Market study biomass advanced cookstove in vietnam

Map 1: Mapping of stove companies’ market penetration in Vietnam Blue represents producer companies’ main workshop, Green represents companies’ branches areas – source: interview stove c

ADB Asian Development Bank ALRI Acute Lower Respiratory Infection

GACC Global Alliance Clean Cookstove

(German: German Society for InternationalCooperation)

MARD Ministry of Agriculture and Rural Development MOIT Ministry of Industry and Trade

PCIA Partnership for Clean Indoor Air

QSEAP Livestock Foodstuffs Safety Project

RENMI Renewable Energy and New Materials Institute SHEER School of Heat Engineering and Refrigeration

VNGO Vietnamese Non Goverment Organization

Abbreviations

I Introduction 4

A Objective 4

B Methodology 4

II Summary 4

III Overview 5

IV Market size and trends 6

V Market potential and opportunity 7

A Target customer profile 7

B Target market areas 9

VI Characteristics by fuel users 9

Firewood user 10

Agriculture residue user 11

Wood pellet and briquette users 11

LPG user 11

VII Cookstove market 11

VIII Policy relating to cookstove 21

IX Companies and product in the market 21

Stove companies and their products in Vietnam 21

Quality control 24

Manufacturing capacity 27

Transportation capacity 28

Retailer system 28

Main barriers to the market 29

Willingness to pay versus high quality of cookstoves 29

Behavior change barrier 29

Limited business management capacity and financial constraint 30

Willingness to participate in SNV ICS product 30

X Conclusion 30

Acknowledgements

This report would not have been possible without the interview participation of cookstove producers and researchers Special thanks to my talented colleagues in renewable energy team for their support

We also thank Resy Vermeltfoort and Theo Shand for their help in text editing

Table of Contents

I Introduction

A Objective

SNV is implementing the project: “Acceleration of sustainable market for advanced

cookstoves in Mekong Sub-region” in Vietnam For the Vietnamese market this is the first

long-term project (4 years) focused on the industry of Improved Cookstove (referred here after as ICS) The project objective is to sustain the market by incentivizing companies to produce and sell stoves that meet international standards and reduce the emissions from the combustion of solid biomass fuels in order to reduce negative effects on human health The overarching development objective is contribute to socio-economic development of the local and global environmental protection This market study was performed to evaluate the current market for cookstoves in Vietnam in order to be able to design a contextualized approach for Vietnam while aligning with the regional project

B Methodology

- Initial desk review of existing reports from Global Alliance for Clean Cookstove (GACC) of which SNV is a fouding member; GIZ, SNV Vietnam and other reference (specified later) The GACC reports of Vietnam Sector Mapping and Intervention Options were made in 2012 in close cooperation with the renewable energy team of SNV Vietnam To date, they are the most comprehensive reports on the cookstove industry in Vietnam, therefore they have served as the basis for this report SNV Vietnam has performed several cookstove projects

in which it executed studies related to cookstove usage and build up a considerable network with several cookstove producers This information has been analyzed and included in this report

- Phone based interviews:: 32 producers, 2 suppliers and 6 institute of energy were identified and contacted by phone 34 of them were able to provide information Others were not available at the time they were contacted The list used to contact the stove companies and retailers was crated based on an online research Stove producers with whom SNV

previously had contact were also included in this list A semi-structured questionnaire was designed and used to guide the interview

II Summary

The study was designed to address key questions listed below:

- What is the potential of the Vietnamese market for using Advanced Clean Cookstoves (ACCS)?

- What are the current cookstoves used in Vietnam and their market penetration?

- What is the available fuel in the market?

- How many stove manufactures are active in the market? Can their products meet customer requirements? Are there barriers to market entry?

- What is the consumer profile? How much will potential clients pay for an ACCS?

General Introduction

III Overview

Vietnam is well on its way to becoming a middle-income country by 2020, having made incredible economic strides across the board in the past decades with GDP increases of 18% per year In 2012, GACC carried out an assessment of the Vietnamese market that resulted in a report which provided sector mapping and intervention options According to the report, since

1980, migration to clean cooking has happened naturally as a result of economic growth

(accounting for 96%) and purposefully through dissemination by two major players: SNV and Vietnam Women’s Union (accounting for 4% with the combination of other smaller funded programs) Despite these significant gains, 46.4% of people still rely on solid fuel for cooking,

causing 10,600 deaths per year (1)

There have been many programs to promote ICS, however they are all small in scale and not funded end-to-end by either Government or NGOs Realizing the importance of cookstove components to the renewable energy, deforestation and food security/cropland salinization sectors, many researchers have been involved in biomass energy production, biochar

production and sustainable forest initiatives but the challenge of creating a self-sustaining ACCS

market in Vietnam remains (2)

This survey pointed out the positive development that the number of private sector parties involved has been increasing dramatically since 2012 The survey identified that 95% of

producers established from late 2011 to present Though some of them are small in scale, they are all private entrerprises and they provide ACCS models that aim to save fuel, reduce smoke and be affordable for rural households

The map provided below illustrates the location of producers and their market penetration across the country The Northern part of Vietnam is covered by company branches providing improved cookstoves (ICS) in 20 provinces, while 8 provinces are reached in the Center and 6 provinces in the South Two companies exported their stoves to Lao PDR and Cambodia with consideration to transfer technology to local artisans One company exports ICS to Korea which is also the main market for the wood pellets they also produce

Map 1: Mapping of stove companies’ market penetration in Vietnam

(Blue represents producer companies’ main workshop, Green represents companies’ branches

areas – source: interview stove companies)

This map visually shows the potential market of ICS in Vietnam as private enterprises have presented in 34/63 provinces However, it also indicates the limitation of stove companies as just provinces around the workshop areas are targeted in order to keep the price low and the products affordable to the target group, while graph of solid fuel use by regions (Which is showed in point B, part V below) points out the potential market is also in the remaining

provinces If SNV Vietnam succeeds with this project, stove companies will have extra financial resources to expand their businessamong other by expanding into more distant markets with high demand of ACCS

The greatest identified challenge for producers is balancing between the quality of stove and the willingness to pay by the end user In general, users are willing to pay more for the better quality stove Many targeted customers however have a low income and use agriculture residue

or fuelwood as the main fuel, don’t prefer to switch to a more expensive stove model Even in

the low cost segment, end-users still expect a stove to last for at least 2 years (SNV-VFD,

9-2015)

While the ICS industry in Vietnam is developing there are no regulations related to ICS, and the process for achieving regulations and national standards is lengthy and challenging While

regulation isl critical, it will not ensure people will actually comply with set standards (2) All ICS

manufacturers’ claims that their stoves are highly efficient compared to traditional cooking methods and are continuously re-designing their products to meet the customer’s expectation

In reality, it was found that only a few stove models were assessed by an official testing center The concept of quality testing is still new to the market and will require significant capacity development

IV Market size and trends

 Animal Farming Household or Non-Animal Farming Household

 Existing use of Traditional or Modern Fuels

 Above or below the recognised poverty line for Vietnam (under 1.25$/person/day) (5) The following assumptions where taken when breaking up the data:

 Animal farmers do not exist in the cities and all animal farmers are above the poverty line; due to research indicating animal farmers are generally richer than their non-

animal farming rural neighbours (SNV Biogas User Survey, 2012)

 A minimum of 2 cows or 5 pigs is required to create biogas; the poorest segments of

urbanites use traditional fuels

Figure 1: Illustration of target market identification according to GACC, 2012

In summary, there are four very different markets with very divergent needs: rural animal farmers, inaccessible poor, rural leapfroggers and the lower-income urbanites The

potential market for an ICS intervention in Vietnam is approximately 12.8 million households

(GACC, 2012) Producers with gasification stoves which use agriculture residue and firewood fuel

should focus on 4.4 million HHs raising animals and 4.6 million HHs without animals in the rural area Producers who are developing the gasifier stove to use wood pellet, briquette or charcoal should target the market of 1.1 million HHs in urban area To 2.8 million HHs using traditional fuel but classified as inaccessible disadvantaged, the approach of a market-based mechanism may be not suitable

as this is where the biggest persistent need will be when the population continues to get richer However, the reason for households using cleaner fuels is to increase their cooking options as an addition to rather than a replacement for, solid fuels and traditional stoves Parallel use of

several fuels appears to be a common phenomenon to utilize the abundant fuel resources in terms of wood fuel and agriculture residue in rural areas

V Market potential and opportunity

A Target customer profile

Figure 1 shows the market identification All segments can in principle be targeted but programs will need to address radically different needs across the segments There are four different groups, 3 rural and 1 urban, as illustrated below:

Rural area Urban area

Rural leapfrogger

Rural animal farmer

Inaccessible disadvantaged

Lower-income urbanite Characteristic Has access to

modern fuels such as LPG and electricity

Has sufficient animals to justify bio digester investment

Has access to modern fuels but might not spend money

on them

In favor of portraying wealth through purchase of high cost electronics, etc

Has limited or

no access to modern fuels

Is not near roads

Primarily uses biomass (wood and

agricultural residue)

Has access to modern fuels such as LPG and electricity

Increasing costs has forced a higher usage of coal

Uses LPG for quick foods and electricity for rice cooker

Profession Farmers,

industry, service &

salary workers

Animal husbandry and farming

Subsidence farmers, gatherers, ethnic

Service and industrial workers

line

Above poverty line

Below poverty line

Below or near poverty line

Cooking

device and

fuel

Traditional fixed stove and portable cookstove

Fuel: wood, crop residue

Traditional fixed stove, gas stove Fuel: wood, LPG, biogas

Traditional fixed stove, 3-stones fire Fuel: wood, crop residue

Traditional rocket stove

Fuel: beehive coal

Cooking

location

Outdoors during summer Indoors during monsoon season

Indoors in a separate building

Mostly indoors for heat in winter, maybe

go to a separate building or outdoor in summer

Outdoors during warm season Indoors during winter (not allowed due to toxis SO fumes emitted by coal stove)

Med

Barriers to

switch

Affordability Access to finance Awareness

Lack of capital Lack of enough animal Lack of construction area

Affordability Access to finance Awareness Access to modern fuel

Affordability (prefer LPG)

Willingness

to pay

hard to pay out of pocket

Low, due to displacement costs from flooding

Med – can pay if fuel price decreases

Purchase

drivers

Ease of use Perception

Fuel saving Ease of use perception

Fuel cost Ease of use

Fuel cost Ease of use

Table 1: Target customers characteristic (GACC, 2012)

The segment most in need of ICS are the highly inaccessible and largely ethnic groups in the North However, this segment is expensive to reach, relatively small and shrinking every day The true challenge is to reach the highly demanding 9 million rural households and farmers that are leapfrogging to new living standards These consumers need stoves to be functional, affordable, and aspirational products that they are as proud to own as their new satellite TV End-user demand and product preference vary significantly across customer segments Although most consumer segments can be reached by market-based cooking solutions, affordability remains a major barrier

B Target market areas

Based on the solid fuel use by region figure, the area that depends most on solid fuel is North Midland and Mountains with 70% dependency, followed by Mekong River delta and North Central with 55% and 53% respectively As this fuel is abundant in this area, it will be the main target for ICS The Central Highland also has high potential with 49% of people relying on solid fuel According

to Map 1 only one of these provinces is actually reached Compared to Map 1, producers are doing business in the first and the third ranked areas and the second and fourth ranked areas are still under served

●

Figure 2: Solid fuel use by region (GACC, 2012)

VI Characteristics by fuel users

Energy consumption and fuel type are strongly influenced by accessibility, affordability and the convenience of the fuel These criteria are closely related to each other and also depend

on household income The decision making process is complex with economic and technical aspects interlinked with social and cultural issues Cooking with wood fuel, for instance, is so deeply ingrained in many local cultures that other fuels have little appeal, even when the

potential health and environmental threats are recognized by users Furthermore, the

prevalence of fuelwood in many developing countries can be explained by the fact that it is still the most readily available, affordable or even cost-free cooking and heating fuel

Table 2: Determinants of stove/fuel choice

Family size Sex of household head Age of household head Education level

Taste of food Cooking habits/customs Convenience of fuel

Food preferences

Household income Stove price

Usage costs Fuel costs Fuel/ICS availability Use as “back-up” stove

Efficiency Safety Emissions Stove quality/durability Functionality/Speed of cooking

Convenience/portability Aesthetic features

Source: (GIZ, 2014) (11)

The prospects for switching fuels within households as well as for effective government interventions are markedly different for urban and rural areas Given the fact that fuelwood will continue to remain the primary practical option for rural households, the promotion of

improved stoves should be given greater attention In urban settings, the availability of LPG, higher education levels and correspondingly higher levels of household income provide the momentum for switching to LPG However, households do not simply substitute one fuel for another all at once but first begin by using multiple fuels, also known as fuel stacking Fuel stacking provides a sense of energy security, since compete dependence on a single fuel or technology would leave households vulnerable to price variations and unreliable service

Firewood user

Based on the methodology to analyze potential customers for the ICS, there are around 12.8 million households still using traditional fuel of which firewood is the main source Those households are living next to mountainous areas where they have an abundance of fuelwood or

in remote area where other advanced types of fuel have not yet reached Firewood is either privately collected by households or is acquired at a firewood market (On average the price per

20 kg of firewood is between 15,000 VND – 30,000 VND depending on the quality of wood)

(SNV, 2011 and field visit experience) (15)

Evidence from reports show that firewood is the dominating source of cooking fuel There are more poor HHs using firewood as a main source comparing to better off HHs Almost all ethnic minority HHs use firewood as a main fuel source for cooking as well as for heating In the winter season in the North (from October to March - 5 months), people keep the fire

burning almost all day to warm the house This is an open fire, generally in house’s center and used for cooking The fire is often used by elderly and children to stay warm which can lead to serious health issues Therefore, it is necessary to have a dual function heating and cooking stove for people in this region The main point that will encourage firewood users to change their behavior of cooking will be the negative effects on the health of women and children It was found that there is very limited awareness about the harmful effects of smoke to human

health such as Acute Lower Respiratory Infection (ALRI) among children under 5 years old, Chronic Obstructive Pulmonary Disease (COPD) and Lung cancer

Another group which consumes a large amount of fuel wood are HHs who raise animals and have secondary business such as selling wine, tofu or run a small restaurant Their key concern is looking for another stove that helps them to save wood in order to increase profit margins

Agriculture residue user

Agriculture residue includes rice husk, rice straw, peanut shell, shaving, corn cob, etc The resource is used either as cooking fuel or supplement to animal feeding In many village rice mills nowadays, it is seldom to see rice husk strewn everywhere even though this was common practice several years before People now collect the rice husk because they know it can be burnt or can be used to feed animal or at least they can sell it with the price of 10,000 VND/sack

(Field visit) While rice husk is utilised quite efficiently as a bio-supplement for animal raising,

cooking and producing briquettes, the rice straw is being left to decay or burned in the field after harvesting It is estimated that in Thanh Hoa province, about 1.5 million tons of residues, including rice husk, straw, sawdust and shavings generated from agricultural and forestry production are being mainly dumped or burned causing serious environment pollution and wasting a valuable biomass energy sources In the view of DARD officers, only about 20% of residues from the bamboo processing industry are utilized and the rest is discharged into the environment

In Northern provinces such as Cao Bang, Ha Giang and Tuyen Quang, corn cobs are used

as a main source of fuel for 11 months of the year (Field visit) To utilize this kind of fuel, one

stove producer designed a model suitable to the needs of these areas Most agricultural residue using households have to combine fuel types in order to keep the residues burning

Wood pellet and briquette users

Currently, not many wood pellet or briquette users have been found across the country

as the supply chain of these fuel is not fully developed In the years before 2014, these products were produced for export purpose to Korea at a rate of 120 USD/ton When the overseas market demand decreased in late 2014 many companies started focusing their efforts on the local market, increasing demand and setting up supply retailers/branches across the country

(Biomass magazine, 2015) (4)

LPG users

The number of LPG using households equals the firewood using households though they are predominantly in urban or sub-urban areas Over recent years Vietnam has seen a reduction in the price of LPG and many lower cost LPG stoves were introduced to the market As a result, many rural households can now also afford such a stove prompting supply retailers to set up at the village level This stove is an aspirational stove that makes people feel they are moving towards a modern life A focus group discussion of 50 women who have LPG stove in Thanh Hoa province (12/2015) provided the following results regarding usage:

 It is used only for quick cooking food such as stir-fried meal or boiling vegetable

 Most of the women will use water heated by firewood stove to boil vegetables on LPG

stove

 Total estimated time using LPG stove per day is 30 minutes while firewood stove will be from 2-3 hours per day

VII Cookstove market

Reports from SNV (Cookstove usage in Vietnam 2011 – 3 provinces in the North and Centre), Biogas user survey (2012 for 17 provinces across the country and 2013 for 13 provinces across the country), a review report of improved cook stove; GACC industry mapping report and

information from news on project of WWF shows that the consumers currently use different types of cookstoves, including:

Iron bar stove (three legs or four legs):

This is a traditional stove that is widely used in the North and Center of Vietnam The advantage of this stove is its price, it can be used for cooking in many places with different types

of fuelwood (tree branches, straw, etc.) Iron bar stoves lasts for a long time, from 5 years to over 20 years The price is relatively low ranging from 50,000 VND to 100,000 VND depending on the size and the amount of iron consumed to produce the stove It is available in local markets and iron-warehouse Today, most people order them from welding workshops because they can tailor one to any size that fits their needs Even though many households will build a new stove when their income increases, the iron bar stove will be kept in the house as a backup or to be used for special dishes such as “banh chung” during New Year vacation or special occasions such

as weddings in rural areas The disadvantage of this stove is that just like an open fire it creates a lot of smoke/dust and often has to be tended continuously while cooking and it has a very low efficiency

Dual concrete rice husk stove:

This is the most promient stove in the Mekong delta regions (13 provinces: Long An, Tien Giang, Ben Tre, Vinh Long, Tra Vinh, Hau Giang, Soc Trang, Dong Thap, An Giang, Kien Giang, Bac Lieu, Ca Mau, Can Tho) Experts who are working in Agriculture sector from

universities in Ho Chi Minh city confirmed that this is the most popular stove in the region due

to the abundance of rice husk as it is a by-product of rice production and this is the largest rice producing area of Vietnam This type of stove can be made by local artisans (it is said that every province has at least one producer) It is made from concrete using a mould The price of this stove is around 700,000 VND/stove with chimney and 600,000 VND/stove without chimney

3 ong tao stove

This stove is similar to the Lao stove It is made by fired clay and uses firewood as main fuel It is widely used in the Mekong delta and provinces near the Lao border The advantage of this type of stove is that it is compact and can be used with small wood branches and leaves for cooking which is appropriate for cooking the food fast by households The stove’s price is quite low at around 50,000 VND/stove which is quite suitable for low income households

Cement brick cookstove:

Depending on the design of this stove, you can cook with 1-3 pots at the same time It has iron bars on the bottom of the pot holder and fuel, such as firewood, agricultural residue or coal, will be placed underneath The fixed stove for one pot is widely used by households for making animal feed or local wine while the multiple pot designs are used for household cooking Over the years this cook stove has been promoted by a number of development projects

(ActionAid in Thanh Hoa 2011, SNV in Nghe An 2007 and Forest Science Institute) However, this stove normally lasts for only 1-3 years, because it cracks over time The cost of this fixed stove falls in the broad range of 300,000 VND to 800,000 VND, depending on the size and quality of the stove and can be made in situ by local masons or even by the households themselves

LPG cookstove:

The LPG stove is an aspirational stove, especially in rural areas In 2015, the price of gas decreased (From more than 500,000 VND/12kg in 2012 to 310,000 VND/12kg in 2015) (12), as compared to previous years, allowing more and more people to financially access this type of stove However, as previously mentioned, people use it mainly for quick cooking, as many rural

households state that one 12kg bottle of LPG can last for 4 months (Field visit) In urban areas

there is a growing trend to replace LPG with electromagnetic stoves, because of a number of gas explosion that have happened

Biogas cook-stove:

It is a cooking system which consists of a gas generation tank, a pipe connecting the tank and one or more cookstoves with valves to control gas emission and thus heat Biogas is

particularly used by households raising a large number of pigs and/or cattle There are several biogas projects of which SNV/BP is the biggest with over 145,000 constructed digesters so far (16); others including QSEAP from ADB with around 22,383 constructed digesters (18); LCASP from MARD with 20,000 constructed digesters by now (19); LIFSAP of World Bank with 25,000 constructed digesters and others are under other programs or constructed purely commercial

In total, about 220,000 household biogas plants have been constructed in Vietnam (20)

Electric rice cooker:

This is a very popular stove for households and it is only used for cooking rice It is accessible to the poor with a price that ranges from 288,000 VND to a few million (17)

different ICS projects more than 44,500 different types of stove were promoted to households across the country It is believed that, to date, the same number of ICS was sold by the private sector Table 3 below shows the classification of the different types of ICS that are available on the current market

Table 3: The current number of improved cookstoves on the market:

Fixed brick

built stove

- Promoted by SNV (2010), World Vision (2011), Helvetas (2011), VNEEP, Science Forest Institute (2007)

Price: 300,000 800,000 VND/stove

Lasts for 1 3 years

- Developed

by Population Environment and

Developmen

t center (PED)

- Helvitas and World Vision models

- Generally uses firewood and biomass

- For 23 years on the market

- Efficiency test in

1990

- Price: 140,000 VND/stove

Mr Hong in Phu Tho

name: GF2

firewood, corncob, woodchip, bamboo waste, etc

was transferred to

a local workshop, but then the quality of the stove was not controlled

- Price:

80,000 VND/stove

CRD/GRET project

Portable iron

cookstove

years on the market

- Design is a combination of metal and clay to make a cone-shaped stove

biomass fuel

- Price:

140,000 VND/stove

counterfeit products available

on the market

Designed by Truong Giang Company

Gasification

stove

- Brand name: THX stove

- 3 years on the market

- Uses woodfuel, biomass and corn cob- Can produce biochar

Price: 150,000 450,000VND/stove

Designed and developed by GreenGen company

- Brand name: Tien Manh stove

- Fuel: rice husk

- 3 years on the market

- Price: 240,000 – 290,000

VND/stove

30,000 VND/fan

- Lasts for 1.5 years

Produced by Tien Manh company

Many producers produce similar types

of this stove such as:

VINASILIC stove, Rua stove, Spin Stove, Viet Stove

- Brand name:

TNM-Sieubep 304

- Innovative stove which has a surrounding chamber working

as a kettle

- 1 year on the market

- Price: 350,000 – 430,000

VND/stove

Produced by TNM company

- Brand name: Tre Xanh Stove

- 4 years on the market

- Price:

450,000 – 550,000 VND/stove

Produced by CCBM company

name: Agrines stove, Lam An stove and other names with the same design

- 1 year on the market

- Price:

400,000 VND/stove

- Model is used for collective kitchens and has a price of 980,000 VND/stove

Produced by Agrines company

name: Infrared gasifier Thao Nguyen stove

utilizes all types of available

agriculture and forestry waste

continuously for

2-3 hours

- Price: 2.9 million/stove

2.2-Produced by Thao Nguyen company, Duc Nhan

company, Thuan Phat, Vinafat, hitech company with the same technology

- Brand name:

Infrared gasifier Duc Nhan stove

Semi-gasifier

stove

- Brand name: PED

- Fuel use: Biomass and fuel wood

- Price: 400,000 VND/stove

- Continuous cooking

- Price: 450,000 VND/stove

- Warranty of 3 years

Solar serve company

- Brand name:

R14, R18, C22

- Fuel: firewood, corn cob and biomass

- Warranty: 6 months

- Price: 150,000 VND for R14 and R18, 180,000 VND for C22

GreenGen company