Improved Casamance Kilns - Using an old simple technology to Increase Economic Activity and Slow Deforestation in Togo
Togo is situated between Ghana and Benin. Biomass accounts for 71% of the country’s energy use. The country relies heavily on imports for other forms of energy. 26% of the country’s energy needs are meet by petroleum products. Electricity meets only 3% of Togo’s energy needs (World Bank, Africa Region 2013, 12). Togo imports more than 70% of its electricity, mostly from Ghana and Nigeria (Ntagungira 2015, 15). Although electricity constitutes a very small portion of Togo’s energy use, expanding and improving the electrical grid is seen as a priority by the world bank and the Togolese government (World Bank, Africa Region 2013, 7). Togo’s utility, the Benin Electricity Company (CEB) was formed by Togo and Benin in 1968. The jointly operated utility hold’s itself up has a model of regional collaboration, however the company’s inability to generate sufficient capacity has led to heavy reliance on electrical imports. The Togolese government is now looking to independent producers to increase supply. Increasing Togo’s electrical production and connection will be a very long-term project.
The government seems most concerned with increasing its electrical supply and reducing its electrical dependency. The government contracted with contour global as an independent power producer to build a 100 MW plant. The plan has increased the country’s internal power, but is much more expensive than imported electricity and must import fuel to power the plant. ECOWAS has identified microhydro and pv solar as potential areas for Togo to expand renewables. These would provide further energy resiliency and independence for Togo and may provide a long-term path to energy independence. The Togolese government is more concerned with increasing electrical capacity and energy independence than promoting the efficient use of traditional fuels, however improving the production of charcoal maybe a much faster and simpler avenue to increase power production and quality of life in the interim, while electrical capacity is developed.
All Togolese are poorly served by electricity. The country imports more than 70% of its electrons. If there is a big game in Gahan or Nigeria, Togo is unlikely to receive sufficient energy. Even Togolese who are connected to the grid cannot rely on electricity for cooking regardless of the potential health and economic benefits. All though 68% of urban Togolese have electricity, only 10 % have “access to clean cooking.” Access is the wrong word. The cost of a hot plate is less than the cost of connection to the grid (World Bank 2014, 135); the cost a hot plate is not the barrier to clean cooking.
People demand the highest reliability from their cooking source. The poorly served will not use electric stoves as their primary source for cooking. Charcoal is usually the cheapest non-electric cooking fuel pure unit of energy, it also burns hotter and longer than wood and is preferred in urban areas (Miyuki Iiyama 2013, 3). Most importantly there is always charcoal to buy. Although electricity and gas are cleaner forms of cooking, existing infrastructure does not reliably supply them. Despite the economic and health benefits of electric stoves, cooking is an intensely culturally experience and people demand the highest reliability from cooking. If and when people in Sub-Saharan Africa transition to clean cooking the change will be gradual. Speaking from personal experience, when I arrived in rural Mozambique, I bought an electric hot plate and intended to do all my cooking there, no lighting charcoal for this young man. Then floods hit the country knocking out the transmission lines to the Northern region of the country where I lived, and there was no electricity for three months. I was gifted an improved cookstove and bought my first 50Kg sack of charcoal and cooked this way for a while. Eventually the power come back, but I still used the charcoal cooked stove to make beans, because it took a third of the time of the electric stoves and if I wanted to bake or I had a lot of guests I used a three-stone fire. Later I was moved to an urban area, and I was able to buy a propane tank to cook with gas, but because of unreliable supply, I still felt the need for a triple redundant cooking system, and yes there were times when the electricity was out and there was no gas to buy. As you know this experience is not remarkable. I only mention it to illustrate that people in the developing world will continue to use charcoal even as other technologies become more accessible. It would be marvelous if SDG 7 was realized fully realized by 2030 and everyone could cook with electric convection stove tops, but during the transition people will continue to use charcoal. As charcoal will continue to be an important fuel source programs should be implemented to improve the efficiency of charcoal production.
Toyola is currently selling improved cook stoves in Togo. The continued reliance on biomass means improved cook stoves would likely be the cheapest way to increase energy production, while simultaneously decreasing GHG emissions. The Togolese government formally approves and recognizes its potential; however, it appears that its plan to improve the use of efficient cook stoves is simply to authorize Toyola to produce and sell stoves (Lettre d'approbation du projet MDP 2016). There are many programs designed to get more households to use improved cookstoves. This is vital work that reduces the demand for charcoal and increases the wellbeing of families, but if we intend to increase the access to energy through sustainable development it should must be done by through enterprise.
Charcoal producers are small, albeit often informal, enterprises which are already engaged in the market. Engaging with these entrepreneurs will spur economic activity in the areas around the kin sites. Training and equipment is most effective if it is targeted at an existing market, or better yet uses an existing market to create a related market. I propose that Toyola, as an existing brand in with an established market, partner with charcoal producers to sell them low cost casamance kilns, provide training on how to use the kilns, and enter a power purchase agreement for with the producers. Toyola will have to carefully choose, which areas to enter the charcoal production enterprise. The price of low quality charcoal is between 3000-3500 CFA in most areas, but the price for high quality charcoal varies greatly. In some areas it costs only 500 CFA more per 50 kg sac than ordinary charcoal, while in others high quality charcoal demands a premium of up 4000 CFA a bag (Peace Corps Togo Environmental Volunteers, December 2017). Added production from the kiln will pay for itself in either scenario, but the market with the 4000 CFA market is obviously more lucrative. The kiln itself only costs between $50 and $200 depending on the cost of local materials. (Hoystad, 2011; Nturanabo 2011, 532) Outside Atakpame, where high quality charcoal sells for 8000CFA a sack, one 89 hour long cycle in the kiln increases revenue by up to $5435. The massive increase comes from the much higher price point demanded by quality charcoal and the three-fold increase in production, using the amount of wood.
Toyola currently operates in Togo. Although it is not necessary to be economical, improved kilns could benefit from carbon financing. Toyola has used carbon financing as an important revenue stream in the past (Toyola Efficient Charcoal Cook Stoves 2017). As an existing brand with experience in carbon markets, Toyola has the potential to expand by selling improved kilns. This potential will be discussed further in “next steps.” Carbonization rates between kiln types vary, but a carbonization rate of 10% for traditional kilns and 30% casamance kilns is about average. A casamance kiln can produce 3 times as much charcoal as a traditional kiln, with the same amount of wood (Miyuki Iiyama, 2013, Nturanabo 2011, 532). Togo produces a lot of charcoal, 419, 963 tons a year on average (Jérémie Kokou Fontodji 2011, 1). Traditional kilns, at 10% carbonization, would require 4,199,630 tons of wood to produce that amount of charcoal, while improved kilns would only use a third that number. Selling improved kilns could vertically integrate Toyola’s market, increase wood use efficiency and reduce GHG emissions. Additionally, charcoal production is the primary enterprise in rural Togo (Jérémie Kokou Fontodji 2011, 3), pr¬¬¬oviding charcoal producers with access to finance would also increase livelihoods, potentially creating new enterprises and create a new market for improved cookstoves.
There are many types of improved kilns, finically, the casamance kiln is the most logical option because it is the lowest cost and it offers similar yields to more expensive models. The kiln is essentially a traditional mound kiln with a chimney. For optimal yields the kiln requires a special stacking technique. Toyola model of evangelizers and experience training new artisans to make improved cook stoves, has prepared Toyola to learn and teach new techniques. The kiln must also be carefully tended to ensure no cracks form, which would allow outside air to enter the kiln. Lighting a small fire at the base of the chimney to drive a greater updraft also improves yields. Like traditional mound kilns the earthen portion of casamance kiln must be rebuilt every time it is used (Nturanabo 2011, 534). This is one of the reasons many development projects pursue more expensive metal or brick kilns. They argue that the extra labor required to use the casamance kilns makes them impractical, however access to startup capital, not labor, is the primary hurdle for increasing the opportunity for sustainable productive enterprise in Togo. The process to run a casamance kiln takes less time than a traditional kiln, although it requires a specific technique and greater attention to gain optimum yields of 30%. If Toyola’s new kiln evangelizers can effectively train charcoal producers and provide them with the chimney they will be eliminating the primary hurdlers, which prevent charcoal producers from using improved methods. The chimney is reusable and could be more easily moved between sites if necessary. Chimney’s generally have a life span of 1 to 2 years. The kilns take roughly 89 hours to convert 100 steres of wood into charcoal.
The kilns could be financed through a combination of carbon credits and “a power purchase agreement.” However the carbon credits will not be necessary for the venture to be very profitable. The possibility of carbon financing will be discussed fully in “Next Steps,” here we will focus on the economics of charcoal production in Togo with improved stoves based solely on the market value of charcoal. The enterprises Toyola sells the kilns to will see charcoal production increase up to three-fold. The improved kilns will also make a higher quality charcoal, which sells at premium. In order to get up to date charcoal prices Peace Corps volunteers serving in Togo were interviewed. The prices below are for 50 Kg sacs of charcoal. The price for low quality charcoal was between 3500 CFA in most places, however the market for higher quality charcoal varied greatly. The highest premium for quality charcoal was in Atakpame. The price for low quality charcoal in Atakpame was average, 3500 CFA, but high-quality charcoal in Atakpame sells for 8000 CFA in other areas the premium charcoal only sold for 4000CFA. (Interview with Peace Corps Togo Volunteer, 2017) The increase in production and higher price point will be used to repay Toyola. Toyola will pay the upfront cost for the kiln and train the charcoal producers how to use it. They will sell the charcoal to Toyola below market value as payment for the kiln. However most charcoal producers are obliged to sell the charcoal for 50-80% what it would worth at market because they do not have access to transportation. ( FAO.,161, Baumert etal, 2). Even selling the charcoal to Toyola at 50% market value the charcoal produced will see a significant increase in his profits because of the three-fold increase in charcoal production from the same amount of wood.
The actual building of the kiln will cost no more than $200 or 110,278 CFA because it is simple an earthen kiln with a chimney built from local materials. One recent project in Togo put the price at only $50 (Hoystad, 2011). The chimneys are often made discard oil drums welded together, but it could be anything. Most studies assume the chimneys will be made from oil drums welded together, but only because they are a cheap way to buy metal cylinders. Togo’s heavy reliance on imported oil indicates used oil drums will be plentiful, however if the oil drums are unavailable an alternative source of metal could be found. Atakampe, the optimum market, is an industrial area on the main national highway, meaning Toyola should not have difficulty sourcing scrap metal. Toyola may also realize savings in the production of chimneys because it already employs or contracts with welders who make their improved cookstoves. The existing network of welders who make improved cook stoves will also help simplify the need to establish a distribution network.
The upfront cost will be repaid to Toyola through a onetime PPA. Framing the transaction in terms of a PPA may improve the case for Toyola to obtain its own financing, as PPA agreements are a familiar financing mechanism for energy projects. In the attached appendix I have calculated two scenarios. One scenario assumes a upper end kiln cost of 200 USD with high charcoal prices of 8000 CFA, the second scenario assume a low kiln cost of 50 USD and a low charcoal price of 4000 CFA. Both models assume 30 % of revenue in expenses to pay for transport and evangelizers salaries. The attached excel model sheet explain the model thoroughly. The producer must have his wood cut and dried at the kiln site when the evangelizer arrives with the kiln. The model assumes the first batch uses 100 steres of Anogeissus leiocarpus, (100 steres is the optimum size of a casamace kiln and Anogeissus leiocarpus is the preferred species for charcoal production in Togo.) The kiln takes 89 hours to run and one 100 stere kiln cycle will be sufficient to pay for the chimney. The evangelizer will pay the charcoal producer the agreed upon price after the charcoal has been bagged and loaded on to transport. The simple payback for the kiln with this model is 1 week including time for construction the kiln training the charcoal producer and bringing the kiln to market. The loan carries very low risk because Toyola never actually gives money to the producer. Toyola gives the producer a chimney, which the producer and the evangelizer then use together to make charcoal. At the end of the of the interaction the evangelizer leaves the chimney with the producers and buys the charcoal at a discounted price. The low risk and very short life of the loan should allow Toyola to carry the cost on its balance sheet, especially if the profits from the first improved kiln ventures are reinvested in future kiln projects.
If a region suffers frequent blackouts or brownouts people will not cook with electricity. Charcoal usually fills this void. Improved cook stoves have helped to increase the efficiency of wood uses and improved kilns for producing charcoal could magnify this success. Together Improved cook stoves and improved kiln will greatly reduce rates of deforestation Toyola’s existing brand, sales structure and experience can allow it to expand in to the kiln market. Toyola’s experience with carbon finance and the potential to become vertically integrated will be explored in “next steps.”
Apart from the charcoal itself the improved kilns offers the potential for carbon credits as an additional revenue stream. As explained above carbon financing is not necessary for the kilns to be very profitable in Atakpame and because it can be so difficult and costly to gain the Gold Standard certification for carbon financing Toyola may be better off investing its resources in other ventures. That being said, if E+Co were to once again aide Toyola in gaining carbon financing this revenue stream could be worth $380 of the lifetime of each kiln, substantially more than the cost of the kiln itself. Every time a casamance kiln runs a cycle with 100 Steres of wood it prevents roughly 3.134 metric tons of CO2 from being released into the atmosphere (See appendix for calculations). The kiln takes 89 hours, a little less than 4 days to run. Considering the time required to bag the charcoal, acquire more wood, and rebuild the earthen portion of the kiln we will conservatively assume the kiln can run every 2.5 weeks, assuming a median life span of 1.5 years for the chimney allows to make the conservative estimate that each chimney should offset 97.86 metric tons through out its life. Goldman Sachs did not disclose how much they paid for carbon credits, but did say each stove generates about $20 worth of credits of its five-year life span (Smith, Nat. Geo Feb 2011) Each stove saves about 1.03 tons of Co2 a year (Ashden Award Winner, 2011), and stoves last about five years. By my calculations this puts the price Goldman Sachs paid at roughly $3.88 per ton. Assuming Toyola could sell kiln carbon offsets for same price and each kiln saves 97.86 tons of Co2 over its life the carbon financing from each kiln should be worth $380. The impermanent nature of the kiln earthen kilns may preclude them for gold standard certificate and carbon credit generation, however if the verification is feasible the carbon financing would more than pay for the cost of the kilns.
The Toyola could also have the advantage of vertically integrating its market by accepting the charcoal in-lieu of cash payment. As Toyola already goes door to door in homes of improved cookstove owners to collect earning from its money boxes. The same collectors could bring the charcoal from the improved kilns and sell it to the improved cookstove owners, as they separate the earnings in the money boxes. The delivery of the quality charcoal could be marketed as a service for the improved cookstove owners. This model would require Toyola to enter in long term PPA agreements with charcoal producers. The producers would be likely to agree to longer term PPAs because of the security offered by the agreement. Numbers for Togo were unavailable, however in general charcoal producers in Sub-Sarah-Africa only receive between 20-50% of the value of the charcoal and the rest is lost to middle men (FAO. 2017,161, Baumert etal, 2). If Toyola buys charcoal for 65% of market value and sells to own customers for 90% of market value the producers and customers will benefit, because Toyola will be able to improve efficiency through cutting out three middle men even at these price Toyola should still see profits. Making slightly lower cost, higher quality charcoal available to purchase for its customers will also increase demand for Toyola’s cook stoves.
Toyola should treat its first kiln deals as pilot studies to determine true transportation and labor costs. If the estimates of 14% of revenue for transport loading costs (FAO, Simple Technologies for Charcoal Making), Toyola hold true Toyola could see a 14% on charcoal sales. The need for the initial kiln sales to attack as a pilot study because these percentages are based on a 1978 study in Senegal. The finical models for the kiln study assume 30% of revenue will go operations and transport in order to provide contingency for Toyola.(See Attached Finical Model). If these assumptions hold true Toyola could see a 14% IRR by expanding into the business of buying charcoal from its kiln owners and sell charcoal to its improved cook stove users.
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