile selling? If so, are these your own retailers, arms-length contracts or third parties? Do the retailers directly pay the full amount of the stove before or can they pay after selling? Do you provide discounts if people purchase the stoves in bulk, if so, how much? Guidance to user? Warranty service? Marketing What difficulties are you facing when selling ICS products? Do you conduct any marketing activities? If you have marketing activities, what is your promotion channel? What is your customer segment? Why you focus on this segment? What you think about the opportunity for a cookstove market? What are the barriers for a cookstove market? What are the most important aspects of a cookstove for your customers? Plan Do you plan scaling up your business? What is your plan for the next year? What is your plan for the next years? Have you received any support from a NGO or national support programme in the past? Do you currently receive any support from a NGO or national support programme? if yes, which program and kind of support? Define your competitors Who are your main competitors What are your competitors' strengths? What are your competitors' weaknesses? Willingness to be involved SNV RBF design SNV is considering to offer an incentive to producers per produced stove , would that encourage you to increase the efficiency of your cookstove? SNV is considering to offer an incentive to retailers per stove that is sold to an end-user, would that encourage you to increase the efficiency of your cookstove? If SNV organised a stove auction and the incentive would be provided to the retailer, would you consider to produce ICS and offer them on this auction? 34 SNV Vietnam Office Address: 3rd floor, Building D, La Thanh hotel, 218 Doi Can street, Ba Dinh, Ha Noi, Vietnam Tel 84 - -8463 791, Fax 84 - -8463 794 Email: vietnam@snvworld.org Website: www.snv.org 35 ... help in text editing General Introduction I Introduction A Objective SNV is implementing the project: “Acceleration of sustainable market for advanced cookstoves in Mekong Sub-region” in Vietnam. .. Fuel: beehive coal Indoors in a separate building Mostly indoors for heat in winter, maybe go to a separate building or outdoor in summer Outdoors during warm season Indoors during winter (not allowed... of the Vietnamese market for using Advanced Clean Cookstoves (ACCS)? - What are the current cookstoves used in Vietnam and their market penetration? - What is the available fuel in the market?