Renewable Energy

Innovative finance mechanisms can scale up clean cooking

Developing countries should integrate clean cooking into their Nationally Determined Contributions to address climate change

By Maitreyi Karthik, Binit Das
Published: Friday 02 December 2022
The advent of electric cooking would be a viable option for improving the sector’s performance. Photo: iStock

In the recent past, clean cooking meant improved cookstoves that use biomass. Clean cooking division was seen by many as a sector that involved low technology. It was considered non-profitable and localised.

The sector is thought to be driven by low-technology cookstove producers despite the spur in bigger and commercial businesses. This understanding is responsible for the sector to be relatively underrated among fund providers and development financial institutions.

The sector has recently undergone tremendous change in terms of fuels used, organisational structures and market models.

Organisations such as electric utilities, mini-grid developers and residential solar systems are entering the market by using cleaner fuels such as — LPG, ethanol and biogas.

Also read: India’s clean cooking transition: Why development financial institutions play major role

The advent of electric cooking, which uses energy-efficient systems, would be a viable option for improving the sectors performance.

In the past, clean cooking has been separated from other energy access initiatives. Thus, most funding institutions did not include clean cooking as part of their landscape.

Some 2.8 billion people throughout the world use biomass despite innumerable efforts in the past decade to improve clean energy access. And another 789 million people do not have reliable access to electricity, according to World BankEnergy Sector Management Assistance Program (ESMAP).

This means that around two billion individuals have access to electricity but still cook using biomass.

Utilising electrical systems for clean cooking is now both affordable and easy to adopt, thanks to innovations and business verticals.

Also read: India’s poor are being forced to return to unclean cooking fuels; here’s why 

The clean cooking venture attracted an investment of $70 million, according to an estimate by Clean Cooking Alliance in 2019. Limited funding and economic tools in clean cooking show the deprivation of electricity as a solution provider in the sector.

One of the important prerequisites for financiers has been assisting in developing commercially successful organisations. These organisations demonstrate that innovations with associated business verticals, when executed, can bring in more investment opportunities.

New energy organisations have shown the capability for technical advancement and this holds good promise for the clean cooking sector with electricity as one of its fuel types.

Rising carbon credit prices (globally) show a positive inclination towards strong economic credibility for the sector. Capital support for organisations in the sector during its early stages is a concern.

The sector at this stage relies solely on grants (including carbon credits) and equity, as opposed to grants, revenue-based funding, equity, debt and other models in later stages.

A figure showing different phases of financing for clean cooking. Source: Energy4 Impact report.

The spur in the growth of Modern Energy cooking is based on technological innovations that have resulted in low-cost appliances with higher energy efficiency and better performance. This has resulted in an increased consumer understanding of clean cooking mechanisms.

Modern energy cooking involves a mix of fuel-cook stove arrangements to achieve tier four or higher emission achievement estimation.

A carbon credit is one scheme that acts as revenue for cooking organisations. Gold Standard, Clean Development Mechanism and other standards organisations are developing frameworks enabling smart communications based on ESMAP-supported procedures.

Last year, Gold Standard, in partnership with Modern Energy Cooking Services (MECS) and ClimateCare, developed a technique for validating carbon emissions for renewable energy-based clean cooking appliances.

This technique uses digital methods based on consumption data to measure and capture the details. This is beneficial for modern cooking organisations to trade in the carbon credit market.

Some of the recommendations that can help scale up the clean cooking division are:

  • Green finance should be derisked by diversifying finance solutions and investment screening to generate returns.
  • Clean cooking value chains should be introduced into the business models of conservation organisations, national parks and other environmental groups to leverage nature-based solutions.
  • Rural development should be promoted by integrating conservation and clean cooking to protect critical ecosystems.
  • Developing countries should integrate clean cooking into their Nationally Determined Contributions to address climate change and other environmental and climate programs.
  • Multilaterals and concessional capital providers should diversify instruments, partial credit risk guarantees, first-loss capital, political risk insurance, foreign exchange risk and private-sector loan guarantees. These instruments will help increase appetite for risk-taking upfront, which is critical to addressing the lack of investable projects in the pipeline.

The development of electric cooking as a practical option is crucial for directing the funds for electrification toward clean cooking initiatives.

Fund providers can use this not only to increase the visibility of electric system manufacturers but also to help the utilities, mini-grid developers, and residential solar systems to increase awareness of the technology.

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