Business Plan for Ethanol Cooking Fuel and Domestic Clean Cook Stove Market Development in Addis Ababa,

Ethiopia

Presented to Makobu Enterprises PLC Gaia Association

United Nations Development Programme (UNDP)

Submitted by Mekonnen assa Partners Consultanc and !n"ormation #ervices

P $ %o& '()*' Addis Ababa+ Et,iopia -el. '(///00110)2341+ '(/2//'0*)'' E5mail6 mekonnenkasa7 a,oo.com

January 2007

Contents
Abbreviations and Acron ms
!ntroduction Countr# Conte$t #ocioeconomic #ituation National Policies and #trategies &he Energ# Sector Energ 8esources+ #uppl and Consumption -,e 9ouse,old #ector :e !ssues in t,e 9ouse,old #ector -,e Urban 9ouse,old ;uel Market Fuel and Stove Market 9ouse,old Cooking ;uels and #toves Use in Addis Ababa Domestic Cooking ;uel Use in $t,er Urban Areas Comparative Cooking Costs in Addis Ababa Consumer Pre"erences and E&pectations <iabilit o" Ma=or Cooking ;uels and #toves Prospects Local Production o" Clean Cook #tove Competition ( Market Anal#sis " % ' 0 ' 4 2 /1 // "% /' /0 /0 /4 /* '> %) '( ') %+ -% >' >'

Competitors in t,e #tove and ;uel Market Anal sis o" Competition "or Et,anol and CC #tove
Stakeholders *oles and Contributions A,areness and Promotional Campaigns A?areness Creation Promotional Campaigns Design and E&ecution o" Campaigns Financing Strategies Direct #ubsidies "rom Government $pportunities "or CDM ;inancing #tove ;inancing Met,ods Suppl# and Distribution of Fuel and Stove

>>
-. >0 >( >) -'

Financial Plan Assumptions !nvestment Costs and ;inancing #ources Pro=ected #ales 8evenue Pro=ected Costs and E&penses Pro=ected ;inancial #tatements ;inancial 8eturns %reakeven Anal ses #ensitivit Anal ses Economic, Social and Environmental !mpacts ;oreign E&c,ange #avings Emplo ment and #ocial !mpacts 9ealt, and environmental bene"its

-/ >* >* 01 01 0/ 0> 0> 00 .0 0) 0) 04

1ist of &ables, Figures and Anne$es

Figures ;igure / ;igure ' ;igure > ;igure 0 ;igure ( ;igure ) ;igure 4 ;igure * &ables -able / -able ' -able > -able 0 -able ( -able ) -able 4 -able * -able 2 -able /1 -able // -able /' -able /> -able /0 -able /( -able /) -able /4 -able /* -able /2 -able '1 -able '/ -able '' -able '> -able '0 -able '( -able ') -able '4 -able '* -able '2 Anne$es Anne& ! Anne& !! 9ouse,old Energ #urve in Addis Ababa6 Met,ods and 8esults Pro=ected ;inancial #tatements Et,iopia6 #elected !ndicators Energ 8esources and Uses National Energ #uppl and Consumption ;uel use b End use in t,e 9ouse,old #ector Estimates o" t,e 9ouse,old ;uel Market Distribution o" ,ouse,olds b "uel and stoves used "or cooking - pes and @uantities o" cooking "uel used in Addis Ababa+ '110 Distribution o" ,ouse,olds b "uel used "or cooking+ /22)5'110 Cooking costs A comparison on a use"ul energ basis Petroleum ;uels Price %uild5up ;uel and stove c,aracteristics soug,t b ,ouse,olds Potential et,anol production and demand+ '1145'1/' Clean Cook #tove #ales Cost components and Price o" CC #toves :e Actors t,e ;uel Market :e #take,olders and Contributions Price %uild5up o" Et,anol Emission 8eduction Potential and #ales o" CE8s #tove ;inancing Met,ods %asic Assumptions "or ;inancial Anal ses #ummar o" !nvestment Costs Pro=ected 8evenue Pro=ected Costs and E&penses #ummar o" ;inancial Pro=ections Loan 8epa ment #c,edule #ummar o" Pro=ect Bort, Bit, and Bit,out CDM ;inancing %reakeven Determination #ensitivit o" t,e !88 and NP< to #elected <ariables !mpact on ;oreign E&c,ange > 4 * 2 / / ' / > / 0 / ( / 4 / * / > / > ' 0 ' ( > 1 > 0 > ( > ) > * > 2 0 1 0 / 0 ' 0 > 0 > 0 0 ( 0 ) Energ consumption b sector+ Et,iopia+ /22* -rends in :erosene Prices in Addis Ababa Energ e&penditure+ '111 Distribution o" urban ,ouse,olds b "uel "or cooking+ /22) Comparative Cooking Costs per ,ouse,old per mont,+ '11) -,e Dometic CleanCook #tove Proposed Distribution C,ain #ensitivit o" t,e !88 and NP< to #elected <ariables * /1 // /> /) '> >4 0(

Abbreviations and Acron#ms

ADL! CDM CE8s C#A EPA E8EDPC E-% GDP G9Gs GD 9!CE !88 kB, LPG MME Mo-! MB NP< E#AE 8#P #DP8P <AAgricultural Development Led !ndustrialiCation Clean Development Mec,anism Certi"ied Emission 8eductions Central #tatistics Aut,orit Environment Protection Aut,orit Et,iopian rural Energ Development and Promotion Center Et,iopian %irr Gross Domestic Product Green,ouse Gases Giga Doules 9ouse,old !ncome+ Consumption and E&penditure !nternal 8ate o" 8eturn kilo Batt ,our Li@ue"ied Petroleum Gas Ministr o" Mines and Energ Ministr o" -rade and !ndustr Mega Batt Net Present <alue Eualit and #tandards Aut,orit o" Et,iopia 8epairable #uspended Particulates #ustainable Development and Povert 8eduction Programme <alue Added -a&

Calorific 2alues
;uel ;uel?ood Crop 8esidues Animal 8esidues C,arcoal #a?mill 8esidues %agasse %iogas LPG :erosene Electricit Calori"ic <alue /0.( MD3kg air5dr + /15/(F moisture content+ ?et basis /(.( MD3kg />.* MD3kg (/(F moisture content+ ?et basis '2.1 MD3kg /0.( MD3kg /1.1 MD3kg /*.2 MD3cubic meter 0(.( MD3liter >(.> MD3liter >.) MD3kB,

Aggregative Prefi$es
# mbol P G M k , da Pre"i& peta tera giga mega :ilo ,ecta deca ;actor /1/( /1/' /12 /1) /1> /1' /1

Conversion Factors
/ =oule / kD /kcal / kB, Amount o" energ to move 2.*/ kg one meter 1.'01 calories 0./2 kD >)11 kD

Currenc# E3uivalents
U#G/ H E-%*.*0''

!4&*5D6C&!54

-,is report presents t,e results o" a stud on market development o" locall produced et,anol as a domestic cooking "uel and t,e Dometic CleanCook et,anol stove in Addis Ababa. -,e goal is to promote et,anol as e""icient+ clean+ sa"e+ and a""ordable cooking "uel ?it, substantial ,ealt,+ economic+ social and environmental bene"its. -,irteen sections make up t,is report. #ection ' provides countr conte&t including socioeconomic situation and national policies and priorities. #ection > revie?s t,e energ sector in Et,iopia. -,is includes discussions on energ resources+ suppl and consumption patternsI ke issues in t,e urban ,ouse,old "uel market. #ection 0 deals ?it, market anal sis including ,ouse,old cooking "uels and stoves use in Addis Ababa and ot,er ma=or urban areasI and comparative cooking costs in Addis AbabaI consumer pre"erences and e&pectationsI viabilit o" ma=or cooking "uels and stoves and local production o" Dometic CleanCook stove. #ection ( deals ?it, industr anal sis6 competitors in t,e ,ouse,old "uel market and competition "or et,anol "uel and stove+ i.e.+ po?er o" suppliers+ t,reats o" ne? entrants+ po?er o" bu ers+ barriers "or entr as ?ell as degree o" rivalr . #ection ) discusses roles o" actors and ke stake,olders in t,e et,anol cooking "uel and stove market development. #ection 4 discusses a?areness and promotional measures "or et,anol "uel and stove. ;inancing strategies "or t,e stove and t,e "uel including subsidies "rom t,e Government+ opportunities "or CDM "inancing+ and consumer "inancing models are dealt ?it, in #ection *. #ection 2 discusses suppl and distribution c,annels "or t,e "uel and t,e stove. #ection /1 presents t,e "inancial plan6 investment costs and "inancing sources+ revenues and e&penses+ pro=ected "inancial statements+ "inancial returns+ and breakeven and sensitivit anal ses. #ection // discusses t,e economic+ social+ environmental+ and ,ealt, bene"its associated ?it, t,e promotion o" et,anol as ,ouse,old cooking "uel. #ection /' presents proposed implementation arrangement and plan. ;inall + #ection /> summariCes some o" t,e conclusions and recommendations Anne&es include ,ouse,old energ surve results+ and pro=ected "inancial statements. met,odolog and summar o" surve

' 2.1

C564&*7 C54&E8&

Socioeconomic Situation

Bit, a total area o" /./0 million s@uare kilometers and a population o" 4/./ million in '110/+ Et,iopia stands as t,e nint, largest in siCe and t,e second most populous countr in A"rica. $verall population densit is )' persons per s@uare kilometer. Appro&imatel /) percent o" t,e Countr Js population resides in urban areas. #elected demograp,ic and socioeconomic indicators are presented in -able /. Et,iopia is among t,e poorest countries in t,e ?orld. -,is is re"lected in lo? per capita income o" U#G 24 in '11>')+ ver poor social indicators+ poor conditions o" t,e productive sectors+ poorl developed in"rastructure and degraded environment. -,e Countr Ks econom is based predominantl on rain5"ed subsistence agriculture. -,e Gross Domestic Product (GDP) at market prices in '11> ?as U#G).4 billion>. -,e agricultural sector contributed 0> percentI t,e manu"acturing industr + including small5 scale and ,andicra"ts+ /' percent and service sector about and 0( percent to GDP. -,e GovernmentKs #ustainable Development and Povert 8eduction Programme (#DP8P) describe povert in Et,iopia as L?idespread and multi5"acetedM. Malnutrition and under nouris,ment are immense bot, in rural and urban areas. A surve on ,ouse,old income+ consumption and e&penditure indicated t,at in /2223'111 about 0( percent o" t,e population ?as belo? t,e povert line measured in terms o" "ood consumption set at a minimum nutrition re@uirement o" '+'11 calories per adult per da . Bit, a national population o" around 4/ million+ t,ese proportions impl t,at >' million are belo? povert line. -,e ,ouse,old income+ consumption and e&penditure surve o" t,e /2223'111 also "ound t,at )1 percent o" ,ouse,old income ?as spent on "ood+ and t,at t,e average dail intake per adult ?as e@uivalent to /+2(0 calories.

/ ' >

Central #tatistical Agenc + #tatistical Abstract+ '11(. UNDP+ 9uman Development 8eport+ '11(. ibid

/1

-able /. Et,iopia6 #elected !ndicators

!ndicators "9 C564&*7 P*5F!1E Land Area Arable Land !rrigated Land Area covered b "orest %9 S5C!A1 !4D!CA&5*S Population Urban population Population gro?t, rate Pop. living belo? G/ a da Li"e e&pectanc at %irt, Male ;emale !n"ant Mortalit 8ate (!M8) Maternal Mortalit 8ate (MM8) Access to improved ?ater source Urban 8ural Access to improved #anitation Urban 8ural Literac 8ate Urban 8ural Gross primar sc,ool enrolment ;emale net enrolment (F) Primar #econdar ;emale tertiar students (F o" total) 9!<3A!D# Prevalence rate Male ;emale Urban areas 8ural areas <alue Near

/./0 million s@uare km 0(.1 F o" total area >.1 F o" total area 0.' F o" total area 4>.1 millions /(.* F '.2 F */.2 F (> ears (( ears 2).* per /+111 live birt,s /+*11 per /11+111 >'.1 percent */.1 percent /'.1 percent >>.1 percent 4/.1 percent 4.1 percent >2.4 percent )2.2 percent '/.4 percent 0(.* percent 0/ percent // percent / percent 0.0 percent >.* percent (.1 percent /'.) percent '.) percent

(/222311) ('111) ('11() ('11/) ('11>) ('11>) ('11>310) ('111) ('111) ('11131/) /2223'111 ('11131/)

('11>)

-9 MAC*5EC545M!C !4D!CA&5*S GDP at Market Prices )2.' billion E-% ('11>310) GDP at /22) ;actor Cost /*.2 billion E-% ('11>310) Agriculture 0>.'F o" GDP !ndustr //.(F o" GDP #ervices 0(.>F o" GDP Sources; UNDP 9uman Development 8eport+ '11>I -,e /220 G.C. Population and 9ousing Census o" Et,iopiaI Ministr o" ;inance and Economic DevelopmentI and A!D# in Et,iopia+ ;act #,eet '11>+ ;i"t, 8eport.

//

2.2

4ational Policies and Priorities Long-term Development

Overall Strategy

Et,iopia ,as adopted a long5term development strateg o" Agricultural Development5 Led !ndustrialiCation (ADL!). -,e #trateg envisions rapid trans"ormation o" t,e previousl centrall planned econom into a market5based and private sector5driven. More speci"icall + t,e #trateg ,inges on t,e small,older agriculture as t,e primar stimulus to generate emplo ment and income+ reduce povert + promote industrialiCation and ensure a d namic and sel"5sustaining gro?t,. -,e rationale "or t,e ADL! strateg lies on t,e agrarian nature o" t,e econom and "or its ,ig, potential "or gro?t, ?it, abundant unemplo ed "actor endo?ments o" land and labor. Poverty Reduction Povert reduction is at t,e top o" GovernmentKs development agenda. -,e strategies to reduce povert + as outlined in t,e #ustainable Development and Povert 8eduction Programme (#DP8P)+ are ensuring macro5economic stabilit + promoting market liberaliCation+ and increasing social sector spending. #peci"ic strategies include development programmes in agriculture+ education+ ,ealt, and in"rastructure. Stimulating !ro"t# conomic

-,e Government recogniCes t,at substantial and sustained progress in povert alleviation can onl come about ?it, "aster and sustained economic gro?t,. Et,iopiaKs overall economic gro?t, per"ormance ,as been relativel robust during t,e period '11>3105'11031(gro?ing at a rate o" about // percent per ear. 9o?ever+ t,e countr needs "aster and sustained gro?t, in per capita income "or rapid povert reduction and signi"icant improvement in t,e @ualit o" li"e. Private Development Sector

-,e private sector is e&pected to pla a leading role in t,e economic and social development o" t,e Countr . 9o?ever+ t,e Countr is et to attract signi"icant private investment. Private sector investment+ particularl "oreign capital+ is criticall dependent on t,e GovernmentKs abilit to address social and economic in"rastructure constraints+ create a stable macroeconomic environment+ develop e""icient sources o" capital "or investment+ and ,asten t,e pace o" sector re"orms and privatiCation o" public enterprises. $uman Development /'

!n recent ears+ t,ere ,ave been improvements in ,uman development in several areas+ including raising sc,ool enrollment+ improving ,ealt, and sanitation+ ?ater suppl services. Despite t,ese positive developments+ Et,iopiaKs ,uman development inde& continues to be lo?er t,an t,at o" most #ub #a,aran A"rican countries. -,e UNDPKs '11( 9uman Development 8eport o" '11( ranks Et,iopia /41t, out o" /4( countries in

/>

9uman Development !nde& (9D!)0. Progress in ,uman development needs to be accelerated "or rapid and sustained povert reduction. Strengt#ening !overnance !t is no? ?idel recogniCed t,at strengt,ening governance is a pre5re@uisite "or creating an enabling environment "or economic and social development. B,ile progress ,as been made in some areas+ t,e Government realiCes t,at "urt,er improvement is needed in several aspects o" governance. !n recognition o" serious capacit gaps in t,e Countr + t,e Government ,as also issued a National Capacit %uilding Polic and #trateg in /22*. -,e capacit building policies and strategies are streamlined into t,e GovernmentKs overall development strateg o" Agricultural Development5Led !ndustrialiCation (ADL!). -,e Government ,as launc,ed t,e Public #ector Capacit %uilding Programme (P#CAP) to implement t,e Capacit %uilding Policies in t,e public sector. -,e P#CAP covers t,e "ollo?ing si& sub5programmes6 5 5 5 5 5 5 Civil #ervice 8e"orm ProgrammeI District5level DecentraliCed #ervice Deliver I !n"ormation and Communications -ec,nologiesI Dustice # stem 8e"ormI -a& 8e"ormI and Urban Management.

-,e Civil #ervice 8e"orm Programme (C#8P)+ a component o" t,e P#CAP+ aims at creating an Oenabling environment ?,ic, ?ill allo? t,e civil service to "unction e""ectivel and e""icientl .K !t "ocuses on t,e development and implementation o" appropriate legal and regulator "rame?orks+ and institutional and ,uman resources as ?ell as t,e introduction o" improved management s stems and best practices. !ender Development and

Bomen in Et,iopia+ as else?,ere in t,e ?orld+ occup lo? status in t,e societ . Bomen in Et,iopia are marginaliCed economicall + politicall and sociall . -,e "ace multiple "orms o" deprivations. Discrimination against ?omen+ lack o" protection o" basic ,uman rig,ts+ violence+ lack o" access to productive resources+ education and training+ basic ,ealt, services+ and emplo ment are ?idespread.( -,e Constitution accords ?omen e@ual rig,ts. -,e Government ,as endorsed t,e National Polic on Bomen (NPB) in /22>. -,e NPB aims to institutionaliCe t,e political and socio5economic rig,ts o" ?omen b creating appropriate structures in government institutions and address t,e critical areas o" concern6 povert reduction and economic empo?erment o" ?omen and girls+ ,uman rig,ts o" ?omen and violence against ?omen and girls+ provision o" education and training o" ?omen and girls+ institutional mec,anism "or t,e advancement o" ?omen+ empo?ering ?omen in /0

0 ibid ( A National report on Progress made in t,e implementation o" t,e %ei=ing Plat"orm "or Action (%ei=ing P /1)+
Prime MinisterKs $""ice3BomenKs A""airs #ub #ector+ Marc, '110+ pp. /.

/(

decision making+ ?omen and environment and reproductive rig,ts and ,ealt, including 9!<3A!D#.) $%&'(%D S Et,iopia is among t,e ?orst 9!<3A!D# a""ected counties in t,e ?orld. 9!< prevalence in '11> ?as 0.0 percentI /'.) percent in urban areas and '.) percent among t,e rural population.4 At t,e end o" '11/ an estimated './ million people ?ere living ?it, 9!<3A!D#*. -,e ,ig,est 9!< prevalence rates are concentrated among t,e out,. -,e ,ig,5risk ages "or ?omen and men are bet?een /( and '0 ears+ and bet?een '( and >0 ears+ in t,eir respective orders. 8eported A!D# cases s,o? t,at 2/ percent o" in"ections occur among adults bet?een /( and 02 ears. Eig,t to ninet percent o" all 9!< in"ections are caused b ,eterose&ual transmission. -,e t?o most important risk "actors are ,eterose&ual contact+ and ,aving se&uall transmitted in"ections. -,e Government ,as "ormulated policies+ strategies+ programmes and t,e re@uisite institutional structures to prevent and control 9!<3A!D# and to mitigate its devastating impact. A compre,ensive 9!<3A!D# polic ?as approved in /22* ?it, t,e ob=ective o" providing Lan enabling environment "or a multi5sectoral approac,M "or t,e prevention and control o" t,e epidemic (NAC+ '11/)2. !n addition+ t,e Government ,as developed a "ive5 ear #trategic ;rame?ork ('11/5 '11() and a t,ree5 ear Et,iopian Multi5#ectoral A!D# Pro=ect (EM#AP) to implement t,at polic . -,e priorit areas o" intervention include be,avioral c,ange and communication+ voluntar counseling and testing+ providing compre,ensive treatment+ care and support+ mitigating impacts o" 9!<3A!D#+ prevention o" mot,er5to5c,ild transmission+ control o" se&uall transmitted in"ections+ condom promotion and distribution+ blood sa"et + universal precautions and post5e&posure prop, la&is+ legal and ,uman rig,ts+ surveillance and researc,+ capacit building and mainstreaming 9!<3A!D#.

/)

) !bid+ pp. 0 5 /> 4 Ministr o" 9ealt,+ A!D# in Et,iopia+ ;act #,eet '11>+ ;i"t, 8eport.

* UNA!D#+ 8eport on t,e Global 9!<3A!D#+ '11'.

2

9APC$, Strategic )rame"or* +or t#e ,ational Response to $%&'(%DS in t#iopia ('11/5'11().

/4

> 3.1

&:E E4E*;7 SEC&5*

Energ# *esources, Suppl# and Consumption

Et,iopia is ?ell endo?ed ?it, a variet o" energ and ot,er natural resources. 9o?ever+ muc, o" t,e energ resource available ,as et to be e&ploited. -,e rene?able energ resources ?it, potential include biomass+ , dropo?er+ and alternative "orms o" energ 5 solar+ ?ind and geot,ermal energ (-able '). -,ere are also considerable reserves o" coal and natural gas. Bood"uel is t,e predominant energ source in Et,iopia. -,ese resources are being depleting rapidl as a result o" over5e&ploitation and lack o" ade@uate management. !n spite o" its large , dropo?er potential o" >1+111 MB+ Et,iopia ,as developed onl 421MB o" , dropo?er+ ?,ic, supplies belo? / percent o" t,e total energ consumption. !mported petroleum makes up a little more t,an "ive per cent o" t,e total consumption.
-able '. Energ resources and uses E&ploit Perce nt '.) F /.1 F 1.1 F 1.1 F

-otal E&ploitabl Currentl 8esource Unit 8eserves Potentia E&ploited l >43 ea Bood biomass Million tons 4)4 013 ear Crop and animal ?aste Million tons >*3 ea *3Near r>1+11 MB 9 dropo?er 421 1 kB,3m' #olar /+'11 kBpe (A Bind m3s >.(A /11 pumps (.( 41 Geot,ermal MB 4.> 1 Natural gas -C; '.4 N 1.1 A Coal Million tons 41 /0 1.1 ,otes- k?pe H kilo?att peak electric Source- Energ Database Et,iopian 8ural Energ Development and Promotion Center.

Despite t,e presence o" considerable energ resources+ t,e energ sector in t,e Countr is one o" t,e least developed in t,e ?orld. -,is situation is re"lected in lo? per capita energ consumption+ e&cessive dependence on biomass energ and ver lo? e""icienc in its use. -,e most recent National Energ %alance s,eet s,o?s t,at a total o" 4(1PD o" energ ?as consumed in Et,iopia in /222. Ninet 5t?o percent o" t,is energ ?as consumed "or domestic applications and ninet 5si& percent o" t,e suppl came "rom biomass energ sources. -,e distribution o" energ consumption b sector ?as as "ollo?s6 t,e rural ,ouse,old sector accounted "or *0 percent o" t,e total energ consumedI t,e urban ,ouse,old sector "or 4.>FI t,e industrial and services sectors "or >.(F eac,I t,e transport sector "or /.>FI and t,e agriculture sector "or 1.'F o" total energ consumed. !n terms o" gross suppl + biomass is t,e most important energ source in Et,iopia. !t meets 20F o" total energ demand in t,e countr and it is t,e onl source o" cooking "uel "or practicall all rural ,ouse,olds as ?ell as a large section o" t,e urban population. ;uel?ood+ agricultural residue+ dung and c,arcoal ,ave s,ares o" 44.(F+ 4.1F+ *F+ and /.'F "rom total "inal energ consumption. /*

-able >. National Energ #uppl and Consumption+ /22*322 Bood Cr op ;uel Du %ioma 8esid ng -otal ;inal Consumption (*/+> (0+0 ()+> 9ouse,old (0'+/ ('+1 (>+* 0/ /1 2/ Urban >0+2 '+* >+' )2 '0 )> 8ural (14+/ 02+/ (1+) 4' 1 *) 1 '2 1 Agriculture -ransport 1 1 1 !ndustr /4+/ /+0 /+> #ervices ''+//1 /+1>/ /+10) Percent

&era <oules C,arc oal *+4 *+( )( (+* () '+4 12 1 1 / /12 Electrici t 0+* /+* >' /+* >' 1 1 /+* /+/0( 1 . Petroleu -$-A m 01+0 L 40)+' 4+> ))(+4 >' 4/ 0+/ ('+2 )/ 1( >+/ )/'+* 4/ )4/+0 /+0 24 24 ')+4 ')+4 0> 0> 0+( ')+0 >>/ '(+44' ( . /11 .1 Perce nt / *2 .' 4 . *' ./ 1 . > . > >.(

44.( 4 * / . and Promotion . . Source- Et,iopian 8ural Energ Development Center

-otal petroleum product consumption ?as '>PD (1.( million -on) in /222. Petroleum "uels are mainl used in transport (01F)+ industr ('1F)+ and ,ouse,olds (>'F). 8ural ,ouse,olds use kerosene "or lig,ting ?,ile urban ,ouse,olds use kerosene "or cooking. Electricit consumption ?as 0.*PD (/>0( GB,) in /222. Demand ?as e@uall divided bet?een domestic and industrial customers (>*F eac,) and t,e rest ?ent "or t,e service sector.
;uel?ood Crop residue Dung C,arcoal Electricit Petroleum

#ervices

!ndustr

-ransport

Agriculture

Urban ,ouse,olds 5 /1 '1 >1 Peta Doules per ear 01 (1 )1

;igure /. Energ consumption b sector+ Et,iopia+ /22*322.

/2

3.2

&he :ousehold Sector

-,e ,ouse,old sector consumed )))PD (0) million tons in ?ood e@uivalent) in /22*. -,e rural ,ouse,old sub5sector accounted "or 2'F o" total energ demand in t,e sector. End uses "or energ in t,e sector are "or cooking+ baking+ lig,ting+ ?ater ,eating+ and electric appliances. Cooking and baking are t,e most energ intensive end uses+ eac, re@uiring about '.) GD3,ouse,old5 ear. Energ demand in rural ,ouse,olds is mainl "or cooking "uels and "or lig,tingI incomes are generall lo? "or t,em to en=o ot,er end uses (electric appliances+ ?ater ,eating). -,e modern energ in"rastructure does not reac, t,em and t,is limits t,em "rom obtaining modern energ a""ordabl .
-able 0. ;uel use b End use in t,e 9ouse,old #ector nd use Cooking %aking Lig,ting Electric appliances #pace ,eating Bater ,eating Rural %iomass %iomass :erosene3biomass None None3biomass None3biomass .rban %iomass3kerosene3electricit %iomass3electricit Electricit 3kerosene Electricit %iomass %iomass3kerosene3electricit

-,e ,ouse,old sector ,as e&perienced substantial trans"ormation in t,e past t,ree decades. !n bot, urban and rural ,ouse,olds access to "uels ,as c,anged signi"icantl . As a result t,ere ,ave been s,i"ts and reversals in "uel use. !n rural areas t,e s,i"t ,as been mainl negative6 diminis,ing access to ?ood "uels ,as resulted in increasing use o" crop residue and animal dung "or "uel and an increasing commercialiCation o" rural "uel supplies. -,e rural transition is t,e natural result o" declining productivit and accessibilit o" ?ood "uels due to over5e&ploitation o" "orests and Enterpriseations "or "uel+ construction+ and e&pansion o" agricultural lands. !n urban areas t,e s,i"t ,as been to?ards cleaner and e""icient "uels and devices. ;or cooking+ ,ouse,olds ,ave moved "rom biomass (especiall "uel?ood) to kerosene and to?ards t,e e""icient La*ec# c,arcoal stove. ;or in/era baking t,e ,ave moved "rom biomass to electricit and t,e e""icient 0irte biomass stove. -,e urban ,ouse,old energ transition is mainl t,e result o" government5led intervention in several "ronts6 pricing polic "or kerosene+ tec,nolog development and pricing polic "or electric mitads and e""icient c,arcoal stoves. -,e urban ,ouse,old sector is+ in "act+ a ver success"ul e&ample o" government led multi5"aceted intervention and cooperation6 Q -,e e""icient c,arcoal stove development and dissemination program is an e&ample ?,ere t,e government developed t,e stove t,en disseminated t,e stove t,roug, t,e private sector. -,e impact ,as been immediate and large scale6 it is estimated t,at more t,an a million La*ec# stoves ,ave been disseminated since /220. -,e kerosene "uel introduction ?as carried out in t,e earl eig,ties. #ince t,en it ,as become t,e most important cooking "uel in t,e ma=or urban centers o" t,e countr . -,e government ,as supported mass uptake o" t,e "uel t,roug, price

subsidies.

-,e electric in/era mitad ?as also introduced in t,e earl eig,ties as part o" t,e government strateg "or "ull utiliCation o" t,e countr Ks po?er generation capacit . A"ter t,e completion o" t,e ;inc,aa po?er generation station+ t,ere ?as considerable capacit surplus on t,e grid and t,e government set tari"" incentives "or industr and encouraged t,e development o" electric bakers "or ,ouse,olds. e# !ssues in the :ousehold Sector

3.3

-,e main issues in t,e sector ma be broadl divided into t?o. -,e "irst is t,e ?idening gap bet?een sustainable suppl and demand "or biomass and t,e second is t,e adverse environmental impact o" ,ouse,old energ use at t,e indoor+ local and global scale. Bood "uels covered *'F o" ,ouse,old energ re@uirements in /222 ())F urban+ *>F rural). -,e s,are o" ?ood "uels in t,e total energ balance in t,e sector ,ad been even ,ig,er in earlier decades. !t is estimated t,at ever person in t,e countr consumes about ,al" a ton o" ?ood per ear. -,is level o" demand "rom a "ast gro?ing population is met "rom a resource stock t,at is diminis,ing in bot, siCe and productivit . Naturall + t,is ,as resulted in declining access to ?ood "uels. !n rural areas t,is is e&,ibited in longer collection distances and commercialiCation o" "uel supplies and in urban areas in ,ig,er prices. ;uel?ood and c,arcoal prices ,ave risen b more t,an )11 percent in t,e past t,ree decades. -,is is an average annual gro?t, rate o" '1F. Prices "or ot,er cooking "uels ,ave also risen considerabl in t,e past t?o decades. :erosene prices ,ave risen "rom E-% 1.)( per liter in /221 to E-% 0./' per liter toda (an increase o" )>0F+ ;igure '). -,e average domestic tari"" ,as increased "rom E-% 1./( per kB, in /221 to E-% 1.0 per kB, toda (an increase o" '))F).

4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96

Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 -

;igure '. -rends in :erosene Prices in Addis Ababa+ E-%3Liter

More t,an 4( percent o" ,ouse,olds in urban areas ,ave annual income o" less t,an E-% )+111. -,e average ,ouse,old spends /1F o" its income on energ . ;or urban ,ouse,olds t,e average e&penditure is about )F o" total income. 9ouse,olds in t,e lo?est segment spend as muc, as /) percent o" t,eir income on energ and t,ose at t,e ,ig,est segment about 0 percent (;igure >). -,e proportion o" income spent on energ ma ,ave increased even "urt,er (t,an t,at s,o?n in t,e "igure) because prices ,ave increased signi"icantl since '111 ?,ereas incomes ,ave not. Energ e&penditure is eroding t,e incomes o" poor and mid income ,ouse,olds in urban areas. ;or ver lo?5 income ,ouse,olds it ma even compromise "ood securit .
'1 distribution /* /) /0 Percent /' /1 * ) 0 ' 1 R )11 )115222 /1115 />22 /011 5 /222 '111 5 '(22 ')11 5 >>22 >011 5 0/22 0'11 5 (>22 (011 5 )(22 ))11 5 *222 21115 /'(2 2 /')11 /)'11 '1111 P 5 5 /)/22 /2222 Energ E&penditure 9ouse,old

!ncome Group (E-%3Near)

;igure >. Energ e&penditure+ '111 (C#A

-9.

&he 6rban :ousehold Fuel Market

-,e urban domestic energ market is relativel ,uge. -,e estimated annual retail market value is close to E-% > billion. -,e main urban centers in t,e countr constitute about ,al" o" t,e total urban population and ?ould account "or more t,an ,al" o" t,e total "uel consumed in urban areas because o" ,ig,er incomes and better "uel availabilit . -,ere"ore it ?ould be reasonable to assume t,at t?o5t,irds o" t,e market ?ould be in t,e ma=or cities/1?it, a total retail market o" E-% ' %illion.
-able (. Estimates o" t,e 9ouse,old ;uel Market
;uel Unit Urban domestic consumption (Million units) 8etail price (Addis Ababa+ '11)) 8etail value End uses

'0

/22 '11) E-%3un Mill E-% 2// it 0./ :erosene Liter /(2 )(( Cooking C,arcoal kg 4 '1 '4( ' '.( )** Cooking ' 1 Bood kg '0/ >+'*' 1.> /+/02 %aking+ '(1 ( cooking Electricit kB, )2> 1.( >*/ Lig,ting+ baking+ 2 ( ot,er LPG kg 1.0 1.)1 *.' ( Cooking 0 ( -otal '+*44 Source- Urban domestic consumption "rom t,e National Energ %alance "or /222I consumption is pro=ected to '11) using urban population gro?t, rate o" 0.(F.
/1

Addis Ababa+ A?asa+ %a,ir Dar+ Debre Seit+ Dessie+ Dire Da?a+ Gondar+ 9arar+ Dimma+ Mekele+ and NaCret (t,ese // cities ,ad a total o" 0./ million people in '11'+ C#A).

'(

0 0./

F6E1 A4D S&52E MA* E&

:ousehold Cooking Fuels and Stoves 6se in Addis Ababa

-,e most ?idel used "uel cooking in Addis Ababa is kerosene (0'.'F) "ollo?ed b "uel?ood ('2.0F). Electricit + LPG+ c,arcoal and residues are used b a muc, smaller section o" cit ,ouse,olds. -,e primar cooking stove used in Addis Ababa is t,e single burner kerosene ?ick stove. -,e sample surve "or t,is business plan indicates t,e single burner ?ick stove is used in 2* percent o" Addis Ababa ,ouse,olds. ;or t,e second most important "uel in t,e cit + "uel?ood+ cooking is done over an open "ire. C,arcoal cooking is made about e@uall ?it, t,e La*ec# and t,e metal stoves. LPG is used b t,e ,ig,est income group in t,e cit and t,is group usuall o?ns multiple burner LPG stoves. ;or electricit t,e most ?idel used stove is a single ,ot plate.
-able ). Distribution o" ,ouse,olds b "uel and stove used "or cooking in Addis Ababa '111 '110 #toves used
;uel Collected "uel?ood Purc,ased "uel?ood C,arcoal :erosene LPG Electricit 8esidue (crop3dung) $t,er -otal #tove use

c,an 9 F 9 F Primar #econda 9s 9s r //+)* ' /2+( 0 $pen "ire Noges ) (* c,ange 0>+/ /. /'0+1 '. $pen "ire No 0> 1. '' (. c,ange /4+/ 0 ''+( 0 Metal Lakec, '0 42 ')>+> ). '1(+* 0. Bick 1) ). */ '. /1+( ' >/+2 ) Multiple 40 . 24 . burner ,ot /0+( > >'+2 ) #ingle /) . (/ . plate '(+> ) 01+0 * $pen "ire No >0 . 14 . c,ange /'+( > /1+) ' 12 . )> . >2*+' 0**+1 1' is "or t,e primar "uel (* used. Most ,ouse,olds use more t,an one "uel and stove. Note6 -,e number o" users Source- 1S(2 3el+are monitoring surveys2 2000 and 20045

Cooking "uels use in Addis Ababa c,anges @uite "re@uentl due to c,anges in prices and availabilit o" "uels. A signi"icant c,ange ,as taken place bet?een '111 and '110 ?,ere t,e number o" ,ouse,olds ?,o reported kerosene as t,eir primar cooking "uel ,as declined in bot, relative and absolute terms. -,e drop in t,e proportion o" kerosene users ()) to 0' percent) implies t,at //)+111 ,ouse,olds t,at ?ould ,ave used kerosene as t,eir primar cooking "uel ,ave s?itc,ed to ot,er "uels b '110. -,e reduction in kerosene users is accompanied b an increase in t,e number o" ,ouse,olds cooking ?it, "uel?ood. -,is suggests a large proportion o" kerosene users ma ,ave s,i"ted to "uel?ood or moved "rom using mostl kerosene to using mostl "uel?ood. #uc, a s,i"t to?ards a less convenient and e""icient "uel suggests price ma ,ave been t,e main driver. Alt,oug, t,e number o" ,ouse,olds ?,o report kerosene as t,eir primar cooking "uel ,as dropped signi"icantl + t,e volume o" kerosene used ,as in "act sta ed level at about *1+111 tons per ear. -,e conclusion is t,at t,e transition is in t,e level o" use o" t,e "uels rat,er t,an complete abandonment o" one "uel in "avor o" t,e ot,er. Modern "uels are generall used b mid and ,ig, income groups in urban areas. As t,e "igure belo? s,o?s kerosene is used across a ?ide range o" income classes "rom t,e lo?est to t,e ,ig,est. C,arcoal is mostl used b t,e mid to upper5middle classes+ electricit b t,e middle to upper classes+ and LPG mainl b t,e ,ig,est income

classes.

90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 600 999 1399 1999 2599 3399 4199 5399 6599 8999 12599 16199 19999 "19999 -

Elect ity LP Kerosene C !rco!l

;igure 0. Distribution o" urban ,ouse,olds b "uel "or cooking A /22) #ource6 C#A+ 8eport on t,e /22) ?el"are monitoring surve + bulletin '1(+ pp. >'(5>>1

-,ere is no recent data "or t,e total volume o" domestic cooking "uel consumed in Addis Ababa. -,e volume o" energ use is estimated indirectl "rom use"ul energ consumption per ,ouse,old (0GD3,ouse,old3 ear) and t,e distribution o" users "or t,e various "uels. -,e result s,o?s t,at in Addis Ababa nearl 1.0 million tons o" "uel?ood and ()+111m> o" kerosene is annuall consumed "or cooking.
-able 4. - pes and @uantities o" cooking "uel used in Addis Ababa+ '110
;uel Collected "uel?ood Purc,ased "uel?ood C,arcoal :erosene LPG Electricit 8esidue (crop3dung) #tandard Unit (#U) -on -on -on m -on MB , -on
>

Energ content GD3uni t /0. /0. ( ( '2. 1 >(. > 0(. (>. ) /0. (

#tove 9ouse,olds e""icienc Numb F F er /2+(( 0.1 /1 /'0+1' * '(.0 F /1 '''+(4 F 0.) 0' 2 F '1(+** 0'.' 0' />/+22 F ).) (( 4 F >'+2( ).4 )1 / F 01+01 *.> /1 4 F

;inal energ per ,ouse,old (# G U) DT '.4 0 ) '.4 1 0 ) 1 1.> 2 > . 1.' 2 4 . 1./ 4 ) . /.* ) ( .0 '.4 ) 1

-otal energ (#U ) D (>+2( 4 >0'+/> > 0+2 * 1 4+0/ )/ ' ( / ((+(0 /+2 )(+// )/ ' 0 > )/+1' ' 1 ' ///+0) /+) * /)

-otal 0**+1( 2+2 * in"ormation onl on t,e primar "uel used b ,ouse,olds. ** Note6 -,e user distribution data (C#A) provides Most ,ouse,olds use several "uels and stoves at t,e same time. ;or ease o" anal sis t,e C#A data is used assuming e&clusive use o" one "uel b eac, ,ouse,old. Source- O"n estimate based on 1S( distribution data on coo*ing +uel use in (ddis (baba5

0.'

Domestic Cooking Fuel 6se in 5ther 6rban Areas

As one moves "rom Addis Ababa to t,e ot,er urban centers access to modern "uels declines ?,ereas access to traditional "uels increases. -,e result is "e?er ,ouse,olds use modern energ in t,e ot,er urban centers compared to Addis Ababa. At t,e national level kerosene is used as t,e primar cooking "uel b onl />.*F o" urban ,ouse,olds compared to 0'.'F in Addis Ababa. #imilarl onl '.>)F and '.)2F o" ,ouse,olds reported LPG and electricit as t,eir primar cooking "uel at t,e national urban level compared to ).()F and ).4(F "or Addis Ababa. #imilar trends are visible regarding c,anges in "uel use in Addis Ababa and t,e ot,er urban centers. !n t,e case o" kerosene+ t,e number o" users ,as dropped substantiall in bot, Addis Ababa and t,e ot,er to?ns bet?een '111 and '110. -,e s,are o" kerosene ,as declined "rom ))F to 0'F "or Addis Ababa and "rom ''F to /0F at t,e national urban level. As in Addis Ababa t,e reduction o" kerosene use is accompanied b an increase o" "uel?ood use.
-able *. Distribution o" ,ouse,olds b "uel used "or cooking in urban areas+ /22)5'110 ;uel /22) /22* '111 Collected "ire ?ood /4.' />.* /).) Purc,ased "ire ?ood 00.( 02./ 0/.> C,arcoal 0.> (.1 *.> Leaves3dung cakes+ ot,ers 4.) ( ).> . :erosene /*.2 /4.' '/.( LPG /.1 ' /.0 . Electricit '.4 >.* '.' $t,ers >.* >.' '.0 #ource6 C#A+ Bel"are Monitoring #urve + '110 '1 / 0 ). 2. 4.4 (.> / >. '.4 '.0 1.*

0.>

Comparative Cooking Costs in Addis Ababa

Energ use b ,ouse,olds is "or in/era baking and non5in/era baking (making "at+ tea+ co""ee+ and ot,er t pe o" cooking). -,e comparative costs o" cooking are based on use"ul energ demand "or non5in/era cooking. -,e most ?idel used cooking "uel in Addis Ababa is kerosene. :erosene ?as t,e c,eapest cooking "uel in t,e cit be"ore '110 ?,en its price ?as belo? E-%>.13liter. -,e cost advantage ,as+ ,o?ever+ diminis,ed over t,e ears and at current prices+ kerosene cooking is no longer t,e c,eapest. At present (November '11)) "uel?ood cooking is t,e c,eapest "ollo?ed b cooking ?it, c,arcoal

)uel 8etail price o" "uel Energ content o" "uel E""icienc o" stove Li"e Price Use"ul energ cost Energ #tove Energ E&penditure 8ank .nit E-%3(kg+ L+ MD3(kg+ kB,) L+ kB,) F Nears E-% E-%3GD E-%3GD E-%3GD E-%3Mont,

Bood

C,arcoa l k kg 1.g '. / '2 > (1 0. .1 / 0' ( F 0 '( / ' ) / / ' ) 1 * ( 4/ /0 '

:erosene Lit er 0./ >(. ' > 0' F ( 0 ( %+ %' // > 2 40 Lit er (.4 >(. 1 > 0' F ( 0 ( -+ -/ ./ > /> ' 4

LP G k g *.' 0(. ( ( (( F ( /( 1 >4 ' >> 10 ' /' 0 )

Elect 5 kB , 1.( (>. ) )1 F > * 1 '* 2 '( (> 0 2 )>

Et,a nol Li te> '/. ( ( /1 > ( ' ) )> / 1 (

-able 2. Cooking costs in Addis AbabaA comparison on a use"ul energ basis (December '11) prices)
Stove $pen "ire Lakec, Bick Bick ricit

Notes6 Discount rate o" /'.(F3 ear is used to annualiCe stove costsI t,e et,anol single burner stove import price is U#G(1 (Makobu)I "or et,anol t,e e&port price (U#G1.')3liter) is used. -,e price build5up "or et,anol "uel is discussed in #ection (. Sources- Stove e++iciency data is +rom 3orld 6an*2 t#iopia nergy (ssessment2 7889; #eating value and e++iciency o+ stove +or et#anol is ta*en +rom t#e !aia et#anol +uel and stove assessment :200;<5

-,e "indings "rom t,e above anal sis are t,e "ollo?ing6 a. Among modern cooking "uels+ electricit and kerosene are t,e c,eapest cooking alternatives. 9o?ever+ kerosene ?ill be t,e most e&pensive cooking "uel i" its subsid + ?,ic, amounts to E-%/.)3liter//+ is removed. !n t,e absence o" t,e subsid kerosene ?ill cost /15>1F more t,an LPG and electricit . b. Et,anol ,as t,e least energ cost among all t,e modern cooking alternatives (E-%')13GD). %ut t,e stove adds substantiall to t,e total cooking cost (/( to '( percent) compared to t,e ot,er stoves ?,ere t,e stoves contribute less t,an /1 percent to total cost. -,is "act leads to t,e need "or price reduction "or t,e et,anol stove as ?ell as "inancing mec,anisms to cover part o" t,e cost o" t,e stove. c. Among t,e modern "uels et,anol ?ill re@uire t,e least "oreign e&c,ange per unit o" use"ul energ . ;or et,anol t,e "oreign e&c,ange cost is about E-% /013GD (stove and "uel) compared to E-%>(13GD "or kerosene. ;oreign e&c,ange re@uirements can be "urt,er reduced t,roug, local production o" t,e CC stove. d. ;uel?ood is t,e c,eapest cooking energ source (E-% (0 per mont,) "ollo?ed b c,arcoal (E-%4/)+ electricit (E-% 2)) and kerosene (E-% 24). -,e mont,l

,ouse,old e&penditure "or cooking ?it, et,anol and LPG ?ould be E-% /1* and E-% /'0+ respectivel .

//

-,e import cost "or kerosene is E-% (.'>3liter (Mid '11)). -ransport costs+ ?,olesale and retail margins add E-% 1.043liter.

/)1 /01 Mont,l Energ E&penditure5 E-% /'1 /11 *1 (0 24 2)

/>' /'0

/1*

4/

)1 01 '1 1

;ire?ood ?it,

C,arcoal

:erosene subsid

:erosene ?it,out subsid

LPG

Electricit

Et,anol

;igure (. Comparative Cooking Costs in Addis Ababa+ E-% per ,ouse,old per mont, 5 '11)

8elieving ta&ation and promotional pricing ,ave ,elped lo?er t,e retail price o" kerosene. B,ere t,e cooking "uel needs o" an average ,ouse,old are met b kerosene ?it,out subsid + t,is ?ould result in mont,l e&penditure o" '' percent more compared ?it, et,anol. -,us+ on t,e basis o" "uel costs alone+ t,ere ?ould appear to be "inancial cost advantage to stimulating et,anol as a substitute "or kerosene. :erosene at t,e moment is not sub=ected to an "orm o" regular ta&ation and en=o s a promotional price reduction o" E-% /.) per liter or about >1 percent "rom t,e stabiliCation "und (-able /1). -,e rationales "or t,e kerosene subsid ,ave been (i) to prevent t,e "urt,er d?indling o" biomass resources and t,e increased diversion o" agricultural residues (dung and crop residue) "or "uel instead o" as soil nutrientsI and (ii) to protect t,e lo? income groups. :erosene is used b t,e urban poor "or cooking and lig,ting and b t,e rural poor+ mainl "or lig,ting.

-able /1. Petroleum ;uels retail price build5up+ Addis Ababa (E""ective August+ '11))
Description E&5 #udan E&5 D=iboutiU :erosene AD$ Lig,t "uel oil 9eav "uel oil Det "uel

/ ' > 0 ( ) 4 * 2 /1

// /' />
/0

E&5D=ibouti price D=ibouti5De?ele3Gala"i transport -otal border price /P' EPE margin Product cost >P0 E&cise ta& >1F o" (/P') <A/(F o" (/P'P)) 8oad "und Municipalit ta& #tabiliCation "und -otal dut ) to /1

0*0.* (/2.4 ('>. 2'2.) 1 4.) ')4. 1 ) )) (/0.0 ('4.> (>1. 2 (.1 ) (.1 2'>. 1 1 11 (/2.0 (>'.> (>>. 2 ) 2' 5 /(0.> /(*.' ( / /11.> /1'.* 5 > 2.( 0 2.( 5 1 1 '.1 '.1 5 1 1 /(.( ('(.0 (/(4.4 ' )) /) '*/.4 '04.1 (/(4.4 *1/./ 442.0 >4). !nvoice price ( P // 2 ( '/ DistributorsJ 0(.0 '0.' 0>. margin / / 0( A.A. 8etail /' P /> */4.1 42).1 0/'. price 1 be trans"erred 1 to t,e road 11 "und All value added and municipalit ta&es ?ill

(14. (>4. )) (/(. /20. 20 ('1. /> 5 44. '* *. 11 '. 11 (22.2 1) (/'.) (14. (/ 00. /( (00. 11

>/2. 2'*. >( >'*. '4*. 11 >>). '4 5 02. '0 5 5 (1./ () 02. >*(. >) 0/. 22 0/2. 11

>/>. 12*. >( >'/. 00*. 11 >'2. 00 5 0*. '/ 5 5 (1.> 0) 04. >44. >/ 0'. 10 0//. 11

('>. ()4. )) (>/. ''4. 11 (>*. '' 5 5 5 5 (1.1 /) (1.1 (>*. '/ 02. 0( (*1. 11

DistributorsJ margins include transport costs and retailersJ margins -,e D=ibouti5De?ele3Gala"i and Algail 5Metema transport costs are considered onl "or ta& purposes Source- Et,iopian Petroleum Enterprise.

-,e trend is "or increasing cooking costs "or bot, traditional and modern "uels. ;or most "uels prices ,ave increased appreciabl in t,e past "ive ears. -,e kerosene price ,as doubled ("rom E-%'.13liter to E-%0./'3liter bet?een '11/ and '11)+ electricit prices ,ave gone up b '1 percent+ ?ood and c,arcoal prices ,ave also increased. -,e recent "uel price rises ,ave resulted in ver large increases in ,ouse,oldsK cooking "uel budgets. ;or ,ouse,olds using kerosene as t,eir onl cooking "uel t,e doubling o" its price ,as doubled t,eir annual cooking "uel budget "rom E-% )11 to E-% /'11. ;urt,er increase o" t,e kerosene price to its "ull delivered (economic) cost ?ill increase t,e e&penditure o" t,e average ,ouse,old to E-% /)11. -,e conclusion is clear A suc, levels o" price rises erode ,ouse,oldsK incomes signi"icantl . ;or t,is reason c,eaper and sustainable cooking "uel ?ill ,ave a ver ,ig, level o" acceptance b t,e population. 0.0
Consumer Preferences and E$pectations

9ouse,oldKs decision to use a particular "uel and stove "or cooking is mainl based on t,ree criteria. -,ese are+ in order o" priorit + t,e "uel cost+ t,e stove cost+ and sa"et . 8esults obtained "rom t,e ,ouse,old sample surve conducted "or t,is %usiness Plan indicates t,at "or 42 percent o" ,ouse,olds t,e "uel price is t,e most important determinant "or cooking "uel c,oice "ollo?ed b stove cost (*F) and sa"et (*F). -,e more ?idel used "uels in t,e cit (kerosene and biomass) score medium to ,ig, on t,e "irst t?o.

-op ranking o" ,ouse,olds

-able //. ;uel and stove c,aracteristics soug,t b ,ouse,olds

:erosene ?it, ?ick stove C,arcoal ?it, Lakec,3metal Bood on open "ire Electricit Et,anol on CC stove

;uel and stove properties soug,t in a ne? domestic cooking "uel and stove6
LPG

22F o" ,ouse,olds are interested in a ne? cooking "uel C,eap "uel 42F M M M L C,eap stove *F 9 9 9 L #a"et *F L M L N Dependable availabilit 'F 9 9 M DL Cleanness and convenience 'F L L L N D #peed o" cooking /F 9 L 9 N D Note6 9H9ig,+ MHMedium+ LHLo?+ NDHNot DeterminedI "or LPG and electricit t,e sample too "e? to dra? signi"icant conclusions. Source- $ouse#old energy survey +or t#e et#anol 6usiness Plan :,ov 2009<5

N N D D N D N D N D N D returns

9 L 9 M 9 9 are

Et,anol is e&pected to score ,ig, on "uel cost and sa"et criteria. -,e CC stove ?ill be t,e most e&pensive stove among t,e cooking alternatives and t,is ?ill be a barrier to lo? and mid income ,ouse,olds. Again+ it is evident t,at ?it, t,e local production o" t,e stove+ et,anol ,as t,e potential to be a ma=or cooking "uel in Addis Ababa and ot,er cities. 0.(
2iabilit# of Ma=or Cooking Fuels and Stoves

=erosen e :erosene ,as been t,e most ?idel used "uel in t,e cit "or t,e past t?o decades. A combination o" lo? "uel and stove prices ,as ,elped it become t,e least cost cooking "uel "or ,ouse,olds in Addis Ababa. :erosene prices ,ave ,o?ever gone up in t,e last "ive ears and t,is ,as resulted in some users moving to ot,er "uels. ;urt,er price rises "or kerosene are e&pected+ as it ?ill be di""icult "or t,e government to maintain past levels o" subsidies as demand increases ("or cooking in urban areas and "or lig,ting in rural areas). 8emoval o" t,e subsid ?ill put kerosene among t,e more e&pensive cooking "uels in t,e cit . Despite t,e price rises kerosene demand is e&pected to gro? (but its market s,are ma decline) due to rapid population gro?t,+ improving access to supplies and e""icient and lo? cost stoves. Q -,e Addis Ababa population is gro?ing at (F per ear. -,is ?ill increase total

cooking "uel re@uirements. :erosene is easier to adopt b ne? consumers because o" its lo? stove prices. Q -,e petroleum distribution in"rastructure is e&panding and t,is ?ill increase access to kerosene supplies. $n t,e end use side+ kerosene pressure stoves+ ?,ic, are '(F more e""icient t,an kerosene ?ick stoves+ are no? available in t,e market and t,eir ?ide adoption ma also drive demand. (9o?ever+ it seems t,at t,eir adoption is retarded as a result o" concerns about t,eir sa"et .)

9ouse,oldsK c,oice to use kerosene is driven mainl b its lo? "uel and stove costs and its ?ide availabilit . 9o?ever+ ,ouse,olds ,ave some reservations about kerosene cooking mainl on its ,andling and sa"et . Bit, increasing incomes ,ouse,olds ?ill be ?illing to move to cleaner and sa"er "uels and stoves provided t,e are "inanciall competitive. 6iomass +uels -,e number o" ,ouse,olds cooking on biomass tripled in t,e past "ive ears a"ter ears o" gradual decline. 9ig,er kerosene prices are t,e main reason be,ind t,is s,i"t back to biomass. -,e s?itc, is mainl to "uel?ood as t,e cost reductions are muc, more substantial ?it, "uel?ood t,an c,arcoal. ;or "uel?ood+ its continued viabilit as a ma=or cooking "uel ?ill depend on its suppl (availabilit and price). ;or c,arcoal+ o?ners,ip o" t,e e""icient La*ec# stove ,as no? reac,ed saturation. $n t,e suppl side+ t,ere is some improvement in c,arcoal suppl as ?ood species ot,er t,an acacia are no? ?idel used "or c,arcoal production. !n particular+ t,e Prosopis s,rub is becoming an important "eedstock "or c,arcoal production in t,e A"ar region. -,ese t?o "actors ?ill continue to make c,arcoal a lo?5 cost cooking "uel "or ,ouse,olds. %iomass "uel in"lo? into Addis Ababa is mainl "rom t,e $romi a ("or "uel?ood and c,arcoal) and A"ar ("or c,arcoal) regions. -,e 8egional Governments in t,ese regions are implementing di""erent policies ?it, regard to t,e production and distribution o" biomass "uels. -,e $romi a 8egional #tate is en"orcing a ban on illegal production and distribution o" c,arcoal t,roug, direct control (c,eckpoints) ?,ile t,e A"ar 8egional #tate is promoting legal organiCed c,arcoal production "rom t,e Prosopis Enterprise. $n balance+ t,e suppl o" c,arcoal is e&pected to increase because o" t,e limited e""ect o" t,e ban (?,ic, is limited to ve,icle tra""ic on t,e main roads onl ) and because o" increased legal supplies "rom A"ar and $romi a. -,e structure o" urban ,ousing is c,anging ?it, appreciable gro?t, in t,e s,are o" lo?5 cost condominium ,ousing in Addis Ababa. -,is ?ill drive a move "rom biomass to modern "uels "or t,ose moving into t,e apartments. LP ! LPG is consumed b ,ig,5income ,ouse,olds in t,e cities o" Addis Ababa+ Dire Da?a and 9arar. LPG consumption peaked in /2**3*2 at )4/0 tons (('4( tons in Addis Ababa) t,en dropped rapidl reac,ing a lo? o" /01' tons in '11/31' ()4> tons in Addis Ababa). -,e rapid decline ?as t,e result o" suppl constraints and ,ig,er prices. -,e number o" consumers and consumption is graduall rising since '11' due to better availabilit and price reductions. !n '110 t,ere ?ere more ,ouse,olds using LPG as t,eir primar cooking "uel t,an c,arcoal (>'+111 ,ouse,olds "or LPG compared to ''+(11 ,ouse,olds "or c,arcoal). -,e LPG market ?as deregulated in '11'. LPG is no? imported and distributed b several companies ?,ereas in t,e past LPG ?as imported b t,e Et,iopian Petroleum

Enterprise and distributed e&clusivel t,roug, t,e t,en e&isted "our oil companies

(-otal+ #,ell+ Mobil and Agip). #ince t,e deregulation supplies ,ave improved+ and LPG bottle and "uel prices ,ave dropped ("rom E-%/'3kg to E-%*.'(3kg). -,e deregulation ,as ,elped reverse t,e decline in LPG use but t,e recover is attributable to regaining o" old customers rat,er t,an addition o" ne? ones. Despite its improved availabilit and lo?er prices LPG still remains t,e most e&pensive cooking "uel in Addis Ababa (E-% >4'3GD use"ul). %ot, "uel and bottle3stove costs are ,ig,. ;urt,er price reductions are not "oreseen "or eit,er t,e "uel or t,e stove in t,e near "uture. lectricit y Electricit is t,e c,eapest modern cooking alternative "or ,ouse,olds in Addis Ababa (E-%'*23GD use"ul "or electricit compared to E-% '2/3GD use"ul "or kerosene in November '11)). ;or lo?5income ,ouse,olds it ?ill be even c,eaper since lo? tari""s appl at lo?er consumption levels. -,e electricit tari"" ?as revised in Dune '11) ?it, an average tari"" increment o" about '1 percent "or domestic customers. #everal tari"" revisions made in t,e past ten ears ,ave recommended substantial tari"" rises+ a minimum o" (1 percent "or domestic customers. ;urt,er tari"" increases are almost certain (to "inance t,e ambitious s stem e&pansion plan (doubling o" installed capacit in "ive ears) and because it ?ill be impossible to continue subsidies ?it, an e&tensive customer base ((1F access in '1/1). An "urt,er tari"" rises "or electricit ?ill eliminate its small cost advantage over kerosene and et,anol. t#ano l -,ere are t,ree government o?ned sugar "actories in Et,iopia ?it, total annual output o" /.( million tons o" sugar. $nl one sugar "actor + ;inc,aa+ is producing et,anol at present ?it, annual output o" * million liters. -,e government plans to e&pand capacit o" e&isting sugar "actories as ?ell as develop ne? "actories at -enda,o and :esem. !mplementation o" t,e plans is under?a ?it, "actor site preparation and building o" t,e "actories. -,e plan is to produce nearl />1 million liters o" et,anol b '1/'. !n response to t,e recent oil price rise+ t,e Government ,as initiated a strateg "or t,e development o" indigenous "uel production to substitute oil products. $ne o" t,e e&pected actions is t,e e&pansion o" et,anol production and use in t,e countr . Et,anol production is t,ere"ore e&pected to increase several "old "rom production "rom e&isting "actories and "rom planned additions. !n t,e ne&t "e? ears national demand "or et,anol ?ill mainl be "rom t,ree sectors. >#e +irst is t#at et#anol "ill be promoted as a gasoline blend +or t#e transport sector5 Depending on governmentKs strateg on levels o" t,e blend+ 4 to /( million liters o" et,anol ?ill be re@uired as gasoline blend ?it, t,e demand gro?ing at about 4 percent per ear./'

/'

-otal current consumption o" gasoline is about '11 million liters ?it, Addis Ababa and t,e surrounding areas accounting "or about t?o5t,irds o" t,e demand. Et,anol re@uired "or blending ?ill be about 4 million liters (i" blending level is E() or /( million liters (i" E/1).

>#e second demand +or et#anol is as biodiesel processing +eedstoc* in t#e oil esteri+ication process5 !n t,e governmentKs ot,er bio5"uel development strateg + t,at "or biodiesel+ et,anol ?ill be re@uired as production input "or t,e oil to biodiesel processing tec,nolog (esteri"ication). -,e esteri"ication process re@uires about /1 percent et,anol b volume "or biodiesel production. -,ere"ore+ depending on demand "or diesel "uel and t,e prescribed level o" blending o" biodiesel ?it, petrol diesel et,anol demand ?ill be about /1F o" t,e blend volume/>. -,e total annual demand "or et,anol as esteri"ication "eedstock ?ill be about /.) million liters gro?ing 4 percent per ear. >#e t#ird demand +or et#anol is +or domestic and commercial cooking5 -,e demand "or t,is service is mainl in t,e cities ?,ere most cooking "uel supplies are commercial and ?,ere biomass "uels are relativel more e&pensive. Bit, t,e envisioned e&pansion+ output ?ill surpass local demand "rom t,e transport sector (/'* million liters output in '1/' ?it, transport demand onl >1 million liters). -,e domestic and commercial cooking market ?ill be t,e onl local outlet "or et,anol. !" t,e e&pansion plan is realiCed about /11 million liters o" et,anol ?ill be available "or t,e cooking market and "or e&ports in '1/'. -,is volume o" suppl ?ill meet cooking re@uirements o" /*1 t,ousand ,ouse,olds. -,e tec,nical potential "or et,anol is t,ere"ore enormous.

/>

-,e current diesel consumption is about 1.* billion liters per ear. A %' bio5diesel blend ?ill re@uire /) million liters o" bio5diesel+ ?,ic, ?ill re@uire /.) million liters o" et,anol as esteri"ication "eedstock.

-able /'. Potential et,anol production and demand+ '1145'1/' (O111 liters)
Et,anol production ;inc,aa Bon=i3#,oa Mete,ara -enda,o &otal Gasoline demand 5 total Gasoline demand 5 Addis Ababa Ethanol as gasoline blend ?E)@E">A Diesel demand %iodiesel re@uired "or blend (%'3%() Ethanol as Biodiesel feedstock E&port (committed) Distilleries &otal Ethanol Demand Ethanol Available for Cooking Market potential ?:ouseholdsA 9ouse,olds in Addis Ababa Market potential in Addis Ababa (F) Notes6 5ther usesB '11)34 *+111 '1143* *+111 /'+'0( %>,%.) '/2+'/ / /0)+/0 1 ',->' /+1(2+*'1 /+/>0+114 > '11*3 2 /4+11 /4+*1 2 '>+'2 ) )/,">) '>1+/4 / /(>+00 4"),-.) ''+)*1 %,%0/ '1123/ 1/*+)1 '1+*> ) /4+)4 ) 04+(1 * ">.,0%> '0/+)* 1 /)/+/' 1%.,"0/ /+'/>+>* * '0+') *%,.%' /+(1 1 /+(1 1 %/,>+ ) '0,)% ) ")+,.% / )(>+2) 4 '0.0 F '1/13/ / /*+)1 '(+/( > '/+>1 / )0+1( / "%+,">0 '(>+4) 0 /)2+/4 )%),-'0 /+'2*+>' ( '(+2) 4%,)+' '+11 1 '+11 1 %+,+' ++,"%>0,)% ' )*)+)) ( >1./ F '1//3 /' /*+) '(+/ (> '0+0 *1 )1+) /) "%/,/.+ '))+0 (' /44+) >( %0,0.) /+>*2+' 1* '4+4 *0 %,''/ '+1 11 '+1 11 -",. %. +',. %) %>%,+ '> 4'1+2 2* '*.' F

/,>>> '1*+44 ' />2+/* / > 221+0*) > )+11 1 /+11 1 4+11 1 ',>> > ",>> > %,>/ ()0+2' / 1.0 F

)+11 /+11 1 1 4+11 1 ".,-> ' ),+/ "%,-' " (2>+/) 4 './ F

/+(1 1 /+(1 1 "+,"" -/,++ % /",%. )''+*' ( />.1 F

-,e demand "orecast assumes (F and 4F annual demand gro?t, "or gasoline and diesel respectivel . -,ese are average ,istorical gro?t, rates "or t,e past ten ears. Q -,e market potential "or stoves is estimated based on 0*1 liters o" et,anol average consumption per middle income ,ouse,old. -,is is based on t,e Gaia ,ouse,old acceptabilit surve . Q !t is assumed t,at E/1 and %' blends ?ould be t,e prescribed blend levels "or t,e ne&t "ive ears. !t is "urt,er assumed t,at "or t,e ne&t t?o ears gasoline blending ?ill be limited to Addis Ababa t,en become national. Q Et,anol re@uired as biodiesel "eedstock is /1F b volume. ;or t,e ne&t t?o ears no production o" biodiesel is "oreseen+ as at least t,ree ears are re@uired "or ,arvesting o" oil trees Enterpriseed in '11). #ources6 Et,anol production data is "rom Et,iopian #ugar Development Agenc I petroleum demand is based on consumption data provided b EPE "or '110.

t#anol Stove $n t,e basis o" t,e et,anol "uel demand discussed above+ t,e pro=ected CC stove market is s,o?n in t,e table belo?. During t,e "irst ear+ a total o" '+111 single burner stoves ?ill be sold. -,is ?ill increase to (111 in t,e second ear and /1111 in t,e t,ird ear. -,e cumulative number o" CC stoves sales at t,e end o" t,e ten ear ?ill reac, /*1 t,ousands and replacement sales ?ould start a"ter /1 ears.

-able />. Clean Cook #tove #ales

Market potential (U o" ,ouse,olds) Potential market Assumed market penetration / %urner ' %urner Cumulative U #tove sales / %urner ' %urner '11)3 4 '+1* '+1* > '+111 '+111 5 '+11 1 '+11 1 5 '1143 * /'+>4 /1+'* 4(+11 1 (+11 15 4+11 1 4+11 1 5 '11*3 2 */+'> )*+*) > /1+11 12+11 1 /+11 1 /4+11 1 /)+11 1/+111 '1123/ 1 /(2+0' 4*+/2 0 /(+11 1 />+(1 1/+(1 1 >'+11 1 '2+(1 1'+(11 '1/13/ / /4)+4* /4+>( 4 '1+11 1 /*+11 1'+11 1 ('+11 1 04+(1 10+(11 '1//3 /' /4)+4 5 '(+1 11 ''+( 11 '+( 11 44+1 11 41+1 11 4+111

0.)

Prospects for 1ocal Production of CC Stove

-,e CC #tove ,as relativel simple components. !t consists o" t,e main stove "rame+ et,anol container and burner+ air controller and a c lindrical per"orated cover around t,e burner and pot5rests. All components ,as relativel uncomplicated con"igurations and lend t,emselves to local manu"acturing. -,e stove "rame provides eas access "or placing o" t,e et,anol canister "rom t,e bottom. Placing o" t,e canister is a @uick "i& st le procedure and t,e design also ensures t,at ?,en burner is not in use t,e opening o" t,e canister can be easil closed and sealed. All t,e components are made o" stainless steel s,eets "or t,e purposes o" ensuring durabilit as ?ell as to increase its est,etic values. -,e basic processes involved in t,e production o" components o" t,e stove include basic metal products manu"acturing processes. -,e ma=or ?orks,op units and processes involved are6 (a) #,eet metal pressing unit 5 blanking+ piercing and deep dra?ing operationI (b) #,eet metal "abrication unit 5 s,eet metal cutting+ bending+ spot ?elding+ drillingI (c) Assembl unit6 sub5assemblies+ and main assembl benc, ?orks+ and (d) packing unit ( packaging in cartoon bo& including cleaning+ labeling+ and inserting o" instruction papers. -,ese tasks are t pical processes conducted in metal manu"acturing industries and metal ?orks,ops e@uipped ?it, basic e@uipments. #everal local "actories including Akaik #pare Parts and 9and -ools ;actor + #elam <ocational Center could be considered b Makobu Enterprises PLC as candidates ?,ere t,e CC stove could be "abricated. B,en produced locall + t,e ma=or cost o" production o" t,e stove ?ould be cost o" dies and stove materials (stainless steel s,eet). %ased on our estimates+ ?,ile t,e material cost per stove produced ?ould be more or less constant+ t,e unit cost associated cost o" dies ?ould be a "unction o" t,e @uantit o" stoves produced ?it,in t,e total li"etime o" dies emplo ed.

;igure )A-,e Dometic -?o %urner CleanCook #tove

Considering an annual production o" /1+111 stoves+ and material cost o" E-% '1 per kg o" stainless steel s,eet metal+ as ?ell as ot,er cost suc, as mac,ine time and labor+ t,e local production cost o" t,e single and double burner CC stoves ?ould be E-% '11+ and about E-% >(1+ respectivel . Assuming /(F producerKs gross margin and a <A- o" /(F+ t,e producerKs unit prices o" t,e single and double burner stoves ?ould be E-% '41 and E-% 041+ respectivel . -,is means t,at local production o" t,e CC stove ?ill bring do?n to (1F o" t,e import price. -,e cost components and price build5up o" locall manu"actured CC stove is given in t,e table belo?.
-able /0. Cost components and Price o" CC #toves

Production cost E-%3Unit) #,are Cost components #ingle %urner Double (F) %urner /01. Material *1.11 '0F Die and tools 0/.11 4'.11 /'F 11 Labor /).11 '*.11 (F Commercial items ((.11 2).11 /)F $ver,eads /1.11 /*.11 >F Production cost '1'.11 >(0. )1F 11 ProducerKs margin /( >1.>1 (>./1 2F #ub5total '>'.>1 014. )2F F /1 <A/( >0.*( )/.14 /1F F B,olesalerKs purc,ase cost ')4./( 0)*. 42F /4 B,olesalerKs margin /1 ').4/ 0).*' *F F B,olesale price '2>.*) (/0. *4F 2* 8etailersK margin /( 00.1* 44.'( />F F 8etail price >>4.20 (2'. /11 Note6 Assuming ;$% prices o" U#G0( and U#G*( "or t,e single burner and double '> burner CC stoves+ F respectivel I custom dut o" (FI a value added ta& o" /(FI and ?,olesale and retail margins o" '1F eac,+ t,e retail price o" t,e single burner and double burners imported CC #tove ?ill be E-% 4)1 and E-% /0>1+ respectivel .

( 5.1

C5MPE&!&!54 ( MA* E& A4A17S!S

Competitors in the Fuel and Stove Market

Domestic cooking "uels used in Addis Ababa include kerosene+ LPG+ electricit + "uel?ood+ c,arcoal and residues (?ood ?orks,ops+ co""ee mills). :erosene and "uel?ood are t,e most important in terms o" users ('1)+111 ,ouse,olds "or kerosene and /'0+111 "or "uel?ood) ?it, t,e ot,er "uels eac, ,aving t?ent to 01 t,ousand users eac,. Et,anol is a ne? potential "uel "or ,ouse,olds in Addis Ababa and ot,er urban areas. -,e domestic "uel market in Addis Ababa ma be divided into t,e modern "uel sector constituting kerosene+ LPG+ electricit and et,anol and t,e traditional biomass sector consisting o" "uel?ood+ c,arcoal and residues. -,e ke stake,olders in t,e modern and traditional domestic "uel market are s,o?n in t,e "ollo?ing table.
-able /(. :e Actors in t,e ;uel Market
Production EEPC$ ;inc,aa+ ot,er sugar "actories Et,anol 8ural ,ouse,olds

Fuel

:erosene

LPG

Electricit

%iomass

!mport -ransport B,olesale Distribution3 retail Stove

EPE Private3compan truck o?ners EPE $il companies Bick burner+ pressuriCed

$il companies+ Private3compan distributors truck o?ners $il companies+ ot,er companies $il companies+ ot,er companies Multi burners+ single burner

EEPC$ EEPC$ EEPC$ #ingle burner

Private3compan truck o?ners ;inc,aa+ ot,er sugar "actories Makobu+ ne? entrants Domestic stove+ ot,er imports Dometic A%

8ural ,ouse,olds+ truckers Urban ?,olesalers Urban traders $pen "ire+ Lakec,+ metal c,arcoal

Production

Pressure stoves made in Et,iopia Bick stoves "rom C,ina+ pressure stoves "rom !ndia

!mport Makobu B,olesale Distribution3 retail

%ottles A oil V ot,er companies #toves A private companies H !mporters 8etailers (W/11) Makobu Makobu V ot,ers Producers 8etailers (W/11)

%ottles A $il V ot,er companies #toves A private companies

8etailers (W/11)

)9%

Anal#sis of Competition for Ethanol Fuel and Stove

Po,er of Suppliers

Ethanol fuel Short termB :igh9 >#ere is currently only one local supplier +or et#anol and t#e potential demand +or its et#anol is #ig# +or e?port2 domestic +uel2 gasoline blend2 and biodiesel process input5 -,is is in contrast to t,e situation onl a "e? ears ago ?,en t,e "actor itsel" promoted et,anol as bot, domestic (:(1) and transport "uel (as gasoline blend) and "ailed. !ts e""ort to promote et,anol as a kerosene blend (:(1) ?as abandoned a"ter onl a "e? mont,s o" distributionI and alt,oug, t,e government did accept t,e potential o" et,anol as a gasoline blend and dra"ted a directive "or its implementation+ no "urt,er action ?as taken and t,is ?as also abandoned. -,e "actor is no? e&porting t,e bulk o" its output t,roug, a long5term contract it signed ?it, one customer. ;or t,e ne&t ' ears ;inc,aa ?ill continue to be t,e onl local source "or et,anol. >#e et#anol +uel and stove enterprise "ill need to secure +irm +uel purc#ase contracts "it# )inc#aa +or t#e s#ort term :@ years<5 %t must also reac# understanding "it# t#e regulatory agency +or t#e sugar +actories :t#e 0inistry o+ >rade and %ndustry< +or long term supplies +rom )inc#aa and ne" et#anol producers. 1ong termB 1o,9 %n t#e long term t#e supplier ris* "ill decline as ne" et#anol producers come into t#e mar*et and supply increases. Bit, t,e envisioned e&pansion and ne? addition o" et,anol Enterprises t,e volume o" suppl ?ill be ,ig,er t,an t,e demand "or ot,er uses (gasoline blend and biodiesel "eedstock) and t,e domestic and commercial cooking market ?ill be t,e onl local outlet "or et,anol producers. # &hreat of ne, entrants

Ethanol fuel :igh. B,en et,anol becomes a ma=or domestic "uel all t,e oil distribution companies as ?ell as ot,ers+ including t,e producers+ ?ill tr to enter t,e et,anol distribution market. -,e oil companies in particular ,ave advantages over t,e ne? enterprise in t,eir e&tensive distribution in"rastructure. Ethanol stove Medium. $nce et,anol is establis,ed as an alternative domestic cooking "uel+ importers and producers ?ill tr to get into t,e stove distribution market. -,e resource re@uirements "or potential importers ?ill be minimal. Local production o" t,e stove+ on t,e ot,er ,and+ ?ill re@uire considerable tec,nical and "inancial resources. Price reduction "or t,e CC stove is ke to sustained development o" t,e et,anol market.

-,e enterprise must t,ere"ore develop strategies "or price reduction to sta competitive in t,e stove distribution market.

Po,er of bu#ers

Ethanol fuel :igh. 9ouse,olds in Addis Ababa are accustomed to c,anging "uel availabilit and prices and ,ave adopted a risk mitigation strateg o" o?ning and using a variet o" cooking "uels and stoves. As t,e recent s?itc, back to c,arcoal and "uel?ood "rom kerosene clearl demonstrates ,ouse,olds are ,ig,l price5sensitive. Et,anol must be priced competitivel ?it, kerosene and prices must be stable. -,e enterprise ?ill need to secure et,anol supplies and s,ould promote et,anol as a sa"e+ lo?5cost "uel ?it, dependable availabilit . Ethanol stove Medium. As s,o?n in previous sections o" t,is plan+ t,e price o" t,e CC et,anol stove is ,ig, compared to ot,er stoves in Addis Ababa. B,ere t,e et,anol "uel is priced competitivel ?it, ot,er cooking "uels t,e price o" t,e stove ?ill determine t,e e&tent o" t,e market. !" t,ere is an c,oice in et,anol stoves mid and lo?5income ,ouse,olds ?ill c,oose lo? price+ lo?er5@ualit stoves over t,e CC stove. -,e enterprise must ?ork to reduce t,e stove price and must promote t,e ,ig, @ualit o" t,e stove ("uel e""icienc + durabilit + and sa"et ).

Barriers to Entr# as a 4e, Fuel

Ethanol Fuel Medium. Eac, ,ouse,old in Addis Ababa o?ns and uses several "uels and stoves. !n t,e long term et,anol ?ill compete ?it, "uel?ood+ c,arcoal+ kerosene+ LPG+ and electricit . Price "or all t,e substitute "uels ,as risen substantiall in t,e past "ive ears and "urt,er rises are e&pected in t,e "uture. -,is ?ill improve t,e competitiveness o" et,anol. 9ouse,olds in Addis Ababa are generall receptive to ne? domestic "uels and stoves. -,is ,as been demonstrated b t,e smoot, and @uick adoption o" t,e La*ec# c,arcoal stove+ t,e electric in/era baking and t,e kerosene cooking. !" t,e et,anol "uel is competitivel priced and its sa"et and econom are ?ell promoted it can easil penetrate t,e domestic "uel market.

Ethanol Stove Medium. -,e decision o" ,ouse,olds to adopt et,anol as an alternative cooking "uel ?ill depend on t,e stove price. !n t,e s,ort term ?,ere t,e market is small t,e barrier ?ill also be small as t,e enterprise can address special segments o" t,e population (upper income ,ouse,olds+ apartment ,ousing). !n t,e long term+ ,o?ever+ it ?ill need to market t,e "uel and stove to mid and lo?5income ,ouse,olds as ?ell and t,e stove price ?ill become a barrier to potential users. Customers need to be convinced o" t,e sa"et o" t,e stove and "uel. -,e enterprise needs to promote t,e CC stove as ,aving ,ig, @ualit and sa"et . # Degree of *ivalr#

Ethanol Fuel :igh. !n t,e ne&t t?o to t,ree ears t,e market "or et,anol as cooking "uel ?ill be small due to limited suppl and t,e time it takes to build customer con"idence in t,e et,anol stove and "uel. At t,is stage "e? ot,er companies ?ill be interested to develop t,e market. !" t,e e&pansion plan "or t,e sugar industries is realiCed+ ,o?ever+ t,e domestic market "or et,anol can reac, 01 million liters a ear ?it,in ten ears. -,is ?ill be a siCable market and t,e oil companies and ot,er distributors ?ill ?ant a segment o" it. Ethanol Stove Short termB 1o,. -,e et,anol stove market ?ill be "e?er t,an (111 stove sales per ear "or t,e "irst t,ree ears. -,is level o" sales is too small "or local production but ma be attractive "or importers. 1ong termB :igh. !n t,e long5term et,anol becomes a ma=or domestic "uel. As et,anol users rise to /(1 to '11 t,ousand ,ouse,olds and annual stove replacements to /( to '1 t,ousand+ more importers and manu"acturers are likel to enter t,e stove market.

S&A E:51DE*S *51ES A4D C54&*!B6&!54S

-,e national energ polic o" Et,iopia (/220) promotes sustainable energ suppl and use. -,e polic states si& polic ob=ectives+ among ?,ic, t,ree are directl related to ,ouse,old energ suppl and use. -,ese are6 a) to give priorit to t,e development o" indigenous energ resources ?it, a goal to?ard attaining sel"5su""icienc I b) to ensure and encourage a gradual s,i"t "rom traditional energ sources use to modern energ sourcesI and cA to ensure t,at t,e development and utiliCation o" energ is benign to t,e environment. -ransition "rom traditional non5sustainable energ sources to modern sustainable "uels "or t,e ,ouse,old sector is a polic priorit . !n t,e polic t,e government commits itsel" to stabiliCing ,ouse,old "uel prices and to increasing alternative energ supplies "or t,e sector. Large5scale adoption o" et,anol as ,ouse,old cooking "uel ?ill ,elp meet t,e t,ree polic ob=ectives outlined above. Et,anol ?ill displace kerosene and "uel?ood+ c,arcoal (in t,e long5term). Unlike t,e "uels it ?ill displace+ et,anol ?ill be sustainabl produced and consumed. -,is ?ill ,elp mitigate t,e non5sustainable e&ploitation o" trees "or ,ouse,old "uel and reduce G9Gs emissions "rom kerosene combustion. Et,anol brings Et,iopia closer to t,e goal o" energ sel"5su""icienc . Energ suppl securit ,as no? become a ma=or concern because o" petroleum suppl uncertainties and rising prices. Promotion o" et,anol as domestic "uel ?ill reduce Et,iopiaKs dependence on imported petroleum and "rees its meager "oreign e&c,ange earnings "or productive investments. Et,anol+ as a ne? ,ouse,old "uel+ re@uires a?areness development+ promotion+ tec,nolog development+ and regulator and polic support. #take,olders engaged in t,e production5consumption c,ainI government agencies responsible "or polic + regulation and promotionI and non5government agencies involved in sustainable energ development need to ?ork toget,er to promote t,e national interest as ?ell as t,eir individual missions.

-able /). :e #take,olders and Contributions Mission #take,olders and contributions /. Polic + 8egulation and Promotion Development o" et,anol as ,ouse,old "uel addresses t,ree o" t,e si& energ polic ob=ectives and it is also uni@ue in its diversit o" bene"its. -ranslation o" t,ese e&pressed policies into action re@uires inputs "rom t,e Ministr o" Mines and Energ (MME) and Ministr o" -rade and !ndustr (Mo-!). -,e MME and t,e Et,iopian 8ural Energ Development and Promotion Center (E8EDPC)+ as energ development and regulation bodies+ can ,elp promote et,anol as domestic "uel t,roug, a?areness development+ stove tec,nolog development and testing+ and regulator support "or ta& reduction "or t,e et,anol stove. Mo-!Ks mission includes regulation o" petroleum suppl and distribution as ?ell as investment promotion. National bene"its are ma&imiCed ?,en et,anol is adopted b a large segment o" t,e population and consumer bene"its are ma&imiCed ?,en prices are competitive ?it, e&isting "uels. -,is means access o" users to et,anol "uel must be en,anced t,roug, competitive pricing and long5term suppl guarantees. -,e Mo-! can ,elp ac,ieve t,is t,roug, support "or "uel ta& reductions and provision o" et,anol "uels suppl guarantees "rom t,e producers. Et,anol output is e&pected to gro? to more t,an ten times current output ?it,in "ive ears. $ptimiCation o" bene"its "rom t,is resource depends on care"ul assessment o" costs o" bene"its o" t,e potential uses o" et,anol (,ouse,old "uel+ gasoline blend+ non5energ use+ and e&ports). !t is t,e "inding o" t,is assessment t,at application o" et,anol as ,ouse,old "uel ?ill be t,e best alternative use compared to t,e ot,er applications. Public as ?ell as consumer bene"its are ma&imiCed ?it, et,anol used as cooking "uel because o" reduction o" kerosene imports+ reduction o" government subsidies to kerosene users+ lo?er li"ec cle costs to users+ and sa"e and clean cooking "or ,ouse,olds. -,e realiCation o" t,ese bene"its ?ill re@uire polic and regulator support "rom t,e Mo-! and MME. Et,anol ,as e&cellent @ualities as domestic cooking "uel. -,e "uel is sustainabl produced and burns cleanl . Combined ?it, t,e ,ig, @ualit and sa"e CC stove it delivers t,e best possible service to ,ouse,olds. Et,anol reduces indoor+ local and global pollutant emissions and "or t,is reason deserves polic and regulator support "rom t,e Environment Protection Aut,orit (EPA). $ne speci"ic action t,at t,e EPA can make to?ards promoting et,anol ?ould be "acilitating international support "or t,e Et,iopian et,anol program. -,is could be CDM "inancing and ot,er tec,nical and "inancial support "or t,e pro=ect. #ustainable development o" t,e et,anol domestic "uel program depends on t,e consistenc o" @ualit "or t,e "uel and stove. !" @ualit is compromised in eit,er t,e stove or t,e "uel t,e e&pected bene"its ?onKt be realiCed. $ne o" t,e potential t,reats "or t,e program is t,e dissemination o" lo? @ualit and unsa"e et,anol

-,e Eualit and #tandards Aut,orit o" Et,iopia (E#AE) s,ould t,ere"ore test+ set and en"orce strict standards "or domestic use o" et,anol. '. Et,anol Production Et,anol producers must realiCe t,at domestic use o" t,eir output (rat,er t,an e&port) secures t,eir market and bene"its. Local use o" t,eir output reduces transport and ,andling costs and makes t,eir product more competitive. -,e onl e&isting et,anol producer+ ;inc,aa+ understood t,is and ?as activel pus,ing "or adoption o" et,anol as gasoline blend t,en as ,ouse,old "uel (?it, t,e :(1). -,is active engagement must continue ?it, ;inc,aa and t,e ne? et,anol producers in t,e "uture. Bit, t,e e&pected rise o" et,anol output to more t,an /'* million liters in "ive ears+ t,e bene"its ?ill be substantial "or all t,ose in t,e suppl c,ain. $il companies and ot,er retailers ?ill ,ave a pro"itable stake in t,e distribution o" et,anol. Distributors ma need to make modest investment in distribution in"rastructure in t,e "irst "e? ears. $ne o" t,e promises o" t,e et,anol market development program is t,e potential "or local production o" t,e stove. -,is is in contrast to ot,er modern cooking devices+ ?,ic, are mostl imported. -otal stove sales ?ill reac, /(1+111 and annual replacements /(+111 stoves in t,e ne&t ten ears. -,is market can support a "e? medium scale manu"acturers. Et,anol is a ne? domestic "uel and "or t,is reason re@uires active promotion. Alt,oug, t,e et,anol "uel and stove ,ave e&cellent @ualities+ t,e can be "urt,er improved to "it customer e&pectation. -,e Gaia Association and government agencies involved in energ tec,nolog development and dissemination s,ould ?ork toget,er to improve t,e @ualit o" service continuall . -,is involves consumer surve s (to get "eedback on access+ @ualit o" "uel and stove) and rela ing t,is back to t,e ot,er stake,olders ("uel and stove producers+ ?,olesaler+ distributors and government).

>. Et,anol Distribution

0. #tove Production

(. End use Promotion

4 7.1

ACA*E4ESS A4D P*5M5&!54A1 CAMPA!;4S

A,areness creation

Public recognition and acceptance o" et,anol as a cooking ?ould re@uire e&tensive public education and promotion campaign t,roug, a variet o" media and events. -,is is evident as most ,ouse,olds ,ave little or no in"ormation on et,anol sa on local production capacit + potential uses and its comparative advantage over alternative "uels. -,e "irst and most important step in t,e process o" et,anol "uel market development s,ould t,ere"ore be to design an appropriate public education and a?areness campaign. #uc, campaign ?ill involve t,e use o" a variet o" media suc, as radio+ -< and ne?spapers+ distributed broc,ures and posters+ posted signs at ,ig,?a s and organiCed ?orks,ops. and During t,e earl stage a?areness campaign s,ould primaril "ocus on availabilit and sustainable suppl o" et,anol "or cookingI e""icienc and sa"et o" t,e "uel and t,e stovesI comparative cooking cost et,anol and competing "uelsI and ,ealt,+ social+ economic and environmental bene"its o" using locall produced et,anol. 7.2 Promotional campaigns

Eac, promotional campaign s,ould be de"ined b a clear purpose6 to motivate consumers to purc#ase t#e 11 stove and et#anol +uel and to create brand a"areness and understanding. -,e "ollo?ing comprise t,e most important areas on ?,ic, promotional campaigns s,ould be designed and conducted. Printed mediaa) !n"ormation Lea"lets6 tri"oliate+ providing in"ormation on product description and ?, it is being promoted as a domestic cooking "uel. Lea"lets could be made available at gas stations+ supermarkets+ and ot,er "re@uentl visited places suc, as banks and post o""ices+ and government o""icesI b) UserKs guide6 tri"oliate+ e&plaining sa"e and e""icient operation o" CC stove and sa"e storage and ,andling o" et,anol "uel. -,is userKs guideline s,ould be distributed to stove retailers and be included in stove packI c) %anners and posters6 providing brie" but clear message on t,e use o" et,anol "or cooking+ and ?,ere et,anol "uel and CC stoves are availableI d) #tickers6 introducing et,anol "uel+ and distributed ?,ere et,anol "uel and CC stoves are soldI and e) Ne?spapers6 @uarter to ,al" page advert on ?idel circulated ne?spapers.

lectronic media a) 8adio6 s,ort radio adverts on ?,ere and at ?,at price et,anol "uel and CC stoves are availableI some discussion programs on et,anol as ,ouse,old cooking "uelI b) -<6 advertising t,e availabilit and demonstration o" sa"e use o" et,anol "or cookingI and c) #,ort "ilm on CDs6 preparation and distribution o" s,ort void clips on CDs ?,ere use o" et,anol is demonstrated+ and also contains basic in"ormation on et,anol and ot,er cooking "uels (sa"et + social+ economic and environmental issues). Ot#er means promotion o+

a) %aCaars3pro"essional and public meetings6 actual cooking demonstration using et,anol+ demonstration o" sa"et "eatures+ e&planation o" t,e bene"its o" et,anol. Demonstrations cooperatives to #ousing

a) Promotional campaign s,ould also directl "ocus on end5users living in t,e recentl constructed lo?5cost condominiums t,roug, demonstration and distribution o" lea"lets. >raining Sta++ o+ Retail

b) -raining o" retail sta"" o" CC stove retailers ?ill ensure t,at t,e are kno?ledgeable enoug, to persuade and in"orm t,e end5users at t,e point5o"5 purc,ase. -raining ma include t,e comparative cost+ ,ealt,+ economic and environmental bene"its o" et,anol cooking "uel+ sa"et measures in stove operation and "uel ,andling and storage. 7.3 Design and E$ecution of Campaigns

8adio and -< campaigns s,ould be designed b e&perienced advertising agenc . -,e agenc s,ould propose di""erent promotional packages. -,e campaign s,ould be continuous and t,e agenc s,ould supervise t,e e&ecution o" t,e promotional activities. At least t?o radio stations s,ould be used+ one o" ?,ic, ?ould be ;M 8adios and 8adio Et,iopia+ ?,ile -< advertisement ?ould be made on E-<. Promotion ?ould be in t,e Am,aric language and transmitted bet?een * to 26>1 pm on #aturda s and #unda s ?,ere entertainment programs are transmitted.

-,e printed media s,ould be designed to ,ave attractive appeal and s,ould be on good @ualit paper. %anners and permanent road sign posters s,ould also be ver appealing and s,ould be placed in places o" ,ig,l "re@uented areas. -,e contracted advertising agenc s,ould propose alternative designs and locations ?,ere suc, materials ?ould be displa ed.

* 8.1

F!4A4C!4; S&*A&E;!ES

Direct Subsidies from ;overnment

As a ne? entrant into t,e market et,anol ?ill need supportive public polic . Urban domestic "uel prices do not re"lect "ull costs. %iomass "uel prices do not incorporate replacement costs+ kerosene prices are "i&ed b t,e government (?it, special ta& e&emptions and cross subsidies) and electricit is subsidiCed up to (1 percent. A ne?+ "ull commercial "uel ?ill be disadvantaged in suc, a distorted market place. $n t,e ot,er ,and+ t,e indigenous and sustainable production o" t,e "uel as ?ell as its "oreign e&c,ange saving potential s,ould attract t,e government. Polic and regulator support s,ould t,ere"ore be soug,t "rom t,e Government. -,e et,anol "uel s,ould at least receive t,e same promotional pricing support "rom t,e Government as it is presentl given to kerosene. -,e et,anol price build5up starts "rom t,e "actor gate selling price o" E-% '.'( per liter. -ransport cost "rom t,e "actor at ;inc,aa to Addis Ababa ?ill add an estimated /1 Et,iopian cents per liter. -,is price build5up assumes t,e sale o" et,anol "rom t,e bulk storage and bottling stations in especiall designed bottles and t,ere"ore includes bottles+ labels+ "uel colorants+ denaturants and bottling costs. %t s#ould also be noted t#at t#e price build-up does not include t#e promotional price reduction applied to *erosene2 "#ic# "ould in t#is case amount to 80 t#iopian cents per liter2 and give a +inal retail price o+ >6 2570 per liter5 -,e retailersK margin is estimated at /( Et,iopian cents. (-,is is "ive times o" t,e current distributorKs margin "or kerosene.) -,e "inal retail price o" et,anol in Addis Ababa ?ould t,us be E-% >.1 per liter as s,o?n in -able /4.
E-%3liter / ' > 0 ( ) 4 * ;actor gate price -ransport cost to Addis Ababa Losses %ottles+ labels+ colorants+ denaturants+ depreciation #ub5total B,olesaler margin B,olesale price 8etailers3DistributorJs margin '.'( 1./( 1.1/ 1.>1 '.4/ 1./0 '.*( 1./( F 4 ( (. . 1 /. 1. 2 1. 0 2. (. ( .

(F o" ( (P) (F o" 4

-able /4. Price %uild5up o" Et,anol

;inal 8etail price in Addis Ababa

4P*

>.11

/11.1

-,e "actor gate selling price is based on production o" E-% /.*4 per liter and gross margin o" '1 percent. -,is is also t,e current e&port price o" et,anol.

8.2

5pportunities for CDM Financing

As stipulated in t,e : oto Protocol+ developed countries ,ave agreed to limit or reduce t,eir G9Gs emissions. 9o?ever+ it ?as also recogniCed t,at reduction o" G9G in developed countries is more e&pensive t,an in developing countries+ ?,ile at t,e same time investments in reduction o" G9Gs emission in developing countries could contribute to social and economic development o" t,ese countries. $ne o" t,e mec,anisms adopted under t,e : oto Protocol to meet t,ese ob=ectives simultaneousl is t,e Clean Development Mec,anism. -,e basic principle be,ind t,e Clean Development Mec,anism is t,us to ,elp reduce G9G emissions at t,e possible lo?est cost ?,ile at t,e same time providing additional source o" "und to pro=ects in developing countries ?it, ,ig, G9Gs mitigation potential. -,e main criteria "or pro=ect to @uali" "or CDM "inancing is t,at t,e are LadditionalMI t,at is t,e pro=ect ?ould not be viable ?it,out e&tra revenue "rom CDM. -,is pro=ect 5 et,anol substitution "or kerosene to meet ,ouse,old cooking energ demand+ provides an opportunit to substitute a non5rene?able energ source ?it, one t,at is rene?able t,at ,as enormous C$' emission reduction pootential. !n spite o" t,is+ o?ing to t,e relativel ,ig, cost o" CC stove+ t,e Pro=ect is not commerciall viable. $n t,e ot,er ,and+ t,e "inancial return o" t,e Pro=ect gets better ?it, CDM "inancing. %ased on emission reduction o" 1.*) tons o" C$'E per stove per ear+ and sales value o" U#G).( per ton+ t,e pro=ect ?ill generate gross CE8s sales revenue o" U#G/.4 million over ten ears and t,e associated transaction costs ?ould be U#G'41 t,ousands or a net revenue o" U#G /.( million (-able /*).
-able /*. Emission 8eduction Potential o" CC #tove and #ales o" CE#s '1143 '11*3 '1123 '1/13/ '1//3/ '1/)3 * 2 /1 / ' /4 Cumulative #tove sales '+11 4+11 /4+1 >'+11 ('+11 /44+1 Emission 8eduction+ tC$'E3stove3 ear 1.* ) Emission 8eduction+ tC$'E3 ear /+4' )+1' /0+) '4+(' 00+4' /('+' 1).( 1 '1 1 1 '1 CE8s value+ U#G per ton 1 CE8s sales+ U#G per ear //+/* >2+/> 2(+1 /4*+** '21+)* 2*2+0 1 1 >1 1 1 >1 NP<+ /'.(F discount rate G/+4/*+)0 0 &ransaction Costs %aseline determination V monitoring 01+11 plan 1 <alidation '1+11 1 Due Diligence /'1+11 1'1+11 Annual certi"ication '1+11 '1+1 '1+11 '1+11 '1+1 1 1 11 1 1 11 -otal -ransaction Costs '11+11 '1+11 '1+1 '1+11 '1+11 '1+1 1 1 11 1 1 11 NP<+ /'.(F discount rate G'41+4' 2 NE- CE8s 8evenue (/**+*'1 /2+/> 4(+1 /(*+** '41+)* 2)2+0 ) 1 >1 1 1 >1 NP<+ /'.(F discount rate G/+004+2/ ) NP<+ /'.(F discount rate Notes6 Emission reduction and CE8s sales and transaction costs are computed based on data "rom 8EAP5 Canada. -,ese are emission reduction per stove+ 1.*) tonsI CE8s sales price+ U#G ).(1.

8.3

Stove Financing Methods

-,e costs o" imported CC stoves are relativel ,ig,. As a result+ a number o" ,ouse,olds ma not be able purc,ase t,e stoves. Accordingl + alternative consumer "inancing met,ods need to be adopted. -,e most promising "inancing met,ods "or t,e stove include salar ?it,,olding sc,emes+ loans t,roug, micro"inance institutions+ and loans "rom saving and credit cooperative societies. Eac, met,od is brie"l described in t,e table belo?.
-able /2. ;inancing Met,ods "or t,e CC #tove
;inancing met,od Cas, purc,ase #alar ?it,,olding sc,emes Description Purc,ase o" t,e CC #tove using one pa ment. -,e consumer+ a civil servant or member o" a compan enters a credit agreement ?it, t,e retailer to ,ave a mont,l deduction "rom ,is3,er salar . -,e deduction occurs automaticall . Loan period ma last ) to /' mont,s. !nterest to be c,arged on accrued amount. -,e consumer takes a loan "rom a saving and credit cooperative societ or a Micro"inance !nstitution to bu t,e CC #tove. E&perience Common. ;or ,ig, and upper middle income group. -,is is ver common among civil servants in Addis Ababa.

Loans t,roug, Micro"inance institutions

Loans t,roug, savings and credit cooperatives

-,e consumer+ a member o" a saving and credit cooperative societ + takes a loan "rom ,is3,er societ to bu t,e CC stove. !n Addis Ababa+ as o" November '11)+ t,ere ?ere '*(' saving and credit cooperatives ?it, aggregate members,ip o" over '(0 t,ousands. Loans b saving and credit societies t picall ,ave lo?er interest rates t,an micro"inance institutions.

-,is approac, ,as been used "or man micro5enterprise loans in Addis Ababa. -,e micro"inance institutions in Addis Ababa ,ave recentl started loans "or purc,ase o" consumer goods. -,is is ver common among civil servants in Addis Ababa.

S6PP17 A4D D!S&*!B6&!54 5F F6E1 A4D S&52E

-o ensure continuous suppl o" et,anol it is necessar t,at ?ell distributed and strategicall positioned et,anol sales outlets are establis,ed. At t,e initial p,ase+ t,e most likel marketing c,annel to "ollo? is depicted in ;igure 4. -,e envisaged Enterprise ?ill purc,ase t,e "uel "rom t,e ;inc,aa #ugar Compan and t,en bottle and distribute t,e product to retailers. -,ese ?ill include t,e oil companies+ ,ousing cooperatives and ot,er private operators. Customers served at t,e retail outlets ?ill e&c,ange empt bottles t,at ?ere "illed and sealed at t,e bulk storage "acilit . -,is o" course implies t,at t,e bottles used ?ill be standardiCed+ and c,ecked "or an p, sical damage ?,en e&c,ange is made. $ne o" t,e potential advantages o" t,is approac, is t,at bulk suppl storage ?ould be establis,ed as necessar and at locations to meet market demand. -,e bulk storage "acilit can also suppl various retail outlets. Additionall + retailers can easil ad=ust stock level based on demand. -,e Enterprise ?ill import t,e CC stove to serve t,e initial market. 9o?ever+ given t,at imported stoves ?ould be more e&pensive+ it is important t,at local production (under license "rom Dometic A%) is encouraged+ capacit developed and manu"acturing is started as soon as t,e beginning o" t,e t,ird ear. !n t,is case t,e local metal manu"acturing industries ?ould be t,e ma=or supplier o" t,e stove and ?ill sell t,eir products to intermediaries in large @uantities. -o keep cost o" stoves as lo? as possible it is necessar t,at t,e bulk bu ers selected 5 ,ave several outlets t,roug, ?,ic, individual ,ouse,olds could purc,ase. !t is also important t,at et,anol "uel distributors3retailing outlets also stock at least small number o" et,anol stoves and ,ence increase availabilit o" stoves at di""erent locations.

Et,anol Producer (;inc,aa #ugar ;actor )

Distribution outlet6 A/5 $il Companies ;illing stations Et,anol Cooking ;uel and #tove Marketing (%ulk #torage and %ottling ;acilities)

Distribution outlet6 A'5 9ousing cooperatives (e.g.+ condominiums)

Customers

!mport and local production o" CC #tove

Distribution outlet6 A>5 $t,er Private $perators

;igure 4. Proposed Distribution C,ain "or Et,anol ;uel and CC #tove

/1

F!4A4C!A1 P1A4

10.1 Assumptions -,e basic assumptions "or t,e "inancial anal sis are summariCed belo?. -,e li"etime o" t,e Pro=ect is assumed to be /1 ears. All "i&ed assets ?ill be replaced at t,e end o" t,eir e&pected economic lives based on t,eir respective depreciation rates. A straig,t5 line depreciation met,od is adopted "or computing annual deprecation c,arges.
-able '1. %asic Assumptions "or ;inancial Anal ses /. '. >. Pro=ect Li"e Construction period ;inancing #ources and -erms6 E@uit (#,are Capital)6 Long -erm Loan !nterest 8ate Loan 8epa ment Depreciation Met,od o" Depreciation Annual Depreciation 8ates6 Land and %uilding Construction Mac,iner and E@uipment Pre $perating E&penditures $""ice ;urniture and E@uipment <e,icles Pro"it -a& /1 ears $ne ear 01F o" investment cost )1 per cent o" total capital per annum *.4(F /1 ears #traig,t Line Met,od (F /) F '1 F '1 F '1 F >( F

0.

(.

10.2 !nvestment Costs and Financing Sources -,e total initial investment re@uired "or t,e establis,ment o" t,e Et,anol Cooking ;uel and CC #tove Marketing Enterprise is appro&imatel E-% /1.) million as s,o?n in -able /). -,is ?ill cover initial investment costs+ ?orking capital re@uirements and pro=ect start5up costs. $" t,is initial investment cost+ 21 percent ?ill be "or t,e "uel marketing business and t,e remaining /1 percent "or t,e stove marketing business. $" t,e estimated initial total costs+ E-% >.1 million ('* percent) ?ill be "or land lease "or t,e bulk storage and et,anol bottling "acilit and E-% /.> million (/' percent) ?ill be "or civil ?orks and building construction. ;uel tankers+ metering pumps+ manual5 operated cupping mac,ines+ and "ire "ig,ting e@uipment ?ill cost E-% *01 t,ousand or * percent o" t,e total costs. <e,icles re@uired "or transportation o" bottled "uels and "or o""ice services ?ill cost E-% /.* million (/4 percent). Borking capital re@uirement is estimated at E-% >.( million or one5t,ird o" t,e total initial investment cost.

-able '/. #ummar !nitial !nvestment Costs+ O111 E-% ;i&ed !nvestment Cost -otal

;uel Marketing

#tove Marketing

F o" total

Land Lease cost Construction ;uel -ankers Metering Pumps ;ire "ig,ting e@uipment $""ice ;urniture and E@uipment <e,icles Borking capital re@uirement $rganiCation and #tart5up costs -otal Percent ;inanced b 6 E@uit Capital Long5term loan -otal

>+111 /+'(1 (01 /11 '11 //0 /+*11 >+(11 4( /1+(42 /11F 0+'>/.0 )+>04./ /1+(4*.(

>+111 /+'(1 (01 /11 '11 4' /+011 >+111 (1 2+)/' 2/F 0 1 ) /11F

0' 011 (11 '( 2)4 2F

'*.0 //.* F F (./ F 1.2 F /.2 F /./ F /4.1 F >>./ F 1.4 F /11.1 F

-,e sources o" "inance ?ill be e@uit capital and long5term loans. !t is assumed t,at t,e envisaged Enterprise ?ill be capitaliCed b its o?ners in an e@uivalent to 01 percent o" t,e total initial investment amounting E-% 0.'> million and t,e remaining balance+ E-% ).>( million or )1 percent o" total investment+ t,roug, a long5term loan. !t is "urt,er assumed t,at interest rate on t,e long5term loan ?ould be *.4( percent per annum and ?ill be repaid over ten ears.

10.3 Sales *evenue -,e annual revenue o" t,e business is pro=ected based on annual sales volume and unit sales prices. -,e ?,olesale price o" single burner CC is E-% (>1 ?,ile t,at o" t,e double burner is E-% /111. #imilarl + t,e ?,olesale price o" et,anol "uel is E-% '.*( per liter. -,e sales revenue pro=ections also assume a (F et,anol "uel product loss. -,e pro=ected revenue "rom sales o" CC #tove and et,anol "uel marketing during t,e "irst ear o" operation is E-% >.* million (E-% / million "rom t,e sale o" t,e stove and E-% '.4 million "rom t,e "uel sales). -,e aggregate revenue ?ill increase to E-% //.4 million and E-% '( million during t,e second and t,ird ears o" operations.
-able ''. Pro=ected Annual 8evenue '1143 '11* '1123 '1/13 * 32 /1 // CC Stove Sales Potential market+ stoves '+1* /1+' )*+* 4*+/ Market penetration+ stove '+11 (+1 /1+1 /(+1 1 11 11 11 / %urner '+11 (+1 2+1 />+( 15 11 11 11 ' %urner 5 /+1 /+( 11 11 Cumulative U o" stove sales '+11 4+1 /4+1 >'+1 1 11 11 11 / %urner '+11 4+1 /)+1 '2+( 15 11 11 11 ' %urner 5 /+1 '+( 11 11 B,olesale price+ E-%3#tove / %urner (> '20 ' %urner /+11 1 (/( / #ales revenue+ O111 E-% /+1) '+)( >+/ 0+40 1 1 )1 1 / %urner /+1) '+)( '+) >+2) 1 1 0( 4 44 ' %urner 5 5 ( / ' Ethanol Sales Cumulative stove sales '+11 4+11 /4+1 >'+11 Et,anol consumption+ liters3,,3 ear 1 0* 1 11 1 1 Annual et,anol net sales+ J111 liters 2) >+/2 4+4 /0+(2 1 ' (' ' Et,anol ?,olesale price+ E-%3liter '.* ( #ales revenue+ J111 E-% '+4> 2+12 ''+1 0/+(( 0 1 4( ' -otal revenue+ stove and "uelK 111 E-% >+42 //+40 '(+' 0)+'2 0o" an estimated 1 >( Note6 -,e Pro=ected et,anol annual sales is net (F product loss.' '1//3/' /4+>(4 '1+111 /*+111 '+111 ('+111 04+(11 0+(11 '1/)3 /4 1 '(+1 11 ''+( 11 '+( 11 /44+1 11 /)1+1 11 /4+1 11 4+* 22 )+) /' /+' *4 /44+1 11 *1+4 /' ''2+* >( '>4+4 >0

)+>/2 (+'*2 /+1>1 ('+111 '>+4/' )4+('' 4>+*0/

10.4 Cost of Sales and ;eneral E$penses -,e annual costs o" sales "or t,e CC stove and t,e et,anol "uel are pro=ected based on annual sales volume and unit purc,ase prices. -,e total import price o" t,e single burner and double burner CC is E-% 00' and E-% *>0+ in t,eir respective orders. 9o?ever+ ?,en t,e local production o" t,e stove starts during t,e t,ird ear+ t,e stoves purc,ase prices ?ill go do?n to E-%')4 and E-% 0)* "or t,e single and double burner stoves. -,e purc,ase price o" et,anol "uel is E-% '.'( per liter. During t,e "irst ear o" operation+ t,e Enterprise ?ill import and sell '111 singe burner stoves and purc,ase / million liters o" et,anol and t,e total cost o" sales ?ill be E-%>.' million (E-% **> t,ousands "or t,e CC #tove and E-% '.> million "or et,anol "uel). General and administration e&penses during t,e "irst ear are estimated at E-% '.' million. -,is ?ill bring t,e total e&penses during t,e "irst ear to E-% (.0 million.
'114 3* '11*3 2 '1123 /1 '1/13/ / '1//3/ ' '1/)3 /4

Cost o" #ales CC Stove Cumulative U o" stove sales / %urner ' %urner / %urner ' %urner Cost o" #ales+ O111 E-% / %urner ' %urner Ethanol Fuel Annual et,anol purc,ase+ J111 liters Et,anol purc,ase price+ E-%3liter Cost o" sales+ J111 E-% -otal cost o" sales+ K 111 E-% General and Administrative E&penses CC #tove Marketing Et,anol "uel marketing

'+1 11 '+1 11 5 00' *>0 **> **> 5 /+1 // '. '( '+' 40 >+/ (4
>)1 /+* )'

4+11 1 4+11 15

'+'1 * '+'1 *5 >+>) 1 4+() 1 2+4) *

>) ( '+40 0

/4+1 11 /)+1 11 /+1 11 ' ) 0 ) '+* 4' '+0 10 0 ) *+/ )1 /*+> )1 '/+' >'
> 4 '+2 40

>'+11 1 '2+(1 1'+(1 1 0+>1 2 >+)1 ) 41 ' /(+>) 1 >0+() 1 >*+*) 2

>4 ) 0+'1 0

('+11 1 04+(1 10+(1 1 (+40 ( 0+*1 2 2> ) >)+2) 1 ()+/) 1 )/+21 (

>* ' (+*0 *

/44+1 11 /)1+1 11 /4+1 11 4+/ */ )+1 // /+/ 41 *0+2 )1 /2/+/ )1 /2*+> 0/

0 / /)+/ 0*

-able '>. Annual Costs o" #ales and general E&penses

Purc,ase Price+ E-%3#tove

-otal General and Admin. E&penses

'+''' /)+((2

>+//1

>+>0(

0+(*1

)+'>1

Cost o" #ales and General E&penses+ 111 E-%(+>42 /'+*4* '0+(44 0>+002 )*+/>( '/0+211

10.5 Pro=ected Statements

Financial

A complete set o" "inancial pro=ections "or t,e "irst ten ears o" operation are provided in Anne& !. -,e pro=ections include balance s,eets+ income statements+ and statement o" cas, "lo?. -,e pro=ections are prepared on an annual basis. -able /4 provides a summar o" ma=or balance s,eet and income statement and cas, "lo? statement items.

-,e envisaged Enterprise ?ill generate E-% /'.4 million during its "irst ear o" operation and E-% /*.( million during t,e second ear. -,e cost o" sales is pro=ected to gro? "rom E-% 4.> million during t,e "irst ear to E-% *.0 million during t,e second ear. -,e pro=ected gross pro"it during t,e "irst and second ears o" operation ?ill t,ere"ore be E-% (.> million and E-% /1./ million+ respectivel . -,e annual general and administration e&penses are pro=ected at E-% >.> million during t,e "irst and second ears o" operation and ?ill go up to appro&imatel E-% >.0 million during t,e t,ird and "ourt, ears. !ncluded as non5operating e&penses is interest pa ment on long5term loan. !t is pro=ected t,at principal and interest on t,e long5term loan ?ill be paid over /1 ears+ starting "rom t,e "irst ear o" operation. -,e Enterprise ?ill pa appro&imatel E-% 40*.' t,ousand in interest on t,e long5term loan during t,e "irst ear and E-% /.) million during t,e second ear o" operation. ;inall + business ?ill generate a net pro"it o" E-% /.' million and E-% (.' million during t,e "irst and second ears+ respectivel + during ?,ic, pro"it ta& pa ments are e&empted. During t,e t,ird ear o" operation+ t,e net pro"it ?ill be slig,tl reduced to E-% 0.2 million during ?,ic, t,e Enterprise ?ill pa E-% '.) million in corporate

pro"it ta&. -,e net pro"it to sales during t,e "irst+ t,e second and t,e t,ird ears o" operation ?ill be /1 percent+ '* percent and '/ percent respectivel .
-able '0. #ummar o" ;inancial Pro=ections+ O111 E-% '1143* '11*3 2
//+>2>. '2+1'0. * '+>)*. 0 //+>2>. ' >+42>. ) >+/(4. 1 )>). 4 '+'''. 1 (/+(*(.> ) '44. 4 (/+*)>.1 ) 5 (/+*)>.1 ) 0+'>/. 0 )+>04. / (22/. /) 2+(*4. 0 )11. 1 /+'(1. 1 (01. 1 /11. 1 '11. 1 //>. ( /+*11. 1 4(. 15 5 5 5 0+)4*. ( 0+21*.* ) 0+21*.* ) *+22>. * *+>)'. > />+>>(. ' '/+)24. ( //+4>2. 02+4)*. ' /+24/. ' >+/12. ) (/+/>*.0 ) (42. 4 (/+4/*.1 ) 5 (/+4/*.1 ) 5 5 ((00.' ) ((00.' ) 0>. 2

Balance Sheet /. -otal Assets '. -otal Liabilities >. -otal E@uit 0. -otal Liabilities and E@uit /. '. >. 0. (. ). 4. *. 2. /.

'1123/ 1
*+>4/. 1 4+*'>. * /0+*1>. 1 ''+)'). * '(+'>0. > '/+'>'. (0+11/. * >+>0(. 1 )(). * (0/. / //(. *01. ( 4(. > 5 5 /+'(/. 1 /+'(/. 1 0>. 2

'1/13/ /
2+4('. * *+40*. ) /)+('/. ' '(+')2. * 0)+'2/. * >*+*)*. 44+0'>. 1 0+(*1. / '+*0>. 1 022. / '+>0>. 2 *'1. 0 /+('>. ( 5 5 >+0>4. ' >+0>4. ' 0>. 2

'1//3 /'
/'+>// .* /1+'* >.' /*+'0 0.' '*+(' 4.0 4>+*0 /.4 )/+21 0.2 //+2> ).* )+'> 1.1 (+41 ).* 0( >.0 (+'( >.0 /+*> *.4 >+0/ 0.4 5 5 )+>1 /.1 )+>1 /.1 0 >. /1 1.1 '1 1.1 // >.( /+*1 1.1 04 4.' (0 >.* *' 1.0 /+1) ).( (+/) (.' /+/>(. *' )+44(. '>

!ncome Statement 8evenue Cost o" #ales Gross Pro"it General and Admin E&penses $perating Pro"it $t,er E&penses !ncome be"ore ta&es Pro"it -a& Net Pro"it Cash Flo, Statement Cas, !n"lo?6 !ncrease in e@uit capital Long5term loans received !ncome "rom operations -otal Cas, !n"lo? -otal $ut ;lo?6 Land Lease cost Construction ;uel -ankers Metering Pumps ;ire "ig,ting e@uipment $""ice ;urniture and E@uipment <e,icles Pre5operation E&penditures !nterest pa ment on loan 8epa ment o" loan Pro"it ta& paid Dividends paid -otal cas, out"lo? Net Cas, ;lo? Cumulative cas, balance

'.

>. 0.

(2*. ' 0''. *5 5 /+1)0. * (/+)12.1' ) >+'22.* >

()/. ' 0(2. * *. / /1. ) /+1*>. ) /)4.0 ) >+0)4.' 2

('1. 2 (11. 1*4. 1 //>. ' /+')(. 1 '+/4'./ ' (+)>2.0 /

-able '(. Loan 8epa ment #c,edule

Pro=ect Near 1 / ' > 0 ( ) 4 * 2 /1 Loa n 8eceip t )+>04+/1 1 %alance %egin. o" Near )+>04+/11 )+)'0+4*) )+/*>+(// (+41>+)'( (+/*/+40* 0+)/0+'1* >+224+11* >+>'(+*1' '+(2(+*)4 /+*1'+1)' 2>*+422 !nter est d u '44+) (42+) *) )2 (0/+1 (4 022+1 )4 0(>+0 1> 01>+4 0> >02+4 >* '2/+1 1* ''4+/ >* /(4+) *1 *'+/0( 1oan *epa#ment !nterest Princip -ot al Pa men Pa me Pa al me t nt 5 nt 5 5 (2*+/)( 0''+44 /+1'1+2 * 0> ()/+/4' 0(2+44 /+1'1+2 / 0> ('1+20' (11+11 /+1'1+2 / 0> 044+/2' (0>+4( /+1'1+2 / 0> 0'2+)/0 (2/+>> /+1'1+2 1 0> >44+*4> )0>+14 /+1'1+2 / 0> >'/+)10 )22+>0 /+1'1+2 1 0> ')1+0/' 4)1+(> /+1'1+2 ' 0> /2>+*)( *'4+14 /+1'1+2 * 0> /'/+02) *22+00* /+1'1+20> %alan End ce o" Near )+)'0+4 )+/*>+( *) // (+41>+) '( (+/*/+4 0* 0+)/0+' 1* >+224+1 1* >+>'(+* 1' '+(2(+* )4 /+*1'+1 )' 2>*+4 22 (1)

10.6 Financial *eturns -,e "inancial pro"itabilit anal ses "or t,e "uel and stove marketing businesses combined indicate t,at t,e Enterprise ?ill generate a reasonable rate o" return. -,e internal rate o" return (!88) is >* percent and t,e net present value (NP<) at a discount rate o" *.4(F (t,e current commercial banks lending rate) is nearl E-% '>.) million. -,e Enterprise ?ill generate a net present value o" E-% '1.' million and E-% /4 million at discount rates o" /1.( percent and /'.( percent+ respectivel . $n t,e ot,er ,and+ ?,en t,e "uel and stove marketing businesses are treated separatel + t,e stove marketing business ?ill not be "inanciall viableI t,e !88 is onl ).*F. 9o?ever+ ?,en t,e CDM "inancing is included t,e !88 increases seven "old to over (>F and t,e NP< to E-% 2 million at /'.(F discount rate. Bit, t,e CDM "inancing+ t,e !88 "or t,e "uel and stove marketing business increases to 0)F. -,e "inancial returns are summariCed belo?.
-able '). #ummar o" Pro=ect Bort, ?it, and Bit,out CDM ;inancing
;uel and #tove ;uel #tove Marketing

Pro=ect Corth NP< at *.4(F+ O111 E-% NP< at /1.(F+ O111 E-% NP< at /'.(F+ O111 E-% !88 on E@uit

Bit,out CDM

Bit, CDM

Marketing '>+4// '1+>10 /)+2*4 >2.4F

'>+)0 '1+/2 4 > /)+*> / >*./ F

01+(/* >(+11* '2+)>> 0(.*F

Bit,out CDM

()0 (//' ) ) (/() ) ).* F

Bit, CDM

/'+/

12 /1+( )( 2+1 (' (>.> F

10.7 Breakeven Anal#ses -,e breakeven point identi"ies output @uantities at ?,ic, total pro"its are Cero. At t,at point t,e volume o" activit produces e@ual revenues and costs and t,ere"ore t,e Enterprise ?ill ,ave no pro"it or loss at t,is sales levelsI it t,ere"ore breaks even. !n order to identi" t,e break5even point eit,er t,e contribution margin approac, or an e@uation approac, could be used. -,e Enterprise ?ill sell its et,anol cooking "uel and t,e single burner stove at E-% '.*( per liter and (>1 per stove. <ariable costs are estimated at E-% '.'( per liter "or

et,anol and E-% 00' per stove. -,e gross margin (selling prices less variable costs) t,ere"ore e@uals E-% 1.) "or t,e "uel and E-% **.>> "or t,e stove. -,e gross margins s,ould cover t,e "i&ed cost o" t,e "uel marketing and t,e stove o" E-% /.*) million+ and E-% 1.>) million+ respectivel . %ased on t,ese data+ t,e break5even points could be identi"ied "or eac, product using t,e e&pression6
%reak5even volume ;uel #tove H H H ;i&ed costs3contribution margin /+*)/+))031.)1 H >+//(+'>> liters+ and >)1+>(13>/' H 0+1*1 units

-able '4. %reakeven Determination !tem " /./ /.' % './ '.' >./ >.' . 0./ 0.' ) (./ (.' Fi$ed Costs ?E&BA ;uel #tove 2ariable costs ?E&BA ;uel+ E-%3Liter #tove+ E-%3/ burner stove Selling Prices ?E&BA ;uel+ E-%3Liter #tove+ E-%3/ burner stove Margin ?E&BA ;uel #tove Breakeven volume ;uel+ liters #tove+ units

<alue /+*)/+))0 >)1+>(1 '.'( 00' '.*( (>1 >./ A './ >.' A '.' /./ 3 0./ /.' 3 0.' 1.)1 **.>> >+//(+'>> 0+1*1

10.8 Sensitivit# Anal#ses #ensitivit anal ses ?ere carried out to test t,e sensitivit o" t,e commercial pro"itabilit o" t,e et,anol "uel and stove marketing business to c,anges in basic independent variables suc, as investment costs+ general and administrative e&penses+ borro?ing interest rates+ and s,are o" e@uit capital to total investment re@uirement. !t is assumed t,at an c,anges in input prices ?ill be taken care o" in product pricing and t,ere"ore are not considered in t,e sensitivit anal ses. -,e sensitivit anal ses indicate t,at t,e "inancial viabilit ?as "ound to be less sensitive to c,anges in initial investment costs and interest rates. A /1 percent increase in investment costs ?ould reduce t,e !88 b onl './ percent (i.e.+ "rom >*./ percent to >4.>percent). similarl + an increase in interest rate "rom *.4( percent (t,e current commercial bank borro?ing rate) to /1.( percent ?ill reduce t,e !88 b onl /.) percent. -,e "inancial viabilit ?as relativel sensitive to c,anges in general and administrative e&penses. As can be seen "rom t,e table belo?+ a '1 percent increase in general and administrative e&penses ?ill reduce t,e !88 b about '>./ percent to '2.> and t,e Net Present <alue ?ill be reduced b nearl >1 percent or b E-% 4 million. Accordingl + it is advised t,at t,e management need to be cautious o" an increases in general and

administrative e&penses.

-able '*. #ensitivit o" t,e !88 and NP< to #elected <ariables <ariable !88 (F) F c,ange !nterest 8ate *.4(F >*./ /1.(1F >4.( (/.)) /'.(1F >).* (>.0) E@uit Capital6 >1.11F >).* (>.0) (1.11F >2.0 > . )1.11F 01.4 ) . !nvestment costs6 !ncrease b /1F >4.> ('./) !ncrease b '1F >).( (0.') !ncrease b >1F >(.* ().1) General and Admin. E&penses !ncrease b /1F >>.4 (//.() !ncrease b '1F '2.> ('>./) !ncrease b >1F '(./ (>0./)

NP< (O111 E-%) '>+)04.11 '1+/2'.(1 /)+*>1.41 ''+420.) '0+022.0 '(+>(/.* '>+/>(.) ''+)'0./ ''+///.) '1+/(2.( /)+))>.( />+/)4.)

F c,ange (/0.)) ('*.*) (>.)) > . 4 . ('.') (0.>) ().() (/0.4) ('2.() (00.>)

0(
!88 NP<

>1111

01 >( >1 Percent

-,ousand E-%

'(111 '1111

'( /(111 '1 /( /1 (111 (

*.4(F /1.(1F /'.(1F >1F (1F )1F !ncrease b /1F !ncrease b '1F !ncrease b >1F !ncrease b /1F !ncrease b '1F !ncrease b >1F

/1111

!nterest 8ate

E@uit Capital

!nvestment costs

General and Admin. E&penses

;igure *5 #ensitivit o" !88 and NP< to C,anges in #elected <ariables

//

EC545M!C, S5C!A1 A4D E42!*54ME4&A1 !MPAC&S

-,e et,anol "uel and stove marketing is e&pected to ,ave signi"icant economic+ social and environmental bene"its. -,ese include emplo ment generation+ saving o" "oreign e&c,ange t,roug, substitution o" imports+ and earning o" "oreign e&c,anges "rom sale o" Certi"ied Emission 8eduction. 11.1 Foreign E$change Savings

Et,anol cooking "uel ?ill substitute imported kerosene and t,us saving scarce "oreign e&c,ange. As s,o?n in t,e table belo?+ t,e present value o" t,e net "oreign e&c,ange saving ("oreign e&c,ange savings less t,e "oreign e&c,ange re@uirements "or t,e production and marketing o" t,e "uel and t,e stoves)+ is about U#G (/ million. Additionall + t,e business ,as t,e potential to earn appro&imatel U#G/.( million in "oreign e&c,ange t,roug, sales o" CE8s.
-able '2. !mpact on ;oreign E&c,ange
:erosene displaced+ J111 Liters ;oreign e&c,ange saved+ J111 U#G ;oreign e&c,ange re@uirement+J111 U#G Et,anol Production+J111 U#G Et,anol Distribution+J111 U#G #tove !mport3Production+J111 U#G Net ;oreign E&c,ange #aving+J111 U#G Present <alues 7 /'.(F discount rate6 ;oreign e&c,ange saving+ J111 U#G ;oreign E&c,ange E&penditure+ J111 U#G Et,anol Production+J111 U#G Et,anol Distribution+J111 U#G #tove !mport3Production+J111 U#G Net ;oreign e&c,ange saving+ J111 U#G ;oreign E&c,ange Earnings sale o" CE8s #ales o" CE8s+ J111 U#G -ransaction Costs+ J111 U#G Net CE8s sales 8evenue+ O111 U#G P< o" Net CE8s #ales J111 U#G -otal Net #aving and Earnings+ J111 U#G '114 3* 4 '11* 32 '+0 /+0 *4 4' ( 1 ' 4 ' > /+2 '1123 /1 )+1 '1/13 // //+> '1//3/ ' /*+04 '1/'3/ > '4+>( '1/)3 /4 )'+*

0 0 /+1 >) * */ )2 ('*'

*)

*)

>2 >+( 40 * 1 ) ( / 0 (+'

>)

)* )+4 '4 /+0 (( /+' >0 ' ' 2+2

/'

/1+2> > ''+>1 / '+11 ) '2 ( /)+/4

'

/)+/* 0 4>+>> 2 '+24 1 >) * ('**

>4+' 4* 12 4+/ 2) )+* '* > ) ((+)

*/

)0+) (> /0+/ '0 //+* )> * ) /+> 24 (1+( '2

// '11 .' .1 (/**. *)/+0 0* (/+2 44

>2 '1 ./ .1 /2
./

2( '1 .1 .1 4(
.1

/4* '1 .2 .1 /(*

.2

'21. 4'1. 1 '41.

4

0>1. 0'1. 1 0/1.

0

2*2 '1 .0 .1 2)2

.0

11.2

Emplo#ment and Social !mpacts

-,e et,anol "uel and stove marketing business ?ill o""er emplo ment opportunities to a total o" 00 people. !n addition+ t,e production o" et,anol in large scale in Et,iopia s,ould result in t,e creation o" ne? emplo ment opportunities in agriculture and agro5 industr + providing "or considerable and sustainable rural development opportunities. !t s,ould also result in reducing urban unemplo ment t,roug, its direct emplo ment creation in t,e marketing and distribution o" t,e "uel and in t,e local production o" stoves. ;urt,ermore+ t,e business is likel to result in more e@uitable income distribution as it ?ill emplo more lo?5skilled and semi5skilled laborers.

11.3

:ealth and Environmental Benefits

-,e environmental problems associated ?it, ,ouse,old cooking range "rom t,e indoor to t,e global. -,e e""ect o" indoor air pollutants on ,ealt, as documented b various researc,ers and organiCations include t,e "ollo?ing6 a) Carbon mono&ide6 carbon mono&ide e&posure ?ill lead to various ,ealt, problems. E&posure to C$ at lo?er level ?ill cause ,eadac,e at ,ig,er levels ma cause loss o" conscious and even deat,. Long term e""ects o" C$ e&posure include risk to "etusI b) Non Met,ane <olatile $rganic Compounds (NM<$C). -,ese compounds include various constituents o" ?,ic, benCoap rene is t,e most studied and kno?n to cause cancerI c) ;ormalde, de (9C9$)6 ;ormalde, de is a colorless and pungent gas kno?n to cause c,ronic reparator diseases. at large dose irritation+ pulmonar damage and even deat, ma occurI d) 8epairable suspended particulates (8#P)6 8espirable suspended particulates are t,ose particulates o" siCe PM/1 or less and are part o" t,e total suspended particulates generated ?,en biomass "uel and li@uid petroleum "uels are combusted in ,ouse,old stoves. -,e 8#P containing , drocarbons are kno?n to cause respirator in"ections mainl in c,ildren e&posed to indoor air pollutantsI and e) #ul"ur dio&ide (#$')6 #ul"ur emissions are not ma=or problems "or biomass "uels as most biomass "uels (e&cept dung) contain ver little sul"ur. 9o?ever it could be generated at ,ig,er levels ?,en kerosene or ot,er petroleum "uels are combusted. #ul"ur emissions cause irritation o" t,e mucus membrane and o" t,e e e and also c,ronic bronc,itis. Curbing indoor air pollution ?ill alleviate c,ronic respirator problems among ?omen and ?ill prevent c,ild morbidit and mortalit .

Anne$es

Anne& !
&he Business Plan :ousehold Energ# Sample Surve# in Addis Ababa
# Methodolog#

-,e consultant ?ill use t,e #,ell ;oundationKs AD- business plan (%P) toolkit "or t,e preparation o" t,e Et,anol "uel and stove development plan. At t,is initial stage+ ,o?ever+ standard %P development guidelines are used to determine t,e data input and anal sis re@uirements. -,e "ollo?ing seven parts constitute t,e plan6

a. %ndustry analysis5 Places t,e business in t,e conte&t o" t,e need "or its services and t,e business
environment including t,e competition. -,e service to be provided is described and di""erentiated "rom t,ose o" competitorsI comparative advantages are e&ploredI and business ob=ectives are de"ined. Met,ods a. 8evie? and anal sis o" business concepts Q Dra? lessons "rom similar business development strategies in developing ?orld markets b. 8evie? and anal sis o" t,e acceptabilit surve "or et,anol "uel and stove conducted b Gaia in Addis Ababa. Q Anal sis o" costs and bene"its o" cooking ?it, et,anol vs. ot,er urban cooking "uels in selected Et,iopian cities. c. Anal sis o" trends in t,e urban "uel market in Et,iopia to evaluate t,e viabilit o" t,e et,anol business in t,e "uture.

b. 0ar*et analysis. !nvolves identi"ication and anal sis o" needs+ customers and t,e Compan Ks
competitiveness. -,e current and pro=ected demand "or t,e service is assessedI t,e competition is evaluated in terms o" pro"itabilit + sales+ pricing+ marketing strategiesI a pricing strateg is "ormulatedI and a sales "orecast is made. Met,ods

a. Demand assessment "or et,anol Q 8evie? o" t,e ,ouse,old surve conducted b Gaia ('11() Q 8evie? o" secondar data "rom t,e C#A ('110) Q 8evie? o" urban ,ouse,old energ studies "rom t,e E8EDPC (/220 to /22*) Q A sample ,ouse,old surve in Addis Ababa.
#econdl t,e baseline surve conducted b Gaia doesnKt seem to ,ave addressed t,e marketing aspect eit,er "or t,e "uel or "or t,e stove. -,ere is need to identi" strategies "or raising a?areness and directing marketing in"ormation. -,e baseline surve did not cover t,ese issues.

b. Assessment o" volume and value o" business "or ,ouse,old "uels in t,e ma=or cities Q 8evie? o" import and sales data "or kerosene and LPGI sales data "or electricit I estimate Q 4(
o" t,e c,arcoal and "uel?ood market "rom t,e E8EDPC. 8evie? o" price data "or c,arcoal and "uel?ood "rom t,e Central #tatistical Aut,orit .

9ouse,old Energ #urve Met,ods and 8esults

c. 0ar*eting and promotional plan. Develops strategies to deliver t,e product to customers. #ervice
deliver c,annels and promotion strategies are identi"ied. Met,ods

9ouse,old Energ #urve Met,ods and 8esults

4)

a. Marketing c,annels Q Assessment o" t,e marketing c,annels emplo ed "or kerosene and LPG Q 8evie? o" t,e marketing strateg emplo ed "or :(1 Q Assessment o" distribution costs (t,e price building up)+ and legal re@uirements Q Consultation ?it, ke stake,olders (Ministr o" -rade and !ndustr + !nvestment b. Promotion Q #ample surve to identi" best strategies "or promotion o" et,anol (,ouse,olds intervie?ed Q
Commission)

in t,e stove acceptabilit surve ma be used) 8evie? o" t,e promotion strategies used "or e""icient stove dissemination (b t,e E8EDPC)

d. Service processes. -,is e&plains t,e processes involved "rom ?,olesale et,anol purc,ase to
deliver to t,e "inal user. !t ?ill also s,o? t,e et,anol stove import (or local assembl ) and marketing process. -,e ob=ective is to evaluate resource re@uirements (including "inance+ ,uman+ and institutional) "or t,e establis,ment and operation o" t,e business. Met,ods

a. Determination o" s,ort and medium range suppl availabilit and costs.
-,e level o" demand (determined in step ') and t,e volume o" et,anol suppl "rom ;inc,aa (or ot,er sources) determine t,e volume o" business "or t,e enterprise. -,e potential suppl o" et,anol in t,e s,ort and medium term ?ill be estimated t,roug, discussions ?it, management o" ;inc,aa and ot,er sugar estates. -,e Ministr o" Mines and Energ ?ill also be consulted on t,e viabilit o" met,anol production "rom natural gas. Q Determine cost o" suppl (?,olesale purc,ase+ transport+ marketing+ retailing) Q Evaluate risks+ alternative sources o" et,anol suppl Q Assess legal and tec,nical re@uirements "or et,anol purc,ase+ storage+ distribution Polic + regulator and tec,nical support issues a. 8evie? o" policies+ regulations and proclamations in place

b.

e. %nstitutional analysis. -,e organiCational structure o" "or t,e business and its ,uman resource
re@uirements (management and sta"") are assessed.

". )inancial plan. -,is plan s,o?s t,e "inancial risks and bene"its o" t,e enterprise. !t ?ill be a ke
re@uirement "rom partners and bankers. !nvestment and operation costs are s,o?n as ?ell as returns on investment.

g. Ris* analysis. -,e risks to t,e business ?ill be assessed in terms o" market demand+ resource
availabilit and costs+ and t,e competition. #ensitivit anal sis ?ill be carried out to evaluate t,e pro"itabilit o" t,e business ?it, di""erent resource costs+ prices+ sales volume and ot,er sensitivit parameters. #trategies ?ill be "ormulated to minimiCe adverse impacts and to e&ploit bene"its.

9ouse,old Energ #urve Met,ods and 8esults

44

Checklist for the market surve# (t,e dra"t ,ouse,old @uestionnaire is attac,ed)

a. General ,ouse,old c,aracteriCation Q 9ouse,old siCe Q - pe o" emplo ment+ education+ age Q - pe o" ,ouse+ o?ners,ip o" ,ouse Q Bater supplies+ electricit access+ and bills Q $?ners,ip o" p,one+ radio+ -<+ ot,er electronic media Q Bater ,eating "or bat,ing (?,at do t,e use+ ,o? muc,+ "re@uenc ) Q 8e"rigeration Q B,o makes purc,ase decisions in t,e ,ouse,oldX ;or ma=or purc,ases+ "or "ood+ and "or Q
"uel and stoveX Mont,l e&penditures "or t,e ,ouse,old

b. Market and promotional in"ormation Q 9o? to reac, potential customers (media H press+ radio+ -<+ ot,er) Q - pe o" media+ speci"ic papers and programs+ ,ours attended Q ;ood and "uel purc,ases Q B,ere+ ?,en+ volume+ value Q 8easons "or c,oices "or places+ times Q Ne? product purc,ase ,abits Q Pa ments (credit+ cas,) c. ;uel use ("ur eac, "uel) Q ;ood preparation (?,o bu s t,e ingredients+ prepares meals+ bu s t,e "uel) Q Cooking done b emplo ed maid (resident+ non5resident)+ ?oman o" t,e ,ouse+ Q Q Q Q Q Q Q

"emale c,ildren+ man o" t,e ,ouse+ ot,er B,o makes t,e decision to bu stoves+ "uels+ etc ;uel?ood+ dung+ c,arcoal+ kerosene+ electricit + LPG - pes o" stoves o?ned+ used+ e&penditure+ li"e ;re@uenc o" use %aking+ cooking (?at+ co""ee+ tea+ ?ater ,eating) ;re@uenc o" purc,ase+ volume o" purc,ase+ value o" purc,ase Q #tove purc,ases H ?,o makes t,e decisionX 9o? are t,e boug,t (cas,+ credit)X !" credit+ ,o? (ikub+ ?ork place+ ikub+ ot,er)X Place o" "ood preparation (separate kitc,en+ inside main ,ouse)X

d. Pre"erences Q B,at are t,e dra?backs o" e&isting "uels and stoves Q B,at do ou appreciate most in e&isting "uels and stoves (cost o" "uel+ cost o" stove+ Q Q

cleanness+ speed+ eas access to "uel3reliabilit + ease o" use+ sa"et + tradition+ taste o" "ood+ durabilit o" stove+ ot,er B,at are t,e dra?backs (cost o" "uel+ cost o" stove+ ,ard to obtain3not reliable+ smell+ smoke+ break do?n+ ot,er) Comparative cost o" cooking Q B,ic, "uels and stove are t,e c,eapest "or cooking+ second+ t,irdX Q B,ic, "uels and stoves are t,e c,eapest "or baking+ secondX

9ouse,old Energ #urve Met,ods and 8esults

4*

Ethanol fuel and stove market development

S6*2E7 5F &:E 6*BA4 C55 !4; MA* E& D6ES&!544A!*E F5* :56SE:51DS
Enumerator identification !ntervie? date Enumerator identi"ication #upervisor identi"ication Area and sample identification 8egion Sone Cit Bereda :ebele %ntroduction o+ purpose o+ survey to #ouse#olds
""9-9

A % C D E ; G 9

9ouse number or name o" ,ead o" ,ouse,old Name o" respondent to intervie? Contact p,one :ousehold characteristics Number o" persons in t,e ,ouse,old Adult men A older t,an /( ears Adult ?omen A older t,an /( ears C,ildren A /( ears or ounger :ousehold head and spouse details Details about t,e ,ead o" ,ouse,old #e& Age Educational attainmentYgrade Main occupation

! D : L M N $

Male ;emale Government emplo ed #el" emplo ed (incl. Private3NG$ salaried trade) 8etired $t,er #peci" Male ;emale Government emplo ed #el" emplo ed (incl. Private3NG$ salaried 8etired $t,er

/ ' 8 / ' > 0 ( / ' B / ' > 0 (

Details about t,e spouse #e& Age Educational attainmentYgrade Main occupation

9ouse,old Energ #urve Met,ods and 8esults

42

#peci"

9ouse,old Energ #urve Met,ods and 8esults

*1

Fuel consumption, e$penditure, stove use

Do ou use kerosene in t,e ,omeX 9o? o"ten do ou use it "or cookingX

E*5SE4E
Nes No More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never Bater ,eating (bat,ing) Lig,ting #pace ,eating $t,er #peci" / ' / ' > 0 / ' > 0 / ' > 0 / ' > 0 % A

9o? o"ten do ou use it "or re,eatingX

9o? o"ten do ou use it "or co""ee3teaX

Do ou use kerosene "or ot,er purposesX

E ; G 9 ! D :

9o? man liters o" kerosene do ou bu per mont,X :enumerator #elps "it# computation< 9o? man purc,ases do ou make per mont,X B,at t pe o" kerosene stove do ou useX / burner ?ick stove ' / burner pressure stove ' burner pressure stove Gravit pressure stove ;uel is ine&pensive Good "uel availabilit #tove is ine&pensive #tove is durable Clean to ?ork ?it, No smoke No smell ;ast #a"e ;ood tastes good $t,er #peci" ;uel is e&pensive ;uel availabilit lo? #tove is e&pensive #tove is not durable Dirt #moke #mell #lo? Not sa"e ;ood tastes bad $t,er #peci" / ' > 0 ( / ' > 0 ( ) 4 * 2 /1 //

B,at do ou like about kerosene cookingX

Z / ' > 0 ( ) 4 * 2 /1 //

B,at donKt ou like about kerosene cookingX

9ouse,old Energ #urve Met,ods and 8esults

*/

Fuel consumption, e$penditure, stove use Do ou use C,arcoal in t,e ,omeX 9o? o"ten do ou use it "or cookingX

C:A*C5A1 Nes No More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never Bater ,eating (bat,ing) Lig,ting #pace ,eating $t,er #peci"

/ ' / ' > 0 / ' > 0 / ' > 0 / ' > 0

A %

9o? o"ten do ou use it "or re,eatingX

9o? o"ten do ou use it "or co""ee3teaX

Do ou use C,arcoal "or ot,er purposesX

E ; G 9 ! D

9o? man kg o" C,arcoal do ou bu per mont,X (Enumerator ,elps in computation) B,at t pe o" c,arcoal stove do ou useX Mostl traditional metal Lakec, Mostl E@uall (Lakec,P-rad) ;uel is ine&pensive Good "uel availabilit #tove is ine&pensive #tove is durable Clean to ?ork ?it, No smoke No smell ;ast #a"e ;ood tastes good $t,er #peci" ;uel is e&pensive ;uel availabilit lo? #tove is e&pensive #tove is not durable Dirt #moke #mell #lo? Not sa"e ;ood tastes bad $t,er #peci" / ' > / ' > 0 ( ) 4 * 2 /1 //

B,at do ou like about C,arcoal cookingX 8ank[

B,at donKt ou like about C,arcoal cookingX 8ank[

/ ' > 0 ( ) 4 * 2 /1 //

9ouse,old Energ #urve Met,ods and 8esults

*'

Fuel consumption, e$penditure, stove use Do ou use ;uel?ood in t,e ,omeX 9o? o"ten do ou use it "or cookingX

F6E1C55D Nes No More t,an once a da $nce a da Less t,an > times a ?eek Never

/ ' / ' > 0

A %

9o? man times per ?eek do ou bake in=era3bread ?it, itX (1 H None) 9o? o"ten do ou use it "or re,eatingX More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never Bater ,eating (bat,ing) Lig,ting #pace ,eating $t,er #peci" / ' > 0 / ' > 0 / ' > 0

C D

9o? o"ten do ou use it "or co""ee3teaX

Do ou use ;uel?ood "or ot,er purposesX

; G 9 ! D :

9o? man kg o" ;uel?ood do ou bu per mont,X (Enumerator ,elps in computation) B,at do ou like about ;uel?ood cookingX 8ank[ ;uel is ine&pensive Good "uel availabilit #tove is ine&pensive #tove is durable Clean to ?ork ?it, No smoke No smell ;ast #a"e ;ood tastes good $t,er #peci" ;uel is e&pensive ;uel availabilit lo? #tove is e&pensive #tove is not durable Dirt #moke #mell #lo? Not sa"e ;ood tastes bad $t,er #peci" / ' > 0 ( ) 4 * 2 /1 // / ' > 0 ( ) 4 * 2 /1 //

L M N $ P E 8 # U < B Z N S
A a A b A c A d A e A " A g A , A i

B,at donKt ou like about ;uel?ood Cooking3bakingX 8ank[

9ouse,old Energ #urve Met,ods and 8esults

*>

Fuel consumption, e$penditure, stove use Do ou use LPG in t,e ,omeX 9o? o"ten do ou use it "or cookingX

1P; Nes No More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never Bater ,eating (bat,ing) Lig,ting #pace ,eating $t,er #peci"

/ ' / ' > 0 / ' > 0 / ' > 0 / ' > 0

9o? o"ten do ou use it "or re,eatingX

9o? o"ten do ou use it "or co""ee3teaX

Do ou use LPG "or ot,er purposesX

9o? man kg o" LPG do ou bu per mont,X (Enumerator ,elps in computation) B,at t pe o" LPG stove do ou useX / burners burner (or scre? tops) ' More t,an ' burners ;uel is ine&pensive Good "uel availabilit #tove is ine&pensive #tove is durable Clean to ?ork ?it, No smoke No smell ;ast #a"e ;ood tastes good $t,er #peci" ;uel is e&pensive ;uel availabilit lo? #tove is e&pensive #tove is not durable Dirt #moke #mell #lo? Not sa"e ;ood tastes bad $t,er #peci" / ' > 0 ( ) 4 * 2 /1 //

D :

B,at do ou like about LPG cookingX 8ank[

B,at donKt ou like about LPG CookingX 8ank[

/ ' > 0 ( ) 4 * 2 /1 //

9ouse,old Energ #urve Met,ods and 8esults

*0

Fuel consumption, e$penditure, stove use Do ou use Electricit "or bakingX 9o? did ou bu t,e electric mitadX

E1EC&*!C!&7 Nes No Cas, Credit %*ub $t,er #peci" / ' / ' > 0 A %

C D

9o? man times per ?eek do ou bakeX Do ou use Electricit "or cookingX 9o? o"ten do ou use it "or cookingX Nes No More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never Bater ,eating (bat,ing) !roning $t,er #peci" / ' / ' > 0 / ' > 0 / ' > 0 / ' >

E ;

9o? o"ten do ou use it "or re,eatingX

9o? o"ten do ou use it "or co""ee3teaX

Do ou use Electricit "or ot,er purposesX

! D : L M

B,at is t,e mont,l electricit bill (E-%)X B,at t pe o" electric stove do ou useX B,at do ou like about Electricit cookingX 8ank[ / ,ot plate ' or more ,ot plates Electricit is ine&pensive Good "uel availabilit #tove is ine&pensive #tove is durable Clean to ?ork ?it, ;ast #a"e ;ood tastes good $t,er #peci" Electricit is e&pensive #tove is e&pensive #lo? Not sa"e ;ood tastes bad $t,er #peci" / ' / ' > 0 ( ) 4 * 2 / ' > 0 ( )

N $ P E 8 # U < B Z N S Aa Ab Ac Ad Ae

B,at donKt ou like about Electricit Cooking3bakingX 8ank[

9ouse,old Energ #urve Met,ods and 8esults

*(

Fuel consumption, e$penditure, stove use $t,er cooking or baking "uel used in t,e ,ome6 9o? o"ten do ou use it "or cookingX

5&:E* F6E1S A More t,an once a da $nce a da Less t,an > times a ?eek Never / ' > 0 %

9o? man times per ?eek do ou bake in=era3bread ?it, itX (1 H None) 9o? o"ten do ou use it "or re,eatingX More t,an once a da $nce a da Less t,an > times a ?eek Never More t,an once a da $nce a da Less t,an > times a ?eek Never Bater ,eating (bat,ing) Lig,ting #pace ,eating $t,er #peci" / ' > 0 / ' > 0 / ' > 0

9o? o"ten do ou use it "or co""ee3teaX

Do ou use t,e "uel "or ot,er purposesX

9o? muc, do ou spend per mont, on "uelX B,at stove is used "or t,e "uelX

: L

B,at do ou like about t,is "uelX 8ank[

Good "uel availabilit #tove is ine&pensive #tove is durable Clean to ?ork ?it, No smoke No smell ;ast #a"e ;ood tastes good $t,er #peci" ;uel is e&pensive ;uel availabilit lo? #tove is e&pensive #tove is not durable Dirt #moke #mell #lo? Not sa"e ;ood tastes bad $t,er #peci"

' > 0 ( ) 4 * 2 /1 //

B,at donKt ou like about t,is "uelX 8ank[

' > 0 ( ) 4 * 2 /1 //

9ouse,old Energ #urve Met,ods and 8esults

*)

No? ' ears ago Fuel and stove preferences

B,at is t,e c,eapest V second c,eapest "uel "or cookingX (/Hc,eapest+ 'Hsecond c,eapest)

:erosene C,arcoal ;uel?ood LPG Electricit Dung3%L-3ot,er residue

A % C D E ;

G 9 ! D : L

No? ' ears ago B,at is t,e c,eapest V second c,eapest "uel "or bakingX (/Hc,eapest+ 'Hsecond c,eapest) Food preparation in the home B,o cooks "or t,e ,ouse,old+ mostl X ;uel?ood Electricit Dung3%L-3ot,er residue 9ired cook3maid Boman o" t,e ,ouse Boman V "em. c,ildren Man o" t,e ,ouse All members e@uall 9ired cook3maid Boman o" t,e ,ouse Boman V "em. c,ildren All members e@uall 9usband Bi"e 9usband V ?i"e All members e@uall 9usband Bi"e 9usband V ?i"e All members e@uall / ' > 0 ( / ' > 0 / ' > 0 / ' > 0 M N $ P E 8 #

B,o bakes in=era "or t,e ,ouse,old+ mostl X

Purchase decisions B,o makes t,e decision to bu ma=or items "or t,e ,ouse,oldX

B,o decides i" t,e ,ouse,old needs to bu a ne? stoveX Marketing information At ?,at times do ou ?atc, -<X B,at -< program do ou like mostX At ?,at times do ou listen to t,e radioX B,at radio program do ou like mostX B,at ne?spaper do ou read o"tenX Bould ou be interested in a ne? "uelX B,at do ou look "or in a ne? "uel suppl X 8ank[

<

B Z N S Aa Ab C,eap "uel Dependable availabilit C,eap stove Clean and convenient Ac Ad Ae A"

9ouse,old Energ #urve Met,ods and 8esults

*4

#a"e #peed o" cooking $t,er #peci"

Ag A, Ag A,

9ouse,old Energ #urve Met,ods and 8esults

**

:ousing and utilit# #emi detac,ed Apartment $t,er #peci" :itc,en Detac,ed modern !n ,ouse modern Detac,ed traditional !n ,ouse traditional Cooking inside ,ouse $t,er #peci" -aps in rooms in ,ouse $ne private tap in -ap s,ared Communal tap $t,er #peci" $?n electric meter #,ared electric meter No meter ("rom land lord) No electricit $t,er #peci" ' > 0

' > 0 ( )

Bater suppl

' > 0 (

Electricit suppl

' > 0 (

:ousehold assets and e$penditure 8adio 8e"rigerator Electric iron Electric ?ater ,eater B,at is t,e ,ouse,oldKs mont,l e&penditureX Less t,an E-% '11 E-% '115(11 E-% (115/111 E-% /1115'111 More t,an E-% '111 ' > 0 ( D : L M

9ouse,old Energ #urve Met,ods and 8esults

*2

Surve# *esultsB Statistical &ables

Cooking Fuel

-,e sample ,ouse,old energ surve in Addis Ababa conducted as part o" t,is business plan indicated t,at 2*F o" ,ouse,olds use kerosene ?,ile c,arcoal is used in 2/F. 9o?ever+ t,ere is also considerable variation o" bot, kerosene and c,arcoal consumption across e&penditure groups/0. 9ouse,olds in t,e ,ig,est t?o e&penditure categories use kerosene+ ?,ile c,arcoal consumption is /11F among t,e lo?er e&penditure groups and 41F among t,e ,ig,est e&penditure groups. ;uel?ood is used b about ,al" o" t,e ,ouse,olds. Mont,l consumption o" kerosene is '4 liters per ,ouse,olds per mont, in t,e ,ig, e&penditure group but onl ) liters in t,e lo?est e&penditure categor . #imilarl ,ouse,olds in t,e ,ig,er e&penditure categor use 00 kilograms o" c,arcoal per mont, ?,ile t,e corresponding "igure "or lo?est group is '* kilograms. ;uel?ood ranges )' to ** kilograms per ,ouse,olds per mont,.
Fre3uenc# of use

:erosene is used more t,an once a da "or cooking in 21F o" t,e ,ouse,olds+ ?,ile c,arcoal is used b >/F and ?ood b 4F. A ,ig,er percentage ()2F) o" ,ouse,olds also use kerosene "or tea and co""ee making ?,ile onl >'F use c,arcoal "or similar purpose.
&able " Cooking fuel use b# e$penditure class
E&penditure class (E-%3mont,) -otal R'11 '115(11 (115/111 /1115'111 W'111 NH /41 ( >2 4' 00 /1 :erosene 2*F /11F 2'F 22F /11F /11F C,arcoal 2/F /11F 2(F 2'F *2F 41F Bood 02F )1F ()F (0F >0F (1F LPG /(F 1F 1F /1F '4F )1F Electricit ' F 1 F > F > F 1 F 1 F

9ouse,old Energ #urve Met,ods and 8esults

21

/0

-,e "ive e&penditure categories used are+ ,ouse,olds spending eac, mont, A less t,an %irr '11I bet?een %irr '11 to (11I over %irr (11 to /111+ bet?een %irr /111 to '111 and over %irr '111.

9ouse,old Energ #urve Met,ods and 8esults

2/

&able % Monthl# fuel consumption b# e$penditure class

:erosene E&penditure class (E-%3mont,) -otal R'11 '115(11 (115/111 /1115'111 W'111 NH /41 ( >2 4' 00 /1 Liter3mont, /4 ) /' /4 '/ '4 C,arcoal kg3mont, /' '* >' > / > 2 00 Bood kg3mont, 4) ** )) ) ' * 0 *) LPG kg3mont, 2 5 5 ( /' * Electricit kB,3mont, '*1 5 >+*1 ) )+/0 *5 5

&able Monthl# fuel e$penditure b# e$penditure class, E&B@month

E&penditure class (E-%3mont,) -otal R'11 '115(11 (115/111 /1115'111 W'111 NH /41 ( >2 4' 00 /1 :erosene 4 ' '( 02 4 1 * /) / 1 C,arcoal 0/ >0 >2 > 4 0 4 (' Bood '4 >/ '> ' ' 2 >1 LPG (> 5 5 ' 1 0 ( '* Electricit 21 5 /+' /* /+2 )4 5 5

&able .
N H /) 4 / burner ?ick 2*F Lakec, ' burners ?ick 'F -raditional metal / burner pressur 1F e stove Lakec, V traditional ' burner pressur 1F e stove Gra vit press 1F

Stove o,nership and use

:erosene C,arcoal /'2 LPG '1 Electricit > 01F / burner (F / ,ot plate >>F )1F ' or more burners 2(F ' or more plates )4F

&able ) Fre3uenc# of cooking

More t,an once a da $nce a da Less t,an > times a ?eek Never :erosen e *2 2 F ' F 1F C,arcoal >/ >/ F '> F /)F ;uel?oo d 4 /1 F 0' F 0/F L P 0* '' F >1 F 1F Electricit /F /F >F 2(F $t ,er ) ) 'F * )/F

&able 0 Fre3uenc# of use for coffee and tea making

9ouse,old Energ #urve Met,ods and 8esults

2'

More t,an once a da $nce a da Less t,an > times a ?eek Never

:erosen e )* ') F ' F 0F

C,arco al >' 0( F /4 F )F

;uel?ood >F 1F /F 2)F

LP G /> ') F ') F >(F

Electricit /F /F 1F 2*F

$t ,er 1 1 F 1 F /11F

9ouse,old Energ #urve Met,ods and 8esults

2>

&able ' Ma=or advantages of household fuels and stoves

:erosen e ;uel is ine&pensive Good "uel availabilit #tove is ine&pensive #tove is durable Clean to ?ork ?it, No smoke No smell ;ast #a"e ;ood tastes good $t,er ' 0* F /' F 0 F / F / F 1 F >/ F / F 1 F / F C,arco al '4 /2 F /1 F '4 F / F 1 F 1 F ' F ' F /' F / F ;uel?ood '(F /0F )F '(F 1F 1F /F '(F 'F /F 1F LP G 1 1 F 1 F 1 F 1 F 1 F 1 F 1 F 1 F 1 F 1 F Electricit 1F 1F 1F 1F 1F 1F 1F 1F 1F

&able / Ma=or disadvantages of household fuels and stoves

:erosen e ;uel is e&pensive ;uel availabilit is lo? #tove is e&pensive #tove is not durable Dirt #moke #mell #lo? Not sa"e ;ood tastes bad $t,er 4> / F 1 F 1 F ' F // F 2 F / F 0 F 1 F 1 F C,arco al 00 ' F 1 F > F / F >( F ( F 4 F > F 1 F ' F ;uel?ood >*F /F 'F 1F /0F >'F )F 1F (F 1F /F LP G *) /0 F 1 F 1 F 1 F 1 F 1 F 1 F 1 F 1 F 1 F Electrici t 1 1 F

1 F 1 F 1 F

&able + Cheapest cooking fuel

-oda C,eapest '2 01 F F '1 F 0 F / F ( F

'nd c,eapest >)F >4F '/F >F /F 'F

' ears ago C,eapest )2F /*F )F 0F >F /F

'nd c,eapest ' ( / ' / 1 )F / 1 1F

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;uel?ood Electricit Dung3%L-3$t,er

9ouse,old Energ #urve Met,ods and 8esults

20

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Pro=ected Financial Statements

Et,anol Cooking ;uel and CC #tove Market Development %usiness Plan5 Pro=ected ;inancial #tatements