Koko Networks’ CEO on the benefits of scaling up ethanol cooking fuel
While charcoal is still used as a primary cooking fuel in many developing countries, it is carbon intensive and can cause respiratory problems. Kenyan climate tech start-up Koko Networks aims to tackle this problem by distributing ethanol as a cheaper and cleaner alternative.
“We’re very focused on destroying demand for charcoal and replacing it [with ethanol],” says Greg Murray, Koko Networks’ co-founder and CEO. A 2018 study found that transitioning households to ethanol cooking fuel in Nairobi, Kenya’s capital, could reduce emissions by up to 2.4mn tonnes per year, and avoid at least 1,500 deaths from indoor air pollution.
Through a network of “fuel ATMs in mom-and-pop stores” across Nairobi, Murray says Koko Networks is able to deliver liquid ethanol that is 40 per cent cheaper than charcoal. He adds that for fast-moving consumer goods such as ethanol to succeed in urban Africa, businesses need “really close proximity” to households and the foot-based retail economy.
Koko Networks, which also produces ethanol stoves at two factories in the Indian city of Ahmedabad, saw the number of Kenyan households using its service grow by 450 per cent in 2021 to reach 330,000. The company, which was founded in 2013, recently opened in the port city of Mombasa and hopes to expand into other countries across Africa, southeast Asia and Latin America.
Expansion hurdles
Murray believes energy is “the least free market sector” globally. Despite renewable sources such as ethanol being favoured through subsidies and taxes, he says translating this into operating licences is “easier said than done”. Though around 300mn households in 60 countries could afford to use Koko Network’s solution, Murray says that government policies — including taxes and import tariffs — can be inhibitive.
“The deciding issue for us is tollgate taxes,” he says, noting that these taxes inflate the cost of KoKo Networks’ products and services compared with charcoal.
Often there are no existing regulations, he adds, noting it took two years of working directly with the Kenyan government to implement national standards on Koko’s ethanol stoves.
“We’ve had to get dozens of individual operating licences across the different ministries,” he says. Despite wanting to invest into neighbouring African countries, such as Uganda and Tanzania, Koko needs assurances from the government around tax and tariff removal, Murray says. “We need pre-investment agreements, similar to a power plant developer, which enables us to decide about investing in one country over another.”
Koko Networks estimates it would take between $1bn and $2bn of investment to enter those 60 countries where consumers could afford its ethanol cooking fuel.
Policy is key
Murray says while governments are committed to reducing charcoal use, liquefied petroleum gas (LPG) is widely viewed as the best alternative — but LPG is far more expensive than ethanol, requiring about 18 times more capital expenditure (capex). “Ethanol is an uncompressed liquid versus LPG being a compressed gas, which means the capex is less across the entire supply chain,” he says. Koko stores its ethanol under existing petrol station infrastructure in Africa as part of a partnership with Vivo Energy.
Koko is also able to sell its ethanol more cheaply to consumers, thanks to selling carbon credits to a subsidiary of South Korean utility Korea Electric Power Corporation. “We are selling to industrial and utility companies, but have also got some of the poorest people on the planet as household customers,” says Murray, who notes that their interests aligning will help accelerate uptake of ethanol as a solution.
While a lot of focus is put on climate financing, multilateral institutions would achieve more by creating enabling business environments, in his view. “The most impactful thing they can do is work with governments to remove the tollgate taxes that enable private investment to flow. All the rest is a distraction.”
This article first appeared on fDi Intelligence