79279 The World Bank Asia Sustainable and Alternative Energy Program E A S T A S I A A N D PA C I F I C C L E A N S T O V E I N I T I AT I V E S E R I E S Indonesia Toward Universal Access to Clean Cooking June 2013 Copyright © 2013 The International Bank for Reconstruction and Development/ The World Bank Group 1818 H Street, NW Washington, DC 20433 USA All rights reserved. First printing: June 2013 Manufactured in the United States of America. Photo credits: Front and back covers: Laurent Durix Inside covers: Laurent Durix (1, 3, and 4) and Voravate Tuntivate (2) Chapter 3: Yayasan Dian Desa The World Bank Asia Sustainable and Alternative Energy Program E A S T A S I A A N D PA C I F I C C L E A N S T O V E I N I T I AT I V E S E R I E S Indonesia Toward Universal Access to Clean Cooking June 2013 Copyright © 2013 The International Bank for Reconstruction and Development / The World Bank Group 1818 H Street, NW Washington, DC 20433, USA All rights reserved First printing: June 2013 Manufactured in the United States of America. Please cite this report as follows: ASTAE (Asia Sustainable and Alternative Energy Program). 2013. Indonesia: Toward Universal Access to Clean Cooking. East Asia and Pacific Clean Stove Initiative Series. Washington, DC: World Bank. Photo credits Front and back covers: Laurent Durix Inside covers: Laurent Durix (1, 3, and 4) and Voravate Tuntivate (2) Chapter 3: Yayasan Dian Desa The findings, interpretations, and conclusions expressed in this report are entirely those of the authors and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its board of executive directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. Contents Foreword.....................................................................................................................................vii Preface........................................................................................................................................viii Acknowledgments.......................................................................................................................ix Abbreviations and Acronyms......................................................................................................x Units of Measure.......................................................................................................................................................x Currency Equivalents.................................................................................................................................................x Main Messages............................................................................................................................xi Executive Summary..................................................................................................................xiii 1. Introduction.............................................................................................................................1 Overview of Program Context...................................................................................................................................1 Clean Stove Initiative.................................................................................................................................................1 Study Purpose and Objectives..................................................................................................................................2 Methodology.............................................................................................................................................................2 Structure of This Report.............................................................................................................................................3 2. Overview of Household Cooking Fuels.................................................................................5 What Cooking Fuels Do Households Use?................................................................................................................5 Mapping Recent Developments................................................................................................................................6 Kerosene-to-LPG Conversion Program...............................................................................................................6 Limited Future for Kerosene...............................................................................................................................8 Sustained Levels of Firewood Use.....................................................................................................................8 Factors Influencing Cooking Fuel Choices...............................................................................................................10 Summary Remarks.................................................................................................................................................. 11 3. Stove Supply Issues.............................................................................................................13 Cookstove Market and Production Capacity............................................................................................................13 Business Models and Limitations...........................................................................................................................14 Common Stove Types..............................................................................................................................................16 Supply Chain Features.............................................................................................................................................16 Production Costs and Supplier Profits.....................................................................................................................18 Knowledge and Attitudes Toward Clean Stoves.......................................................................................................18 Conclusion...............................................................................................................................................................24 4. Policies, Programs, and Institutional Players: Lessons Learned.......................................25 Overview of Laws and Policies...............................................................................................................................25 Limitations of Past Programs and Institutional Players............................................................................................26 Successful Program Experience..............................................................................................................................26 Kerosene-to-LPG Conversion Program.............................................................................................................26 Indonesia Domestic Biogas Programme..........................................................................................................28 Summary of Lessons Learned................................................................................................................................29 Conclusion...............................................................................................................................................................30 iii iv Contents 5. Toward Universal Access to Clean Cooking: Key Policy Recommendations...................31 Access Barriers and Strategy Overview..................................................................................................................31 Institutionalization............................................................................................................................................32 Creating an Enabling Environment...................................................................................................................34 Stimulating User Demand for Clean Biomass Stoves......................................................................................34 Supporting the Market and Supply-Side Business Development.....................................................................36 A New Approach to Promoting Clean Stoves: Results-Based Financing.................................................................38 Chain of Results...............................................................................................................................................38 RBF Framework...............................................................................................................................................39 Vision Toward Universal Access to Clean Cooking Solutions by 2030.....................................................................41 Next Steps...............................................................................................................................................................42 Establish Stoves Standards/Testing/Certification System................................................................................42 Strengthen Institutions and Build Stakeholder Capacity..................................................................................42 Design and Implement Pilot Program..............................................................................................................42 Design and Prepare Master Plan for National Program....................................................................................43 The Road Ahead......................................................................................................................................................43 Annexes A Kerosene-to-LPG Conversion Program: Case Study Summary........................................................................45 B Indonesia Domestic Biogas Programme: Case Study Summary.....................................................................53 C Biomass Cookstoves in Indonesia: Case Study Summary...............................................................................61 References...................................................................................................................................69 Boxes 1.1 Health Impact of Indoor Pollution in Indonesia...................................................................................................2 1.2 Promoting Clean Stoves in East Asia and the Pacific.........................................................................................2 1.3 Terminology Clarification....................................................................................................................................3 2.1 What Is the Niche Market Potential for Biogas?................................................................................................6 2.2 What Drives Households to Switch Cooking Fuels?........................................................................................10 3.1 Coverage Area of Stove Producers in Central Java..........................................................................................18 4.1 Kerosene-to-LPG Conversion Program.............................................................................................................27 4.2 Indonesia Domestic Biogas Programme..........................................................................................................29 5.1 China Association of Rural Energy Industry.....................................................................................................33 5.2 Social Drivers for Adopting Improved Stoves: Field Assessment in Yogyakarta...............................................35 5.3 What Is Results-Based Financing?...................................................................................................................37 A.1 Indonesia’s Fuel Subsidies Process..................................................................................................................46 Case Stories 3.1 Traditional Stove Producer Foresees Continued Growth..................................................................................20 3.2 Improved Stove Training Opens Opportunities.................................................................................................22 Maps 2.1 Area Coverage of the Kerosene-to-LPG Conversion Program............................................................................7 2.2 Distribution of Households Using Mainly LPG for Cooking, 2010......................................................................7 2.3 Distribution of Households Using Mainly Kerosene for Cooking, 2010..............................................................8 2.4 Distribution of Households Using Mainly Firewood for Cooking, 2010..............................................................9 Contents v Figures 2.1 National Trend in Household Cooking Fuel Use, 2005–10..................................................................................5 3.1 Direct Delivery Routes Used by Stove Producers............................................................................................16 3.2 Producer Reliance on Wholesalers, Retailers, and Retail Buyers.....................................................................17 3.3 Wholesaler Distribution Network, Showing Inter- and Intra-Province Coverage..............................................17 3.4 Wholesalers’ Opinion on Factors that Make Stoves Best Sellers....................................................................19 3.5 Retailers’ Opinion on Factors that Make Stoves Best Sellers..........................................................................19 5.1 Overall Strategy to Scale Up Clean Biomass Cookstoves in Indonesia............................................................32 5.2 Sample Results Chain for Clean Stoves Promotion Program...........................................................................38 5.3 RBF Framework with Three Building Blocks and Two Supporting Pillars..........................................................39 5.4 Example of Linking Results-Based Incentives to Monitoring and Verification Stages......................................40 5.5 Scenario Analysis of Household Primary Cooking Fuels..................................................................................41 5.6 Scenario Analysis of Households Using Primarily Biomass for Cooking..........................................................41 5.7 Roadmap to Universal Access to Clean Cooking Solutions by 2030................................................................42 A.1 Rising Cost of Indonesia’s Kerosene Subsidy, 2001–08...................................................................................45 A.2 Subsidized LPG Supply Chain and Price Cap...................................................................................................48 A.3 LPG Production and Storage Infrastructure......................................................................................................49 C.1 Reasons for Household Fuel Switching............................................................................................................63 Tables 2.1 Provinces with Largest Number of Households Using Wood for Cooking, 2007–10.........................................9 2.2 Provinces Heavily Reliant on Firewood for Household Cooking, 2010.............................................................10 3.1 Estimated Annual Cookstove Production in Five Selected Provinces..............................................................13 5.1 Main Obstacles To Scaled-Up Access to Clean Biomass Cookstoves..............................................................32 Foreword In accordance with our main policy on diversified energy are available. Since biomass energy is a renewable sources, the Government of Indonesia promotes the resource if used in an efficient and clean way, biomass utilization of clean stove technology, with the aim of cookstoves could contribute significantly to our country’s optimizing biomass use and thus creating a better envi- green growth agenda. ronment and quality of life. We believe that clean stove implementation can also meet other multidimensional The Indonesia Clean Stove Initiative (CSI), a collaborative challenges, including better health and gender equality. effort of the Indonesian government and the World Bank, There is no one-size-fits-all solution for energy demand takes an integrated approach to creating the enabling issues, including those in the domestic sector. Rather, conditions for developing a thriving clean cookstove mar- complementary clean cooking programs are being imple- ket. Initiated in 2012, the CSI program consists of four mented across the archipelago, reflecting the country’s phases: (i) initial stocktaking and development of the diverse geography, culture, and cooking practices. The implementation strategy; (ii) institutional strengthen- recent government-supported Kerosene-to-LPG Conver- ing, capacity building, and piloting of the strategy; (iii) sion Program has succeeded in replacing kerosene as scaled-up program implementation; and (iv) evaluation the country’s main household cooking fuel. In addition, and dissemination of lessons learned. This report syn- nationally and internationally funded biogas programs thesizes the knowledge to date; emphasizes a market- have installed more than 10,000 biogas units in targeted based approach to sustainability; and proposes a path rural areas with sufficient livestock and agricultural indus- toward achieving universal access to clean cooking solu- try waste. tions, based on the activities undertaken in phase I of the CSI program. It is our hope that this report will serve At the same time, 40 percent of Indonesia’s house- as a knowledge base and roadmap for encouraging and holds remain dependent on traditional biomass cook- engaging all interested parties to work together on this ing energy. These households are located mainly in rural important agenda. We look forward to working with our areas where the LPG conversion program has limited partners to implement the key policy recommendations impact and where the biogas option is unlikely to be offered in the report during the next phase of the CSI pro- suitable. Despite limited efforts in the past, a market for gram to accelerate Indonesia’s journey toward universal clean biomass cookstoves has yet to develop. Indeed, access to clean cooking solutions. few households use, or are even aware of, clean biomass cookstoves. We need to focus our efforts on helping this Rida Mulyana 40 percent of the country’s households access clean Director General cooking solutions. Technologies and techniques for sus- Ministry of Energy and Mineral Resources tainable production and efficient use of biomass energy Republic of Indonesia vii Preface About 2.8 billion people, more than a third of the world’s needs. However, some 24.5 million households or two- population, rely on open fires or inefficient stoves to fifths of Indonesia’s population, mainly in rural areas, con- cook and heat their homes. They use solid fuels, such tinue to depend on traditional biomass as their primary as charcoal, wood, and other biomass; animal dung; and cooking energy. In many rural and peri-urban areas, bio- coal—all of which produce toxic smoke that pollutes the mass can be freely collected from the local environment air inside and outside their homes. The Global Burden or cheaply purchased. Thus, without sufficient economic of Disease Study 2010, published in 2012, estimates development or effective policy interventions, the use of that household air pollution from the use of solid fuels traditional biomass for cooking will remain high or may for cooking and heating contributes to 4 million pre- even rise in certain areas. The resulting negative health mature deaths each year (2010 figure). Unlike malaria, impacts are significant: an estimated 165,000 premature tuberculosis and HIV/AIDS, for which the death toll is deaths each year are attributed to household air pollution declining every year, the number of premature deaths linked to traditional biomass cooking. Those dispropor- due to household air pollution is on the rise. How can we tionately affected are the poor, who depend heavily on reverse this? biomass for cooking, and women and their young chil- dren, who spend many hours each day in the household As a follow-up to the regional energy flagship report, One cooking environment. Goal, Two Paths: Achieving Universal Access to Modern Energy in East Asia and the Pacific, the East Asia and Now there is a window of opportunity to promote Pacific (EAP) Clean Stove Initiative (CSI) was launched clean biomass cookstoves in Indonesia, building on the in early 2012 with the aim of scaling up access to clean momentum from the country’s recent success in pro- cooking and heating solutions in the region, particularly moting clean cooking solutions. The policy recommenda- for rural households likely to continue relying on solid tions offered in this report reflect the World Bank’s shared fuels to meet most of their cooking and heating needs commitment with the Indonesian government to ensure beyond 2030. This multi-country, multi-phase initiative that all of Indonesia’s citizens have access to clean cook- comprises four country-specific programs (China, Indo- ing solutions by 2030. On a global scale, this goal is nesia, Lao PDR, and Mongolia) and a regional forum to echoed by the United Nations Sustainable Energy for All promote collaboration, learning, and knowledge sharing initiative, to which Indonesia is committed. The scaled-up on access to modern energy at the household level. This access to clean biomass cookstoves, complemented by report summarizes the findings from phase I of the Indo- an expanded and sustainable LPG conversion program nesia CSI, based on a comprehensive stocktaking review, and greater adoption of other clean cooking fuels, such two national consultation workshops, and a first ever as biogas systems in suitable areas, can move the coun- national-scale biomass cookstove supply-side survey. try far along the road to achieving this ambitious goal. The benefits are many, including better health, reduced Indonesia has made great strides in moving its citizens poverty, improved gender equality, and less pressure on toward clean cooking solutions. Thanks to the govern- the global environment. ment’s Kerosene-to-LPG Conversion Program—the world’s largest LPG conversion program—the landscape Stefan G. Koeberle of household cooking fuel choices has shifted dramati- Country Director for Indonesia cally. Today a majority of Indonesian households use LPG East Asia and the Pacific Region instead of kerosene to meet most of their daily cooking The World Bank viii Acknowledgments This report summarizes the findings from phase I of the Conversion Program, by Edi Susanto under the guidance Indonesia Clean Stove Initiative (CSI), implemented in of Yusep Kartika Cahyana of the Directorate General of Oil collaboration with Indonesia’s Directorate of Bioenergy, and Gas (MIGAS), MEMR (Annex A); Indonesia Domestic Ministry of Energy and Mineral Resources (MEMR). The Biogas Programme, by Robert de Groot of the Humanist World Bank team is particularly grateful to Maritje Huta- Institute for Development Cooperation (HIVOS) (Annex pea, former Director of Bioenergy, and Dadan Kusdiana, B); and Biomass Cookstoves in Indonesia, by the YDD current Director of Bioenergy, for their leadership and team led by Christina Aristanti and Prianti Utami (Annex commitment to the Indonesia CSI. The team extends C). The report was edited by Norma Adams and typeset special thanks to the CSI Technical Committee, chaired by Michael Alwan. by the Director of Bioenergy, for its open and construc- tive exchange of ideas and information, which contrib- The team wishes to thank peer reviewers Koffi Ekouevi uted to the preparation of the report. and Venkata Ramana Putti, as well as colleagues Bert Hofman, Douglas Barnes, Andrew Shepherd, and David The Indonesia CSI is led by Yabei Zhang, with a core team Hawes, who provided useful comments. The team is also including Laurent Durix, Dejan Ostojic, Voravate Tunti- appreciative of the valuable overall guidance provided vate, Olivia Tanujaya, and Yun Wu. The World Bank team is grateful for the support and inputs from the local NGO by World Bank management throughout the process, team of Yayasan Dian Desa (YDD), led by Christina Aris- particularly John Roome, Stefan G. Koeberle, Franz R. tanti and Prianti Utami. Drees-Gross, Vijay Jagannathan, Charles Feinstein, and George Soraya. Finally, the team gratefully acknowledges The report is authored by Yabei Zhang, Voravate Tuntivate, the generous funding support provided by the Australian Christina Aristanti, and Yun Wu and benefited from the Agency for International Development (AusAID), as well preparation of three background case studies, which are as the World Bank’s Asia Sustainable and Alternative summarized in the annexes: Indonesia Kerosene-to-LPG Energy Program (ASTAE). ix Abbreviations and Acronyms ARI Acute Respiratory Infection HAP Household Air Pollution AusAID Australian Agency for International HIVOS Humanist Institute for Development Development Cooperation BIRU Biogas Rumah program (IDBP) IDBP Indonesia Domestic Biogas Programme (BIRU) BPS Bandan Pusat Statistik (Indonesian National Statistics Office) IDR Indonesian Rupiah (currency) CAREI China Association of Rural Energy Industry LPG Liquefied Petroleum Gas CPO Construction Partner Organization M&E Monitoring and Evaluation CSI Clean Stove Initiative M&V Monitoring and Verification DJLPE Directorate General for Electricity and MIS Management Information System Energy Utilization NGO Nongovernmental Organization EAP East Asia and Pacific R&D Research and Development EBTKE Directorate-General of New and RBF Results-Based Financing Renewable Energy and Energy Conservation SNV Netherlands Development Organisation (Stichting Nederlandse Vrijwilligers) GACC Global Alliance for Clean Cookstoves YDD Yayasan Dian Desa GERES Renewable Energy, Environment, and Solidarity Group Units of Measure kg kilogram m2 square meter kl kiloliter m3 cubic meter km kilometer MT metric ton Currency Equivalents Currency Unit = Indonesian Rupiah IDR 9,152 = US$1 x Main Messages Rural households in Indonesia are likely to rely on biomass Any strategy to scale up the use of clean biomass stoves cooking energy for years to come. Today, approximately 40 requires an enabling environment. This stocktaking exercise percent of Indonesia’s households—about 24.5 million recommends implementing a comprehensive strategy households, located mainly in rural areas—still rely on that institutionalizes issues of cooking technologies and traditional biomass energy (mainly fuelwood) as their pri- biomass fuels into the national policy framework, requir- mary cooking fuel. The Indonesian government’s highly ing centralized leadership and cross-sector cooperation. successful Kerosene-to-LPG Conversion Program (2007– To create a sustainable market, both supply- and demand- 12) has resulted in a fivefold increase in the number of side issues must be tackled in an integrated manner, LPG users, located mainly in urban areas. But among supported by both technical assistance and financing. A biomass-using rural households located far from the LPG results-based financing approach, which offers incentives distribution network, the program’s impact has been and flexibility, is recommended to motivate private sup- limited, with only a 9 percent decline in fuelwood use pliers to deliver clean cooking solutions to households. over a three-year period (2007–10). Rural households are unlikely to switch to modern fuels on a large scale if they The Indonesia Clean Stove Initiative reflects the World Bank’s are unaffordable and will likely continue to rely on bio- shared commitment with the Indonesian government to bring mass cooking energy for the foreseeable future. clean cooking solutions to all of the country’s citizens by 2030. The World Bank is committed to supporting the Indone- Scaled-up access to clean cooking solutions can mitigate sian government’s efforts to achieve universal access the risks of cooking with traditional biomass. Household to clean cooking solutions by 2030. Working with the burning of traditional biomass is a major health-risk fac- Directorate of Bioenergy, Ministry of Energy and Mineral tor in Indonesia. Household air pollution resulting from Resources, the World Bank has launched the Indonesia the inefficient use of traditional biomass is linked to an Clean Stove Initiative and is completing the first phase of estimated 165,000 premature deaths annually, affect- stocktaking and stakeholder consultations. Having char- ing primarily women and their young children. But under acterized the country’s biomass use and stove practices, conditions of sustainable production and more efficient the next phase will focus on establishing stove standards/ fuel use, biomass energy is renewable; with better fuels testing system, strengthening institutions and building and more efficient cookstoves, such emissions could be stakeholder capacity, and implementing pilot programs reduced. Implementing clean biomass cooking solutions in preparation for national-scale program rollout. can lead to better health, reduced poverty, greater gen- der equality, and less pressure on the local and global environment. xi Executive Summary Most households in Indonesia are shifting to modern cooking capacity building, policy development, and support for energy thanks to the government’s recent interfuel substitu- selected government action plans. The program consists tion program, yet 40 percent of households still rely on tra- of four phases: (i) initial stocktaking and development of ditional biomass cooking. The Indonesian government’s the implementation strategy; (ii) institutional strengthen- Kerosene-to-LPG Conversion Program, a five-year effort ing, capacity building, and piloting of the strategy; (iii) initiated in 2007, has made significant progress in incen- scaled-up program implementation; and (iv) evaluation tivizing households to switch from kerosene, an increas- and dissemination of lessons learned. This study reflects ingly expensive fuel choice, to liquefied petroleum gas the findings of the initial stocktaking review, including a (LPG). As a result, the fiscal pressure linked to contin- field survey and stakeholder consultations. ued kerosene subsidies has been reduced. Today, LPG is the country’s dominant cooking fuel, yet rural and LPG is well on its way to replacing kerosene as Indonesia’s poorer households located far from the distribution net- primary cooking fuel in the areas targeted by the Kerosene- work continue to depend on fuelwood collected from the to-LPG Conversion Program. The LPG conversion program local environment to meet most of their cooking needs. has been especially effective in East, West, and Central Without designing and implementing targeted policies, Java; all of these areas have exhibited more than a five- the percentage of households cooking with biomass fold increase in household use of LPG for cooking since energy will remain high—and may even increase in cer- 2007 . It was estimated that nearly 30 million households tain areas—for years to come. would be using LPG as their main cooking fuel by late 2012, when the program was scheduled to end. At the Indonesia ranks second among East Asia and Pacific coun- same time, another 11.7 million households on the island tries in mortality attributed to household air pollution (HAP) of Java and 12.8 million scattered throughout the coun- from solid fuel combustion. Household air pollution linked try’s other provinces, located mainly in less economically to smoke emitted from the incomplete combustion of advanced areas, will continue to rely on firewood for solid cooking fuels accounts for about 165,000 prema- cooking. ture deaths each year. The use of fuelwood for cooking is associated with increased risk for asthma, lung tuber- Household selection of cooking fuels is generally determined culosis, and acute respiratory infections (ARIs) among by a fuel’s affordability, availability, accessibility, and cultural children under age 5. A number of studies show that the acceptability. In the case of Indonesia, the 2006 reduction use of solid fuels, especially among households in rural in the availability of kerosene supply resulted in many areas, is closely linked to a high incidence of respiratory households—particularly those in rural areas for whom disease. Switching to such modern fuels as LPG or elec- LPG was too expensive or inaccessible—switching to tricity—the most effective way to reduce HAP—would firewood. In addition, many rural households have been require more costly stoves and delivery infrastructure, unwilling to pay for LPG, even at the subsidized price, which most rural households cannot afford. Such emis- given that they can freely collect fuelwood from the local sions could still be reduced with more efficient use of environment at little or no cost, except for the time spent biomass fuel and cookstoves. Thus, in areas where bio- collecting it. Furthermore, many households rely on a mass cooking persists, the most effective remedy to mitigate mix of cooking fuels, especially when alternative fuels HAP exposure is to promote improved or advanced stoves that are available at an affordable price. For example, rural burn biomass energy in a cleaner, more efficient way. households that cannot access LPG regularly may use kerosene to supplement their firewood use. The Indonesia Clean Stove Initiative (CSI) aims to scale up access to clean cooking solutions for poorer, primarily rural The CSI stocktaking survey shows that the commercial mar- households who are likely to continue relying on solid fuels ket for biomass stoves is quite limited. Indeed, in many rural beyond 2030. The World Bank, in collaboration with the and more remote areas, there are no existing markets for Directorate of Bioenergy, Ministry of Energy and Mineral biomass cookstoves. Annual stove production is far less Resources, launched the Indonesia CSI in early 2012. This than the number of households using biomass stoves, initiative, one of four country-specific programs under suggesting that a significant number of households do the AusAID-funded East Asia and Pacific CSI, focuses on not buy stoves available in the market. Many make their xiii xiv Indonesia: Toward Universal Access to Clean Cooking own rudimentary stoves (e.g., three-stone) and have efforts have tended to be fragmented and sporadic, more than one. Primary stoves, commonly made of mud, focusing only on small areas. Most have been donor- cement, or stone, are quite energy-inefficient and emit funded programs implemented by nongovernmental significant amounts of toxic smoke. organizations (NGOs); in virtually all cases, the programs ended when funding ceased. The stove supply chain is characterized by longstanding busi- ness relationships between traditional producers, wholesal- Key principles underlying the success of the Kerosene-to- ers, and retailers. Members of the traditional stove supply LPG Conversion Program and the Indonesia Domestic Biogas chain at each of these levels usually have worked together Programme can be adapted to a program designed to promote for many years and operate according to informal busi- clean biomass cooking. The LPG conversion program has ness agreements based on mutual trust. Their business demonstrated the importance of strong government practices in terms of who sells stoves to whom, how commitment and a firm policy objective, effective market- stoves are transported, and price margins taken at each ing and public-awareness campaigns, assured availability level are deeply embedded in these relationships and tra- of an uninterrupted fuel supply, and effective monitor- ditional business practices. ing and evaluation. In addition, the biogas program has underscored the value of adopting a market-based Indonesia’s geographic and cultural diversity is reflected in approach, in combination with targeted financial support the strong regional variations in business and stove purchas- to help households overcome high upfront costs. That ing practices. Key contributing factors include stove costs program also has emphasized the need for quality control at each point of sale, final stove cost to users (i.e., what and adherence to standards, verification of results and users are accustomed to paying), and the types of stoves procedures, and local management to ensure program primarily sold (including the types of materials used). The sustainability after international donor funding ends. rate of stove production and business size varies by prov- ince, and production patterns and business relationships The proposed CSI strategy requires an enabling environment differ by area, as do supply-and-demand relationships, within which to scale up the use of clean biomass stoves. The which affect the supply chain’s readiness to produce and CSI strategy builds on and is consistent with the sector distribute new models and households’ willingness to transformation strategy developed by the Global Alliance use them. for Clean Cookstoves and the World Bank’s “one goal, two paths� approach to achieving universal access to The traditional cookstove supply chain generally lacks modern energy in the East Asia and Pacific region. Insti- knowledge about better stove models, and a new model’s tutionalization, which lies at the heart of the CSI strategy, acceptability depends on its potential to be sold. Knowledge is essential to developing this enabling environment. Also about stove performance is limited throughout the entire vital are the mutually reinforcing pillars of stimulating supply chain. With the primary target of selling as many user demand for clean stoves and supporting the market stoves as possible, producers, wholesalers, and retailers and supply-side business development. In addition, sup- are more concerned with profit than which stoves might port is required for establishing and strengthening stove be more fuel-efficient or clean-burning. Price plays an standards, testing, and certification; conducting research important role in the decision to sell a stove since con- and development on improved and advanced stoves and sumers are used to paying low prices. Introducing new fuel processing technologies; and developing a master stove models would need to be linked to a higher profit plan for a national clean biomass cookstoves program. margin and would require training supply chain members in how to maximize their benefits from participating in Stimulating user demand for clean biomass stoves requires a selling the new stove models so they would be incentiv- large-scale public health campaign that must be far-reaching ized to continue with the trade into the future. and comprehensive, involving multiple sectors. Without con- sumer demand coming to permanently influence the To date, Indonesia’s policies and programs have failed to clean stove market supply, any market intervention is address household biomass cooking energy and health issues unlikely to be sustainable. But educating the public about in an integrated manner. Without specifics on biomass and the characteristics and benefits of using modern, high- clean cooking solutions and recognition of the reality that quality stoves instead of inefficient traditional technolo- nearly half of the country’s population uses biomass, gies can result in changes in user preferences, which, in the problem—involving a wide range of cross-cutting turn, can change the direction of market development. issues—will continue to be overlooked. While various This effort will require cooperation across various min- improved stove programs have been implemented in istries, women’s groups, local and international NGOs, Indonesia over the past 25 years, these decentralized academia, and the private sector. Executive Summary xv Government support of the market and supply-side business is recommended that two consecutive national programs development must fit Indonesian conditions and target long- be implemented. These will require a high level of gov- term sustainability. Where stove supply chains already ernment commitment and financial support and adoption exist (e.g., Java, Sumatra, and parts of Kalimantan and of a market-based mechanism to support development Sulawesi), the CSI strategy recommends building aware- of the clean biomass stoves sector, using a phased ness and capacity. However, in areas without stove sup- approach with gradual geographical expansion. ply chains (e.g., East Nusa Tenggara, Papua, and Maluku), significant time and resources will need to be invested Achieving universal access to clean cooking solutions by 2030 in building local supply chains and educating both pro- will require action on several key fronts. These include the ducers and households in the use and benefits of the continued strengthening and expansion of the LPG retail new stoves. Additional recommendations are to provide distribution network, along with ensuring well-targeted training within the cookstove supply chain, ensure qual- subsidies; continued expansion of biogas programs in ity control over clean cookstoves, develop and provide suitable areas, in line with community resources; and training on new business models and entrepreneurship, overcoming the institutional and supply- and demand- provide financial incentives for delivering clean cooking side barriers to creating a thriving clean biomass cook- solutions to households, and support market research. stove market. As phase I of the Indonesia CSI concludes and the lead-up to the national program accelerates, The CSI strategy recommends using a Results-Based Financing phase II will focus on establishing stove standards and (RBF) approach to promote clean stoves. International expe- testing protocols, strengthening institutional capacity, rience has shown that more innovative subsidy schemes supporting pilot programs, and designing and preparing are required to develop a sustainable market and thus for the national program rollout, envisioned to begin in make government funding support more effective and 2014. efficient. One such scheme is RBF , which disburses pub- lic resources against demonstrated, independently veri- Over the next 10–20 years, it is expected that national eco- fied outputs or outcomes instead of project inputs. This nomic development will continue to enrich Indonesian citi- distinguishing feature can mean more effective and effi- zens, influencing the increased adoption of LPG, and that those cient use of public funds and improved support of market who continue to use biomass fuel will do so with a clean stove. interventions. The conceptual framework for using RBF By 2020, a target has been proposed for achieving 40 in programs to promote clean stoves could include three percent use of clean biomass stoves (10 million stoves key building blocks—defined clean stoves, results-based delivered), with momentum leading to 100 percent pen- incentives, and a monitoring and verification (M&V) sys- etration by 2030. The private sector—including stove tem—supported by the pillars of institutional strengthen- designers, producers, wholesalers, and retailers—is in ing/capacity building and awareness-raising campaigns. the best position to know its customers; thus, the public sector will provide the private sector sufficient incentives The scenario analysis conducted under this study estimated and support so it is enabled to reach its customers. Ulti- that at least 10 million clean biomass cookstoves will need to mately, the market should decide which customers and be delivered by 2020 to be on the path to universal clean cook- locations to target and which types of technologies and ing solutions by 2030. To reach such an ambitious target, it fuels to focus on, with the freedom to innovate over time. 1 Introduction Indonesia’s household cooking fuels have undergone a Indonesia needs to build on its earlier experiences with dramatic shift in recent years, owing primarily to the gov- stove programs and develop more effective policies and ernment’s highly successful Kerosene-to-LPG Conver- programs that simultaneously address energy conserva- sion Program; yet the impact in poorer rural areas has tion, health, gender equality, poverty, and environmental been limited. Switching to LPG, electricity, and other concerns. Families usually burn biomass fuel using tra- modern fuels would be the most effective way to achieve ditional, inefficient cookstoves that waste potential fuel clean cooking solutions, but these fuels are expensive, energy and emit many health-damaging pollutants into requiring costly stoves and delivery infrastructure that the household environment. Each year about 165,000 are beyond reach for most rural households. By contrast, premature deaths in Indonesia are attributed to house- many types of biomass can be freely collected from the hold air pollution (HAP) linked to traditional biomass local environment or purchased for significantly less than cooking (Lim et al. 2012) (box 1.1). The groups dispropor- other fuels. Thus, large-scale fuel switching in rural areas tionately affected are the poor, who rely heavily on bio- is unlikely to occur until rural economies become sub- mass for cooking, and women and young children, who stantially more developed. This means that an estimated spend many hours each day indoors in the household 40 percent of households will continue to rely on tradi- cooking environment. tional biomass energy, especially fuelwood, to meet their daily cooking needs for years to come. Achieving universal access to modern energy services by 2030 is the goal set by the United Nations, which declared 2012 as the Year of Sustainable Energy for Overview of Program Context All. With its large population lacking access to modern energy services, Indonesia will have an important role to As early as the 1980s, a handful of nongovernmental orga- play in achieving this global goal. nizations (NGOs) began implementing improved stove programs in Indonesia. While some achievements have been made, most programs are still in their pilot phases, the total number of stoves disseminated remains limited, Clean Stove Initiative and a market for improved biomass cookstoves has not yet developed. At the same time, the Kerosene-to-LPG Against this backdrop, the World Bank, in collaboration Conversion Program, a five-year effort initiated in 2007 , with the Directorate of Bioenergy, Ministry of Energy has made significant progress in incentivizing households and Mineral Resources (MEMR), launched the Indone- to switch from kerosene to LPG. While the program has sia Clean Stove Initiative (CSI) in early 2012. As part of helped to reduce the budgetary cost related to kerosene the East Asia and Pacific (EAP) Clean Stove Initiative (box subsidies, the targeted beneficiaries are mainly kerosene 1.2), the Indonesia CSI aims to scale up access to clean users. The use of biomass fuel for cooking is expected and efficient cooking solutions in Indonesia through to remain high over the next decade; without significant capacity building, policy development, and support for shifts in policy, it may even increase in certain areas. selected government action plans. 1 2 Indonesia: Toward Universal Access to Clean Cooking BOX 1.1 HEALTH IMPACT OF INDOOR POLLUTION IN INDONESIA Indonesia ranks second among East Asia and Pacific countries in mortality attributed to household air pollution (HAP) from solid fuel combustion. The Global Burden of Disease Study 2010 estimates that each year about 165,000 premature deaths in Indonesia can be attributed to HAP linked to smoke emitted from solid cooking fuels (Lim et al. 2012). The use of fuelwood for cooking is linked to an increased risk of asthma, lung tuberculosis, and acute respiratory infections among children under age 5. Various studies show that the use of solid fuels, especially by households in rural areas, is closely linked to a high incidence of respiratory disease. Switching to clean fuels—electricity, natural gas, liquefied petroleum gas (LPG), and biogas—is the most effective way to reduce HAP , but most rural households in Indonesia cannot afford modern fuels, which require more costly stoves and difficult-to-access delivery infrastructure. A wide array of technological, housing, and behavioral interven- tions (e.g., house design and ventilation, stove-use behavior, and amount of time spent near the stove) can be used to reduce HAP exposure in areas where the use of solid fuels persists. But the most effective remedy is the promo- tion of improved or advanced stoves that use solid fuels in a cleaner, more efficient way. Sources: Zhang and Wu 2012; Lim et al. 2012. BOX 1.2 PROMOTING CLEAN STOVES IN EAST ASIA AND THE PACIFIC The East Asia and Pacific (EAP) Clean Stove Initiative (CSI) is a follow-up regional program to the energy flagship report, One Goal, Two Paths: Achieving Universal Access to Modern Energy in East Asia and the Pacific. It focuses on achieving access to modern cooking and heating solutions in the EAP region, particularly scaled-up access to advanced cooking and heating stoves for poor, primarily rural households that are likely to continue relying on solid fuels to meet most of their cooking and heating needs beyond 2030. With funding support from the Australian Agency for International Development (AusAID), the EAP CSI comprises four country-specific programs (China, Indonesia, Lao PDR, and Mongolia) and a regional forum to promote regional collaboration, learning, and knowledge-sharing on access to modern energy at the household level. The initiative takes a three-pronged approach, focusing on: (i) strengthening institutional capacity and creating an enabling policy and regulatory environment for scaling up access to advanced stoves, (ii) supporting supply-side market and busi- ness development, and (iii) stimulating demand for clean and efficient stoves. Sources: World Bank 2011a, 2011b. The Indonesia CSI comprises four program phases. that cook with biomass fuels to achieve clean biomass Phase I centers on initial stocktaking, which is critical cooking solutions by 2030. Specific objectives are to for developing the implementation strategy, designing gain a better understanding of the challenges facing subsequent program phases, and establishing policy dia- Indonesia’s household cooking fuel technologies and logue with the country’s institutional focal point. Phase cookstove market, review the existing policy and institu- II focuses on required institutional strengthening, capac- tional framework for cooking fuels, and identify lessons ity building, and piloting of programs. Phase III scales up from successful programs that can be applied to future program implementation, while phase IV centers on pro- intervention programs promoting clean biomass cooking gram evaluation and dissemination of lessons learned. solutions (box 1.3). Study Purpose and Objectives Methodology This study is the key activity under phase I of the Indo- This study relied on both primary and secondary data nesia CSI. Its broad aim is to contribute to developing sources. Primary data was gathered through a field sur- a roadmap for helping the 40 percent of households vey of the biomass stove supply chain (i.e., producers, Introduction 3 BOX 1.3 TERMINOLOGY CLARIFICATION In this report, unless otherwise noted, the following definitions apply: • Traditional biomass cookstove refers to a rudimentary biomass stove (either open fire or constructed by arti- sans or household members) that is energy inefficient with poor combustion features. • Clean biomass cookstove refers to a biomass stove that is either mass-produced or built in situ that, with the benefit of laboratory research, performs better in fuel efficiency, emissions, durability, and safety than open fires or rudimentary traditional cookstoves. (In this report, the term is broadly used; it is recommended that an Indonesia stove standards/testing/certification system be established to more clearly define the term.) • Improved biomass cookstove refers to the lower segment of clean biomass cookstoves installed in legacy programs. • Advanced biomass cookstove refers to the higher segment of clean biomass cookstoves with superior perfor- mance and often using processed biomass fuels. • Traditional cooking fuels refer to coal, charcoal, wood-based biomass fuels, agricultural residues, and dung. • Solid fuels are synonymous with traditional cooking fuels. • Transitional fuel refers to kerosene. • Modern energy refers to electricity, natural gas, liquefied petroleum gas (LPG), and biogas. • Modern or clean cooking solution refers to cooking with modern energy or solid fuels used with clean biomass cookstoves. Source: Authors. wholesalers, and retailers) conducted in 17 representa- of the CSI and generate new ideas on the initiative’s pro- tive provinces, including West Nusa Tenggara (Nusa Teng- posed strategy and program direction. gara Barat [NTB]) and East Nusa Tenggara (Nusa Tenggara Timur [NTT]). The information was collected through sub- In addition, background case studies were prepared on sequent guided interviews with producers, wholesalers, two successful programs promoting clean cooking solu- retailers, and other relevant parties in the biomass cook- tions in Indonesia—the Kerosene-to-LPG Conversion stove supply chain. Program (Annex A) and the Indonesia Domestic Biogas Programme (Annex B)—as well as biomass cookstove Data was also gathered from two national stakeholder use in Yogyakarta and Central Java (Annex C). Finally, the consultation workshops, which brought together key study was supported by a range of published informa- representatives of the Indonesian government, NGOs, tion, including census data and national socioeconomic academia, and the private sector; and meetings of the surveys conducted by the BPS (Bandan Pusat Statistik), CSI technical committee, established to ensure that Indonesia’s national statistics office. the study would be completed in cooperation with the various stakeholders and in accordance with existing policies. The first national stakeholder consultation work- Structure of This Report shop, held in May 2012, discussed initial field findings and gathered comments and input for improving them. This report is structured according to the directional The second workshop, held in July 2012, discussed the organization of the study. Chapter 2 presents an over- final stocktaking results and generated additional ideas view of household cooking fuels in Indonesia, includ- for phase II of the CSI. The technical committee, chaired ing policy changes and other factors that influence fuel by the MEMR’s Director of Bioenergy, includes represen- choices. Chapter 3 examines an array of stove supply- tatives of relevant ministries and national experts. The side issues, including market and production capacity, committee conducted two meetings to discuss progress popular stove models, limitations of business models, 4 Indonesia: Toward Universal Access to Clean Cooking key features of the supply chain, and attitudes toward cooking. Finally, chapter 5 presents the recommended new stoves. Chapter 4 identifies gaps in policies and implementation strategy, including an innovative financ- institutional strengthening that future intervention pro- ing approach, and the proposed next steps in helping grams will need to fill and reviews lessons from suc- Indonesia move toward universal access to clean cook- cessful programs promoting clean cooking solutions ing solutions by 2030. that can be applied to those focused on clean biomass 2 Overview of Household Cooking Fuels The types of cooking fuels used by Indonesia’s more What Cooking Fuels Do than 60 million households reflect diverse factors, Households Use? ranging from geographical differences throughout the archipelago’s many islands to level of socioeconomic Today Indonesian households mainly use liquefied petro- development, household income level, and cultural pref- leum gas (LPG) and firewood to meet most of their erences. In addition, government intervention can signifi- cooking needs. The 2010 national socioeconomic survey, cantly alter patterns of cooking fuel use on a large scale conducted by the BPS (Bandan Pusat Statistik), shows (YDD 2012). This chapter explores recent national trends that about 46 percent of all households (27 .6 million in household cooking energy, focusing on the impact households) now rely on LPG as their main cooking fuel. of the government’s Kerosene-to-LPG Conversion Pro- Some 40 percent (24.5 million households) continue to gram, as well as the implications for the large portion depend primarily on firewood, while about 12 percent of households that will continue to rely on firewood and (7.2 million households) rely on kerosene. The remaining other alternative energy sources to meet their cooking 2 percent use other resources, including electricity, char- needs. coal, other biomass, and biogas (figure 2.1). NATIONAL TREND IN HOUSEHOLD COOKING FUEL USE, 2005–10 FIGURE 2.1  70 60 Millions of households 50 Other resources 40 Firewood 30 Kerosene 20 LPG 10 0 2005 2006 2007 2008 2009 2010 Year Source: BPS: year 2005 (Intercensal Population Survey [SUPAS]), years 2007–09 (National Socioeconomic Survey [SUSENAS]), year 2006 (esti- mated from 2005 SUPAS and 2007 SUSENAS), year 2010 (Laporan Bulanan Data Sosial Ekonomi 2012). Note: Other resources include electricity, charcoal, other biomass, and biogas. 5 6 Indonesia: Toward Universal Access to Clean Cooking BOX 2.1 WHAT IS THE NICHE MARKET POTENTIAL FOR BIOGAS? Currently, biogas comprises a small segment of Indonesia’s market for household cooking fuels. Fewer than 12,500 household systems have been installed to date. Some 40 percent (5,056 units) were installed under the Indonesia Domestic Biogas Programme (IDBP)—the national program under bilateral cooperation between the Government of Indonesia and the Kingdom of the Netherlands—while the remaining 60 percent (7 ,370 units) were installed under various programs, including the World Bank–supported National Program for Community Empowerment and other programs supported by local government and nongovernmental organizations. A case study on the IDBP prepared for this study estimates the total market potential at about 1 million units, most of which would be located on the island of Java (Annex B). The main barriers to household adoption are insufficient supply of feedstock (a daily supply of 25 kg of dung is needed), limited outdoor space around the house, and high upfront system costs. To reach more farming households, ongoing efforts will be required to overcome these technical constraints, along with raising households’ awareness of the environmental, health, and economic benefits of biogas cooking. Source: Authors, based on de Groot 2012. In terms of total energy consumption, firewood remains prices over the past decade, particularly the 2005–06 the main primary energy source for households in Indo- price jump, put fiscal pressure on the government to nesia. In 2007 , biomass represented 72 percent of the significantly reduce the volume of subsidized kerosene household sector’s energy demand. The household sec- in the market.1 As a result, households reduced their tor accounted for more than 84 percent of the 119 million kerosene use by 8 percent (from 45 to 37 percent) over tons of officially recorded biomass energy use across all the subsequent two years. Many wealthier urban house- sectors, while industry represented about 15 percent holds increased their LPG use, while lower-income rural (GERES 2009). households stepped up use of locally available firewood. Indeed, by 2007 , firewood use had risen to 49 percent, From 2005 to 2010, the percentage of households who highlighting that affordability and availability are key driv- used kerosene as their primary cooking fuel fell from 45 ers of household cooking fuel decision-making and the percent to 12 percent, while the number of households importance of interfuel substitution for households faced using LPG rose from about 10 percent to 46 percent with higher fuel prices and limited availability. (from 5.6 million to 27 .6 million households). Over the same period, the percentage of households who relied on Kerosene-to-LPG Conversion Program firewood remained at or above 40 percent, peaking at 49 percent in 2007 . The use of other fuel sources for house- The Indonesian government’s Kerosene-to-LPG Conver- hold cooking remained limited; for example, by 2010, just sion Program, launched in 2007 , has succeeded in replac- 300,000 households (less than half of a percent) used ing kerosene with LPG as the nation’s dominant cooking charcoal as their main cooking fuel, and fewer than 12,500 fuel, substantially changing the landscape of fuel choices household biogas systems had been installed (box 2.1). for households and small business enterprises (map 2.1). The next section examines the policy changes behind During the first four years of the conversion program this recent shift in household cooking fuels, the areas (2007–11), more than one-third of households (from 11 covered, and the implications for households outside the percent to 46 percent) switched to LPG as their main targeted areas. cooking fuel, while one-quarter (from 37 percent to 12 percent) shifted away from kerosene, underscoring the program’s success. Households in western areas of Indo- nesia have been specifically targeted. More than three- Mapping Recent Developments quarters of the households that use LPG as their main cooking fuel—an estimated 21 million households—live Before 2006, kerosene had been the preferred house- on the island of Java (map 2.2). The eastern part of the hold cooking fuel among Indonesia’s urban and peri- urban households and, to a certain extent, rural families. 1. Over a three-year period (2005–08), the Indonesian government Historically, the price to consumers had been kept low reduced the market volume of subsidized kerosene by one-third owing to heavy government subsidies. But rising oil (from 11.4 to 7.8 million kl). Overview of Household Cooking Fuels 7 MAP 2.1 AREA COVERAGE OF THE KEROSENE-TO-LPG CONVERSION PROGRAM Converted in 2007–08 Converted in 2009 Converted in 2010–11 To be converted in 2012 Will not be converted Source: PT Pertamina and WLPGA 2012. MAP 2.2 DISTRIBUTION OF HOUSEHOLDS USING MAINLY LPG FOR COOKING, 2010 Source: BPS 2011. country—including Papua, Maluku, North Maluku, and By 2010, when the conversion program was in full swing, East Nusa Tenggara—and other more remote areas are 48.2 million LPG start-up packages (i.e., a filled 3-kg LPG excluded from the program owing to the potentially high cylinder, stove, hose, and regulator) had been distributed investment cost of developing supply networks in such free of charge to 48.2 million eligible households and sparsely populated areas. small- and medium-sized enterprises (SMEs). That year, 8 Indonesia: Toward Universal Access to Clean Cooking MAP 2.3 DISTRIBUTION OF HOUSEHOLDS USING MAINLY KEROSENE FOR COOKING, 2010 Source: BPS 2011. some 27 .6 million households—46 percent of all house- replacing kerosene as the primary cooking fuel in the holds—were reported to be using LPG as their primary areas targeted by the conversion program (Annex A). cooking fuel, suggesting that a significant portion of those who had received the start-up packages made the switch from kerosene to LPG (BPS 2011) (map 2.3). In Limited Future for Kerosene 2011–12, an additional 8.5 million start-up packages were By mid-2012, the Kerosene-to-LPG Conversion Program distributed.2 had been implemented in 23 out of the country’s 33 prov- inces; however, only 13 provinces had been designated The conversion program has been especially effective in as “closed and dry,� meaning that distribution of the LPG the provinces of East, West, and Central Java, all of which start-up packages had been completed and supply net- have exhibited more than a fivefold increase in house- works were considered secure, with all subsidized kero- hold use of LPG for cooking since 2007 . As of 2010, East sene withdrawn. In the remaining 10 provinces covered Java had reported a sixfold increase, while West Java had by the conversion program, the kerosene subsidy is being the largest total number of LPG users, at 8 million house- reduced gradually until all LPG start-up packages are dis- holds. In that province, where kerosene had been used tributed and supply networks are considered secure and by nearly half of all households in 2007, LPG surpassed it sufficient to meet demand. Thus, as program implemen- as the dominant cooking fuel as early as 2009. Such dra- tation winds down, only non-subsidized kerosene will be matic increases can be attributed to the program’s effec- available on the market (Susanto 2012). tiveness, combined with the advantageous geographic and socioeconomic conditions of these provinces. It is expected that about 10 percent of households will continue to rely on kerosene as their primary cooking Today, LPG is the dominant cooking fuel in some 10 prov- fuel beyond the end of the conversion program. These inces, located mainly in the western part of the country. households are located in areas where it has not been In all but 7 provinces, both the number and share of LPG economically feasible for the government to implement users have increased. Clearly, LPG is well on its way to the conversion program (i.e., such eastern provinces as Papua, Maluku, North Maluku, and East Nusa Tenggara and other sparsely populated regions). In these areas, 2. It was estimated that nearly 30 million households would be using where the government has no plans to implement the con- LPG as their main cooking fuel by late 2012, when the program was scheduled to end. version program, subsidized kerosene use will continue. Overview of Household Cooking Fuels 9 MAP 2.4 DISTRIBUTION OF HOUSEHOLDS USING MAINLY FIREWOOD FOR COOKING, 2010 Source: BPS 2011. Sustained Levels of Firewood Use households—are concentrated on Java, the country’s most densely populated island. These households com- In 2010, an estimated 40 percent of all households in Indo- prise about 40 percent of all households in the provinces nesia (24.5 million households) used firewood as their of East, Central, and West Java (table 2.1). The other 12.8 main source of cooking energy (map 2.4). Just prior to million households that rely on firewood for cooking are launching the Kerosene-to-LPG Conversion Program, the government reduced the supply of subsidized kerosene, scattered throughout the other 30 provinces (map 2.4). at which time LPG supply could not yet meet demand. In response, these households either switched to firewood Those provinces least dependent on firewood for cook- or began using more of it in their fuel mix; as a result, the ing energy tend to be more economically advanced. For percentage of firewood users rose to 49 percent in 2007 . example, in DKI Jakarta, only 5,559 households—less Once LPG supply was raised sufficiently, firewood use than 1 percent of households—depend on firewood as fell to about 40 percent, where it is expected to remain their main cooking fuel, while in Kepulauan Riau, just in the coming years. 40,077 households or 9 percent of households use fire- wood. By contrast, the 13 provinces considered most reli- About half of all households that depend on firewood ant on firewood for cooking tend to have higher proportions as their main cooking fuel—approximately 11.7 million of lower-income households (table 2.2). These provinces, TABLE 2.1 PROVINCES WITH LARGEST NUMBER OF HOUSEHOLDS USING WOOD FOR COOKING, 2007–10 Number of households (million) Province 2007 2008 2009 2010 East Java 5.3 5.5 5.1 4.8 Central Java 5.2 5.3 4.4 4.0 West Java 3.6 3.6 3.1 2.9 Countrywide 26.3 27.4 25.3 24.5 Source: BPS 2011. 10 Indonesia: Toward Universal Access to Clean Cooking TABLE 2.2 PROVINCES HEAVILY RELIANT ON FIREWOOD FOR HOUSEHOLD COOKING, 2010 Households using firewood as main source of cooking energy Poverty rate Number of Province (percent) households (million) Number (million) Percent Nusa Tenggara Timur 21.23 1.01 0.85 83.4 Sulawesi Barat 13.89 0.26 0.19 74.2 Papua 31.98 0.66 0.47 70.6 Lampung 16.93 1.93 1.33 68.6 Maluku Utara 9.18 0.21 0.15 68.1 Sulawesi Tengah 15.83 0.62 0.41 65.7 Gorontalo 18.75 0.24 0.15 63.3 Sulawesi Tenggara 14.56 0.50 0.31 62.6 Nusa Tenggara Barat 19.73 1.25 0.77 61.1 Bengkulu 17.50 0.43 0.26 59.7 Maluku 23.00 0.32 0.18 57.9 Kalimantan Barat 8.60 1.02 0.56 55.2 Sumatera Barat 9.04 1.15 0.62 53.6 Source: BPS 2011. which stretch from west to east, are particularly concen- was too expensive or inaccessible. Currently, LPG use trated in Nusa Tenggara, Papua, and Sulawesi—islands is subsidized, with about 40 percent of it imported. How- that exhibit the country’s highest poverty rates. Nearly ever, international price fluctuations could impinge on two-thirds of these 13 provinces’ 9.6 million households the government’s fiscal ability to maintain today’s level use firewood as their main cooking fuel. of price subsidy. If subsidies were reduced and retail prices raised, many households would likely shift to fire- wood as an alternate fuel, underscoring the importance Factors Influencing Cooking of affordability in households’ cooking fuel decision- Fuel Choices making (box 2.2). Indonesia’s 2006 reduction in kerosene supply resulted Although LPG is now the preferred cooking fuel among in a significant number of households switching to fire- urban households, rural households continue to pre- wood, particularly those in rural areas for whom LPG fer firewood for several key reasons. First, firewood is BOX 2.2 WHAT DRIVES HOUSEHOLDS TO SWITCH COOKING FUELS? In 2009, the Renewable Energy, Environment, and Solidarity Group (GERES) conducted a household energy survey in selected districts of Central Java and DI Yogyakarta, Indonesia to examine the factors that influence household fuel choice and reasons for switching fuels. The results identified fuel cost as the main reason for changing fuels. Nearly one-third of respondents reported switching fuels because of changes in fuel subsidies, while more than one-quarter said they were looking for cheaper fuels. Fifteen percent said they were seeking fuels that were easier to obtain. Others reported a desire for better-tasting food, a cleaner cooking environment, and ease of use (Annex C). Source: YDD 2012. Overview of Household Cooking Fuels 11 readily available in the local environment at little or no albeit at a level of lesser intensity than households that cost, except for the time spent collecting it; also, a recent use firewood as their main cooking fuel. study showed that most firewood used by households is renewably harvested (GERES 2009). Second, LPG distribution networks tend to be limited to urban and Summary Remarks peri-urban areas. Finally, many rural households either cannot afford LPG, as suggested in table 2.2, or are As a result of the government’s Kerosene-to-LPG Con- unwilling to pay for it, even at the subsidized price, given version Program, LPG has replaced the kerosene mar- that they can freely collect firewood. Based on these ket, but its availability is limited mainly to urban and factors, combined with the analysis presented earlier, peri-urban areas.3 Rural households that can afford LPG it is expected that most rural households will continue may be located too far from the distribution network to using firewood for the foreseeable future, with demand be able to regularly access the fuel. Other rural house- remaining at levels prior to the 2007 launching of the con- holds may choose to use kerosene along with firewood version program. in their fuel mix. It is imperative that such households, along with those who cannot afford or access transitional Moreover, empirical evidence suggests that many or modern fuels, have access to clean-burning, fuel-effi- households rely on a mix of cooking fuels rather than cient biomass stoves. In addition to mitigating the health a single one, especially when alternative fuels are avail- risks associated with household air pollution, clean bio- able at an affordable price. For example, in urban areas mass stoves can alleviate the fiscal pressure on LPG sub- where firewood is not readily available, households that sidies by providing alternative clean cooking solutions. As use LPG as their main cooking fuel may use electricity as a renewable resource in Indonesia, biomass is abundant a supplemental or substitute fuel. But in peri-urban areas and affordable to the poor. Used with fuel-efficient, clean- where firewood can be collected at no cost or purchased burning cookstoves, it could contribute significantly to cheaply, households that use LPG may supplement it the country’s green growth agenda. with firewood or use firewood for specific purposes. Since national-level data indicate only one main cooking 3. Although this report relies on 2010 data and the conversion pro- fuel that households use, the estimated portion of house- gram was ongoing through 2012, it was expected that about 40 per- cent of households would continue to rely on firewood as their main holds that use a mix of LPG and firewood is unknown. cooking fuel, the same level prior to implementing the conversion But it is important to take these households into account program. The vast majority of these households reside in rural areas, since they will continue to rely significantly on firewood, where gaining access to LPG is quite difficult or not possible. 3 Stove Supply Issues As discussed in chapter 2, 40 percent of Indonesia’s mud, cement, or such materials as stone, scrap metal, households (24.5 million households)—nearly half and recycled oil drums. These stoves are quite energy- located on the densely populated island of Java and inefficient and emit significant amounts of toxic smoke. the other half scattered throughout lower-income prov- The stove types selected by households are closely tied inces—are expected to continue relying on firewood as to income. Purchased stoves are relatively inexpensive. their main source of cooking energy for years to come, Most households buy from the local market, others suggesting a total technical potential of at least 24 mil- purchase directly from producers, and still others buy lion clean-burning, fuel-efficient cookstoves. This chapter from local shops or mobile traders. The usable lifetime examines key supply-side issues, including the current of household stoves varies from about six months up market and production capacity, the most popular stove to four years, given that many owner-built stoves are types, business model limitations, production costs and repaired on an ongoing basis (YDD 2012) (Annex C). profits, and attitudes toward new stoves. The field survey conducted for this study reveals that annual stove production is far less than the number of Cookstove Market and Production households using biomass stoves, suggesting that many Capacity households do not buy stoves available in the market. In many rural and more remote areas, there are no markets Currently, the commercial market for biomass stoves is for biomass cookstoves. By contrast, in the more devel- quite limited. Households in Indonesia either purchase or oped regions of Java, Sumatra, and Sulawesi, markets construct their own stoves, and usually own more than are fairly well-established. Five of the 17 provinces that one. Many rural households make rudimentary three- participated in the survey were found to produce nearly stone stoves. Primary stoves are commonly made of 850,000 cookstoves each year (table 3.1). TABLE 3.1 ESTIMATED ANNUAL COOKSTOVE PRODUCTION IN FIVE SELECTED PROVINCES Stove fuel type Province Firewood Charcoal Number of stoves produced East Java 429,240 32,820 462,060 West Java 172,800 101,160 273,960 Central Java 50,880 26,460 77,340 Lampung 14,400 — 14,400 North Sumatera 120 21,600 21,720 Total 667,440 182,040 849,480 Source: Indonesia CSI field survey. 13 14 Indonesia: Toward Universal Access to Clean Cooking Stove production capacity varies widely among pro- operated by women, 26 percent by men, and the remain- ducers. Among the 580 producers interviewed for this ing 34 percent by women and men jointly. About half of study’s field survey, the average monthly production is producers diversify their stove product lines by also mak- about 275 stoves. The monthly output range among the ing ceramic roof tile, clay pottery, or other items. smallest producers is 5–10 stoves. About one-fifth of pro- ducers have a capacity of up to 20 stoves per month, Limited working space is one of several key determi- while another one-fifth can produce 21–50 per month. nants of the scale of stove production. A typical stove- Less than one-fifth have a capacity of 500–5,000 stoves. making facility consists of a small shed without walls and Ten large producers make more than 1,000 stoves per a kiln used for firing stoves. On the island of Java, where month, while the three largest ones have a total monthly the population density is quite high, a facility’s working production capacity of some 10,000 stoves. Many pro- space averages only about 50 m2. A kiln typically con- ducers make terra-cotta (clay-based) stoves. Those with a sists of a simple square with a short wall and firing holes smaller production capacity may construct stone stoves, at the side. Smaller producers (i.e., those constructing while others may make stoves from brick and cement. fewer than 50–100 stoves a month) usually do not own a Production is concentrated mainly on the island of Java kiln but rent one from nearby producers, adding to their and in South Sulawesi. production cost and reducing their profit margin. A case study conducted in Central Java for this project revealed that only 47 percent of the 117 producers interviewed Business Models and Limitations owned kilns with a firing capacity of at least 100 stoves (YDD 2012) (Annex C). The survey results confirm that all commercially sold biomass cookstoves are based on the Artisan Produc- Most artisan producers make terra-cotta stoves using tion Model, meaning that local producers build stoves clay, while stoves made of stone are quite common on individually by hand. Most of these artisans run small the island of Java. The energy inputs for kiln-firing include family-owned businesses, which are passed down from firewood, scrap wood, biomass residue, and rice husk. one generation to the next, with few new business start- Clay must be mixed with ash or rice husk. The major- Women producers making fired-clay (pottery) stoves ups. Both owners and workers have been trained by their ity of producers mix the clay manually (using their feet), parents or other artisans or are self-taught. In addition to while a small minority (less than 10 percent) use electric lacking formal training in stove-making techniques, most motors. Stoves that are made of stone involve the labor- artisan producers lack skills in business management intensive steps of removing the stone from the moun- and marketing. tain, cutting it into pieces, and carving it into the stove shape. Slow production processes incur high labor costs; The survey results also suggest that women dominate and quality control, which is based on visual inspection, the stove-making trade. Among the producers inter- is weak. An analysis of production costs, based on inter- viewed, about 40 percent of businesses are owned and views with producers and data on wholesale and retail Stove Supply Issues 15 Stone-stove production site (upper left and right) and variety of potholes (lower left, center, and right) stove prices, indicates that producers have a relatively as mobile vendors. As expected, most retailing occurs in thin profit margin. the market; thus, sales are limited in toko and warung, located mainly in residential areas. On the other hand, in Business arrangements among producers, retailers, and the market, stoves are typically sold at warung that sell wholesalers are mostly informal, based on mutual trust, basic household appliances. Outside the market, stoves with no legally binding conditions of sale and purchase. are sold at grocery stores or small convenience shops Most local artisans are passive producers, meaning that in residential areas. Stoves may also be sold at retailers’ they do not actively market their stoves. Among those homes or by mobile vendors who use carts and bicycles. interviewed for this study, only 15 percent reported In addition, some retailers use more than one distribution actively promoting their stoves to wholesalers and retail- method (e.g., at the market and door-to-door sales). ers. In most cases, wholesalers, retailers, and even users buy directly from the producers. About 87 percent of the producers surveyed reported using cash payment only for their financial transactions, while the remaining 13 percent use credit, consignment, and cash combined with other payment arrangements. More than 90 percent of the wholesalers surveyed have been in operation for more than a decade (more than half have been in business for more than 20 years), while more than one-third of retailers have been in business for more than 20 years. Nearly half of wholesalers conduct business from their homes, while the other half include those who operate in the market (12 percent), estab- lished shops (toko) (12 percent), and less formal, smaller Adjustable pot rings or blengker shops (warung) or stalls (10 percent); the remainder work 16 Indonesia: Toward Universal Access to Clean Cooking Keren stove in Yogyakarta (left), Anglo stove in Central Java (center), and Apollo stove (right) Traditional stove supply chains and improved stove pro- Supply Chain Features ducers and distributors provide no after-sales service, except for large fixed stoves used for commercial pur- The CSI field survey reveals that stove producers rely on poses. Spare parts are limited mainly to the grate for the two main channels to market their products (figure 3.1). Anglo Supra (Thai Bucket) improved charcoal stove; how- The first channel, which is used by about 30 percent of ever, stovemakers often produce adjustable pot rings, producers, is direct delivery to customers. This choice allowing users to fit the stove to the pots they want to requires producers to own or rent a truck or other means use, which are sold as part of the stoves by wholesalers of transport; in return, they receive a better price for their and retailers. stoves. A producer may deliver stoves to either or both wholesalers and retailers or retail buyers. Smaller-scale producers tend to deliver more to retailers than whole- Common Stove Types salers owing to the smaller quantity of their products. Thirteen percent of mainly small-scale producers sell The CSI field survey results show that wood-burning their products (including heavier, bulkier stoves) directly cookstoves are the most popular stove types produced to retail buyers (i.e., stove users) at the market. and sold in the 17 provinces covered. Three biomass cookstove models commonly used in Indonesia are the The second, and by far the most common, channel for Keren, Anglo, and Apollo, which are distinguished by stove producers to market their stoves is to rely on the types of fuels used. The Keren is a firewood-burning wholesalers and/or retailers to purchase their stoves in stove, usually made of terra cotta or other materials. The bulk and transport them to retail shops, where they are Anglo, typically made of clay pottery, uses charcoal; while sold (figure 3.2). This channel, used by nearly 70 percent the Apollo uses sawdust and rice husk for fuel. Many local names, which vary by region, are used to refer to FIGURE 3.1 DIRECT DELIVERY ROUTES USED BY STOVE fuelwood and charcoal stoves. In Central Java and Yog- PRODUCERS yakarta, for example, the Pawon refers to the large fixed stove that burns firewood. Wholesalers, Retailers retailers (2%) (6.4%) More than three-fifths of the stove producers and retail- ers who participated in the CSI field survey reported making or selling the Keren and traditional Anglo stoves. Pawon stoves are made and sold mainly in West and Cen- Wholesalers Retail buyers (8.5%) (conduct retail tral Java, where the required stone material is available. Stove sales) (13%) producers The survey showed that, in North Sumetera, some of the cookstoves produced and sold are made of concrete and metal. Among all of the 17 provinces surveyed, none of the identified producers make technically advanced bio- Source: Indonesia CSI field survey. mass stoves. Stove Supply Issues 17 The selling of stoves by producers, wholesalers, and FIGURE 3.2 PRODUCER RELIANCE ON WHOLESALERS, retailers to respective downstream suppliers commonly RETAILERS, AND RETAIL BUYERS occurs at the city, district, or subdistrict level within prov- inces. The survey results show that it is commonplace Wholesalers, for producers and wholesalers to serve local needs, with retailers few working to meet demand beyond their provinces. (23.5%) Approximately one-third of producer sales is at the city or Wholesalers Wholesalers, district level, with just 14 percent occurring outside their (45.6%) retail buyers respective provinces. Similarly, most wholesalers limit (0.2%) their sales to within their own provinces, owing mainly to their small delivery capacity, which averages 10 or fewer Stove stoves per delivery. However, one-third of wholesalers producers have a delivery capacity greater than 40 stoves—they use larger transport vehicles, such as pick-up trucks— reflected in the 8 percent who sell between provinces Source: Indonesia CSI field survey. (figure 3.3) (box 3.1). The survey results indicate that the majority of wholesal- of the producers surveyed, requires that wholesalers or ers are facing certain obstacles that limit their capacity to retailers provide the means of transport. Typically a pro- expand their businesses. The main issues cited by survey ducer is visited by wholesalers exclusively, both whole- respondents include lack of sufficient capital, too limited salers and retailers, or wholesalers and retail buyers (i.e., space for storing stove inventory, lack of transportation, stove users); stove users who buy directly from the pro- and the quality level of the cookstoves. ducer usually purchase heavier, bulkier stoves, such as those made of stone or mud. FIGURE 3.3 WHOLESALER DISTRIBUTION NETWORK, SHOWING INTER- AND INTRA-PROVINCE COVERAGE Ache Bengkulu North Sumatera Riau Medan Deli Serdang Pelalawan Rohul Sumatera Barat Kisaran Pekanbaru Rantau Prapat Kampar Langkat Indragiri Hulu NTB Bali East Java Yogyakarta Blitar Kediri West Java Kulon Progo Bangil Pasuruan Jakarta Malang Bantul Sumenep Banyuwangi Situbondo Bondowoso Jember Tulungagung Trenggalek Source: Indonesia CSI field survey. 18 Indonesia: Toward Universal Access to Clean Cooking BOX 3.1 COVERAGE AREA OF STOVE PRODUCERS IN CENTRAL JAVA COVERAGE AREA OF STOVE PRODUCT SALES FROM THE PRODUCERS In Central Java, most cookstove production and supply chains 8.8% focus on meeting local demand. More than 37 percent of produc- outside province area ers cover the market within their district, about 24 percent cover 18.3% their subdistrict, and nearly 12 percent sell their products within within province their own villages. Only about 18 percent sell their stoves outside 37.2% their district area, while just 9 percent sell outside their province within district or between provinces. Producers that do sell cookstoves outside 23.9% their province usually target West and East Java, including Jakarta within subdistrict and even parts of Yogyakarta province. However, no producers in Yogyakarta sell stove products outside their province. 11.8% within village Source: YDD 2012. Production Costs and Supplier Profits compensate for the low profit margin, producers rely on a fast turnover; indeed, the durability of the Keren stove Analysis of stove production costs and supplier prices col- is usually less than six months. lected from the CSI field survey indicate that profit mar- gins at each level of the supply chain are relatively low. Wholesaler transport and delivery of stoves from produc- Thus, the prices of biomass cookstoves are affordable for ers to retailers is estimated as high as IDR 10,000 per the vast majority of Indonesia’s households. Based on stove. Typically, wholesalers rely on a motorcycle owing the survey data, wholesalers charge retailers an average to the vehicle’s relatively low operating costs compared price of about IDR 14,921 per stove, while the average to a truck or van and the small scale of the business. price retailers charge households is about IDR 30,000, However, wholesalers with a larger operation must have with a combined margin—difference between the whole- a truck or van, which allows them to cover more than sale and retail price—of about IDR 15,000, from which one retailer; typically, they have three or more retailers costs for marketing, labor, and other expenses (averaging as their customers. IDR 7 ,000–8,000 per stove), must be deducted.4 Simi- larly, producers must cover stove-making materials, fuel Retailers’ price margins, including profits and operating for firing the kiln, and other costs. Most producers do not costs, depend largely on the size, type, and location of record their own time and labor spent on the stove busi- the retail shop. For example, the price margin for the ness as part of their production costs (Case Story 3.1). Keren stove, which has the lowest retail price range, is IDR 500–3,000. For medium- and larger-sized stoves in The survey reveals that producers usually make stoves the low-to-mid retail price range, the price margin rises to of various types and sizes targeted to different clientele. IDR 3,000–6,000. For higher-priced stoves, it increases As a result, the margin, including the profit, received by to IDR 8,000–16,000 (e.g., 5,000–10,000 for the large- producers varies according to the client group, as well as sized Anglo Supra). stove type and size. For example, producers can make more profit by selling to retailers and end-user consum- ers. The average selling price to retailers is 1.5 times Knowledge and Attitudes Toward higher than that to wholesalers and 4 times higher when Clean Stoves selling directly to consumers. At the same time, produc- ers must bear added costs to ensure that their stoves Most stove suppliers in Indonesia are unaware of clean reach the customers. In terms of stove type and size, stove designs and programs. Among the producers inter- producers can command a higher price and profit from viewed as part of the CSI field survey, only 21 percent the Anglo Supra charcoal stove, especially the larger- had ever heard of new or improved stoves; of those, 12 sized version (Case Story 3.2). By contrast, the lowest percent were mistakenly referring to traditional stove profit margin is on the popular Keren wood stove, which designs from other areas. Similarly, more than 80 per- costs less to make and has a low retail price, making cent of the wholesalers interviewed were unaware of it the preferred stove among poorer households. To improved stove designs, while the other 20 percent mis- takenly regarded traditional stove designs (e.g., Apollo, 4. Based on an exchange rate of IDR 9,152 = US$1. Keren, and SBY) as improved ones. Stove Supply Issues 19 At the same time, the survey results confirm that the 3.4 and 3.5). Both generally agreed that users consider entire supply chain—stove producers, wholesalers, and price as the most important feature of a stove and retailers—is enthusiastic about learning about clean believe that cheap stoves sell well and fast. Some retail- cookstove models. About 79 percent of the produc- ers expressed concern that the price of the new clean ers interviewed are open to new ideas and clean stove cookstoves would be beyond reach for their customers, products and believe they should have access to new which would ultimately hurt sales. Many stressed the stove technology; 9 percent are interested because they need to test the stoves before selling them to ensure believe clean stoves are saleable, and 7 percent foresee that they would meet the stated claims. Many others a potential market (Case Story 3.1). said they were satisfied with the current stove models, believing that the new ones would not sell. This finding The wholesalers and retailers interviewed identified a underscores the importance of extending knowledge stove’s price as the most critical factor for sales and thus and information on advanced (clean and efficient) bio- the supply sector’s acceptability of new stoves (figures mass stoves to all levels of the supply chain. FIGURE 3.4 WHOLESALERS’ OPINION ON FACTORS THAT MAKE STOVES BEST SELLERS Cheap 41 High power/fast cooking 28 Durable 15 Stove easy to obtain 10 Factor Easy to use 5 Beautiful 4 Fuel easy to obtain 4 Can cook with two pots 3 0 5 10 15 20 25 30 35 40 45 Percent of wholesalers Source: Indonesia CSI field survey. FIGURE 3.5 RETAILERS’ OPINION ON FACTORS THAT MAKE STOVES BEST SELLERS Cheap 24 Durable 16 Efficient 15 Heat up quickly 14 Factor Use different type of fuel 6 Easy to obtain 5 Familiarity/easy to use 2 Portable (small, light, etc) 1 0 5 10 15 20 25 Percent of retailers Source: Indonesia CSI field survey. 20 Indonesia: Toward Universal Access to Clean Cooking CASE STORY 3.1 TRADITIONAL STOVE PRODUCER FORESEES CONTINUED GROWTH Pak Buang, who lives on the island of Java, Indonesia, is a producer of traditional biomass stoves. He runs his stove production business out of his home in Panjangrejo, a village in Pundong, a subdistrict of Bantul District. Buang, his wife, and two sons manage the business, which Buang inherited from his parents. The family produces three sizes of a one-pothole woodfuel stove, locally known as the “Keren. � Unlike most producers who passively wait for buyers, Buang and his family proactively market and deliver their stove products to areas located up to 60 km from their village, including Gunung Kidul District. Like most traditional stove producers, Buang does not keep records on the cost of his input materials, but he does calculate cash expenses, which allows him to organize production batches. Buang obtains the clay material for free, but must pay to rent a truck for its transport, at IDR 500,000 per trip. He estimates that one truckload of clay lasts about three months; at this rate, one person can produce 35 small-, 25 medium-, or 20 large-sized Keren stoves per MONTHLY PRODUCTION PROCESS day. When asked about his monthly production levels, he can only provide information based on his kiln capac- ity, which holds about 500 stoves per firing. Since the Clay Free family usually does three firings, monthly production averages about 1,500 stoves of mixed sizes. Dig, grind, and transport IDR 500,000 When Buang and his family do not have enough of their per batch x 3 own stoves for a batch, they purchase raw (not fired) Ground clay ready stoves from neighbors to make up the difference. The to mold price of one raw stove, including materials and labor, is 35 (small), IDR 1,000 (small), IDR 1,400 (medium), and IDR 1,750 Molding 25 (medium), or 20 (large) (large). Wet stove, air dry stoves per day Buang spends about IDR 800,000 each month to fire about 1,500 stoves of mixed sizes, so the cost of firing Collected fuel one stove averages about IDR 533. Based on this infor- Firing (free) mation, we can attempt to analyze Buang’s production costs and profit margin from selling to the wholesaler, Stove ready for market as follows: Keren stove size Production cost, IDR* Selling price, IDR Profit, IDR Small 1,533 3,000 1,467 Medium 1,933 5,000 3,067 Large 2,283 7,000 4,717 *Production costs exclude labor, working space, and depreciation; selling price is roughly calculated, based on proven business sustainability and profitability. (Continued next page) Stove Supply Issues 21 CASE STORY 3.1 (CONTINUED) For the same stoves, the wholesaler’s selling price and profit margin from the retailer are as follows: Keren stove size Purchase price, IDR Selling price, IDR Profit, IDR Small 3,000 4,000 1,000 Medium 5,000 7,000 2,000 Large 7,000 10,000 3,000 The wholesaler’s profit from a medium-sized stove is double what s/he receives from a small-sized one, while a large-sized stove is three times more profitable than a small-sized one. By contrast, the retailer receives less profit from selling the medium-sized stove than s/he does from the small-sized one, as shown here: Keren stove size Purchase price, IDR Selling price, IDR Profit, IDR Small 4,000 7,500 3,500 Medium 7,000 9,000 2,000 Large 10,000 14,000 4,000 According to Buang, the stove business is good, offering his family a promising future. Moreover, stove demand has not been affected by the recent Kerosene-to-LPG Conversion Program, in part, because the family’s target market includes rural areas in Gunung Kidul, where people are less likely to use LPG for cooking. In fact, demand for the Keren wood stoves is increasing, and Buang has sought out more people to supply raw stoves to his production center. Though Buang runs a traditional business, he is open to new ideas. When asked whether he would be interested in producing new (improved) stove designs, he confirmed his interest. He had previously seen the improved two-hole stove design (that is, the TSHE) introduced by Yayasan Dian Desa (YDD), a local NGO, and had tried to produce a similar looking stove on his own. However, since Buang had not been trained in making the improved stove, his look- alike version, indeed a two-hole pottery stove, had no baffle and thus failed to realize similar benefits in fuel savings and emissions reduction. 22 Indonesia: Toward Universal Access to Clean Cooking CASE STORY 3.2 IMPROVED STOVE TRAINING OPENS OPPORTUNITIES Today Mr. and Mrs. Sutras are the prosperous owners of an improved stove business in Metroyudan, a town near Magelang city in Central Java, Indonesia. It all started eight years ago when the couple, then makers of brick roof tile, participated in improved stove training facilitated by Yayasan Dian Desa (YDD), an NGO based in Yogyakarta. Among the various producers who completed the YDD training, only Mr. and Mrs. Sutras persevered in learning how to make the Anglo Supra, an improved pottery stove that burns charcoal, more commonly known as the Thai Bucket stove. At first Mr. and Mrs. Sutras produced the Anglo Supra only if they received orders for it, and continued their roof tile business for income security. Aware of the couple’s situation and interest in making new stoves, YDD trained the couple in making the Jolentho, a large pottery liner designed for both households and small producers in the palm sugar industry; they also learned to make an improved two-hole pottery wood stove. As Mr. and Mrs. Sutras honed their skills, YDD promoted the couple to others and supported them financially by purchasing their stoves for distribution elsewhere as part of an effort to develop an open market for better stoves. The NGO’s support incentivized the couple to continue on. Several years later, as nearby house- holds became aware of the Anglo Supra’s high heat and fuel-saving benefits, the market began to open up. In 2009, one local wholesaler, Mr. Irawan, spotted a business opportu- nity. At that time, kerosene prices had spiked, and many households were nervous about switching to LPG stoves because of the accidents that had occurred. Mr. Irawan decided to start purchasing 200–250 large and small Anglo Supra stoves from Mr. and Mrs. Sutras every three weeks, which he then sold to retailers in and around Magelang city, about 43 km north of Yogyakarta. He began demonstrating the stoves in the marketplace. Since then, sales have steadily increased, and today the Anglo Supra has no real competition in the market. Once sales of the Anglo Supra were guaranteed, Mr. and Mrs. Sutras stopped producing brick roof tile. Marketing is not an issue since demand often exceeds the couple’s monthly production capacity. Mr. and Mrs. Sutras own a 100-stove capacity kiln, which they fire three times each month. If Mrs. Sutras were available to help her husband full-time—she must also attend to household chores and various other activities—the couple’s daily production at full capacity would be about 20 stoves. But lacking working space for enlarging their product output, the couple, like many other small-scale producers, decided not to hire paid labor; instead, they do everything themselves, limiting their monthly production output to 300 stoves. At this rate, the couple’s average monthly income is IDR 4.17 million, significantly higher than the region’s minimum wage (IDR 800,000). The couple’s economic progress is evidenced by their recent house renovations. The main monthly production costs are those for the clay (IDR 20,000 per m3); digging and grinding (12 m3 at IDR 240,000 per 300 stoves); kiln firing (1.5 m3 of firewood or 100 pieces at IDR 100,000 x 3); fixing the outer liner, which requires sand and cement (IDR 75,000 per 30 stoves) and zinc (IDR 15,000 per large-sized stove and IDR 10,000 per small-sized stove); and transport to market in Magelang city (IDR 1,000 per stove). (Continued next page) Stove Supply Issues 23 CASE STORY 3.2 (CONTINUED) Based on their production processes and required materials, Mr. and Mrs. Sutras calculate the total cost of making the Anglo Supra stove at IDR 24,300 for a large-sized stove and IDR 19,300 for a small one. The cost breakdown is shown below: Production cost item Large stove (IDR) Small stove (IDR) Clay 300 300 Digging and grinding 1,000 1,000 Sand and cement 500 500 Zinc pail 15,000 10,000 Labor* 5,000 5,000 Transport 1,000 1,000 Other 1,500 1,500 Total cost 24,300 19,300 *Estimate based on 2 workers at IDR 50,000 per person per day; i.e., 2 workers making 20 stoves per day = IDR 5,000 per stove. Anglo Supra (Thai Bucket) stove Mr. and Mrs. Sutras sell some of their improved stoves to households located nearby at a price slightly less than retail. For these direct buyers, the couple sells the large-sized Anglo Supra for IDR 65,000, yielding a profit of IDR 40,700 per stove; while they sell the small-sized version for IDR 50,000, making IDR 30,700 per stove. The couple earns the most per stove from these few sales. The couple’s profit from selling to Mr. Irawan, the wholesaler, is significantly less, as shown below: Anglo Supra stove size Production cost (IDR) Selling price (IDR) Profit per stove (IDR) Large 24,300 38,000 13,700 Small 19,300 32,000 12,700 Mr. Irawan’s profit from selling to retailers is quite high compared to what he makes from selling regular cookstoves, owing to the low final selling price of traditional models and stiff market competition. Anglo Supra stove size Purchase price (IDR) Selling price (IDR) Profit per stove (IDR) Large 38,000 60,000 22,000 Small 32,000 50,000 18,000 For these same reasons, retailers admit that they earn higher profits from selling the Anglo Supra. Anglo Supra stove size Purchase price (IDR) Selling price (IDR) Profit per stove (IDR) Large 60,000 70,000 10,000 Small 50,000 60,000 10,000 Although Mr. and Mrs. Sutras cannot fill the steadily rising household demand for the Anglo Supra improved charcoal stove, other small artisanal producers in the area have expressed no interest in making the stove, which they per- ceive as being difficult and troublesome. Even today, Mr. Irawan, whose primary motivation in selling the stove was to turn a higher profit, remains the only wholesaler of the Anglo Supra. 24 Indonesia: Toward Universal Access to Clean Cooking Other factors that the wholesalers and retailers inter- as do supply-and-demand relationships, which affect the viewed considered important were related to a stove’s supply chain’s readiness to produce and distribute new functionality or performance (i.e., high power and thus models and households’ willingness to use them. ability to cook food faster), as well as durability. The Keren wood stove, which has all of these features, was The traditional cookstove supply chain generally lacks most often recognized by both wholesalers and retailers knowledge about new and improved stove models and as the best-selling stove. The Anglo charcoal stove, which stove performance. Although some of the supply chain shares these features to an extent, was considered the members surveyed said they were aware of new stove second most popular stove. At the same time, nearly designs, the ones they were referring to were not always one-quarter of retailers could not identify which stove improved, suggesting the supply chain’s lack of a clear con- model was the best-selling one. cept about what constitutes an improved or clean stove. Despite the interest expressed by the supply chain in Conclusion producing and selling clean stove designs, profit is the major concern for producers, wholesalers, and retail- Results of the Indonesia CSI stocktaking survey, which ers alike. Since consumers are used to buying stoves at traces stove supply links from producers to wholesalers cheap prices, suppliers are interested in selling as many and retailers, show that the largest number of biomass stoves as possible, not just those that might be the most stove producers and users are found in Central and East fuel-efficient. Introducing a new stove model would need Java, where demand for wood-burning cookstoves is to be linked with a higher profit margin. It would also higher than regional supply. Stove supply chains tend to require training the supply chain in business develop- deal in traditional cookstove models, including the wood- ment so members could maximize the benefits of par- burning Keren and charcoal-burning Anglo stoves, which ticipating in selling new models and thus be incentivized are produced and sold by traditional family-based busi- to continue with their trade into the future. nesses mainly through cash-based transactions. In terms of future intervention strategies, the areas with Price mark-ups are taken at each level of the supply pre-existing stove supply chains, as discussed in this chain. High price margins between stove production chapter, should be treated differently than areas with- costs and final sale price could incentivize the supply out established stove supply chains, where users are chain to produce more improved stove models; however, accustomed to making their own traditional-style stoves. a variety of models that fit households’ needs should be Therefore, two strategies are proposed: one involving made available once their demand for new technology training and use of existing supply chains to produce and has increased. distribute new stove models and the other developing national capacity to mass-produce and disseminate clean Traditional stove producers, wholesalers, and retailers stove models. In determining which strategy might be have longstanding business relationships, usually having most appropriate for a given area, it will be important worked together for many years. They operate through to consider the driving factors behind both stove sup- informal business agreements based on mutual trust. ply (e.g., profit and user acceptability) and household Their business practices (i.e., who sells stoves to whom, demand (e.g., high heat, ability to use multiple fuels, and how stoves are transported, and price margins taken at ready availability of fuels). each level) are deeply embedded in these relationships. Finally, considering the dominance of traditional stoves As can be expected from such a geographically and cul- and longstanding family business practices in the sector, turally diverse country, Indonesia exhibits strong regional there is a need to introduce and attract new suppliers to variations in business and stove purchasing practices. scale up the dissemination of clean stoves. However, in Key contributing factors include stove costs at each point the process of scaling up the clean stove business, one of sale, final stove cost to users (i.e., what users are must protect against driving traditional stove producers accustomed to paying), and the types of stoves primarily out of business. Therefore, in addition to engaging exist- sold (particularly the type of material). The rate of stove ing producers in the clean stove business, appropriate production and business size vary by province, and pro- safeguards and social protection mechanisms should be duction patterns and business relationships differ by area, established. 4 Policies, Programs, and Institutional Players: Lessons Learned This chapter reviews the extent to which biomass cook- product standardization and certification, as well as ser- ing energy has been addressed in Indonesia and the vices related to renewable energy and energy efficiency. gaps in policies and institutional strengthening that future intervention programs will need to fill. The next sections While a recently issued public health decree (Decree No. present an overview of current laws and policies related 1077/Menkes/PER/5/2011) recognizes the problem of to biomass cooking energy and stoves, followed by a household air pollution (HAP), its concerns are limited to review of key programs and institutional players. The the need for indoor air quality, citing smoke from cook- chapter then reviews lessons from two highly success- ing activities as a factor affecting household members’ ful programs that have promoted clean cooking solutions respiratory illnesses. Unfortunately, the suggestions to in Indonesia, including features that can be applied to improve indoor air quality refer only to fuel switching household energy and health interventions. (e.g., from kerosene to liquefied petroleum gas [LPG]). In reality, this option is impractical for about 40 percent of the country’s households that currently rely on biomass Overview of Laws and Policies fuel for cooking. As previously discussed, LPG is unaf- fordable, even at the subsidized price, for the vast major- Since clean biomass cooking solutions involve a variety ity of such households, particularly those in rural areas. of cross-cutting issues, this review focuses on current Also, distribution networks are usually limited to urban laws and public policies, the regulatory framework, and and peri-urban areas and are thus inaccessible to most practices covering a range of issues, including access rural households. to modern energy, promotion of energy efficiency and renewable energy, biomass utilization, business devel- A thorough review of these laws and policies confirms opment and renewable energy investment, and public that none specifically addresses biomass cooking energy health. The review confirms that Indonesia has several and cookstoves. Their usefulness is limited to providing laws that address equitable access to modern energy. a high-level policy framework for clean biomass cooking The country also has policies that directly aim to pro- solutions. However, past experience and empirical evi- mote the development and use of renewable energy. dence suggest that, without specifics on biomass and For example, there are policies that provide financial clean cooking solutions and recognition of the reality that and non-financial incentives, both direct and indirect, nearly half of the country’s population uses biomass, the to ensure private-sector involvement and encourage problem—involving a number of cross-cutting issues— its investment in renewable energy. These incentives will continue to be overlooked. Experience from the are related to taxation, access to financing, and regu- Kerosene-to-LPG Conversion Program and the Indonesia latory regimes to provide an enabling environment, as Domestic Biogas Programme demonstrates that suc- well as training and capacity building. In addition, there cessful programs require focused policy with a specific are national-level governmental provisions that address mandate and concerted efforts. 25 26 Indonesia: Toward Universal Access to Clean Cooking Limitations of Past Programs and Successful Program Experience Institutional Players In the past five years, two noteworthy programs promot- Over the past 25 years, various improved stove pro- ing clean cooking solutions in Indonesia have enjoyed grams have been implemented in Indonesia; however, successful outcomes: (i) the Kerosene-to-LPG Conver- such efforts have tended to be fragmented and sporadic, sion Program and (ii) the Indonesia Domestic Biogas focusing only on small areas. Most have been donor- Programme (IDBP). The LPG conversion program, initi- funded programs implemented by nongovernmental ated and developed by the Indonesian government and organizations (NGOs); in virtually all cases, the programs implemented by Pertamina, the state-owned oil and gas ended when funding ceased. In the early 1990s, Indone- company, is considered one of the world’s largest clean sia’s Directorate General for Electricity and Energy Utili- cooking solution programs. The 2010 national socioeco- zation (DJLPE) first introduced the concept of improved nomic survey conducted by the BPS and the 2010 cen- cookstoves to the market. The DJLPE launched projects sus confirm that the program has successfully converted that centered on improved stove design competitions, more than 22 million households that use kerosene as producer training, and development of performance their main cooking fuel to LPG (Annex A). The IDBP was benchmarks. Unfortunately, these efforts were imple- initiated by the Government of Indonesia through the mented on a project-by-project basis and were never Joint Energy Working Group under bilateral cooperation institutionalized. Furthermore, they lacked appropriate between the Indonesian government and the Kingdom follow-up and monitoring and evaluation (M&E) to pro- of the Netherlands. The program is funded by the Dutch vide the feedback needed for successive projects and government and facilitated by the Government of Indo- programs. Owing to these shortcomings, past programs nesia. HIVOS, an international NGO, was appointed by by numerous NGOs, donors, and governments have the Dutch government as Program Manager, with techni- largely failed, and biomass-using households continue to cal support provided by SNV, another international NGO rely on traditional cookstoves. with broad experience in domestic biogas programs. Over a three-year period (May 2009–May 2012), the IDBP In recent years, there has been renewed private-sector installed more than 8,700 biogas systems throughout interest in developing and producing improved cook- the country (Annex B). stoves, with an emphasis on fuel efficiency and emis- sions reduction. A few private-sector entrepreneurs in Kerosene-to-LPG Conversion Program Indonesia have independently tested the market with a limited number of advanced biomass cookstoves. How- The highly successful Kerosene-to-LPG Conversion Pro- ever, since there is no market for these stoves, produc- gram offers useful lessons for future national programs tion remains at the experimental or testing stage, with related to household clean cooking (box 4.1). The main stoves produced only to fill orders. Without any interven- factors contributing to the program’s success are out- tion, it is unlikely that new advanced stoves will reach the lined below. market or households. Strong Government Commitment and Firm Policy Objective. Even with renewed private-sector interest, improved In 2006, the Indonesian government was under tremen- stove programs and activities still remain small, frag- dous fiscal burden to continue a rapidly rising kerosene mented, and sporadic. Recently, various global aid subsidy. Under such pressure, the government urgently agencies and NGOs, including Mercy Corps, the United searched for an alternative, which the conversion to Nations Development Programme, and the Netherlands LPG provided. In 2007 , the government acted swiftly to Development Organisation (SNV)/Humanist Institute for implement the Kerosene-to-LPG Conversion Program, Development Cooperation (HIVOS), have embarked on completing the initially proposed six-year program in just clean cookstove programs. Yet these programs’ scope three years. The government’s strong program commit- and activities, like past efforts, remain limited to certain ment has been evidenced by its willingness to reorganize areas. To date, they have been unable to create a sustained program execution when any aspect has been found inef- market or attract interest in clean cookstove technology fective. For example, initial program coordination, which among households. Most programs have targeted Java, included four ministries, was reduced to a single one and some cover Sumatra, Sulawesi, and other areas of (i.e., Ministry of Energy and Mineral Resources [MEMR]) the country. Unfortunately, none have moved beyond when it became clear that coordination among the minis- their own distribution networks to create a commercial tries was ineffective. Such swift corrective action enabled market for a particular improved cookstove model. the program to complete on time. Also, the government Policies, Programs, and Institutional Players: Lessons Learned 27 BOX 4.1 KEROSENE-TO-LPG CONVERSION PROGRAM Indonesia’s Kerosene-to-LPG Conversion Program, launched in May 2007 in Jakarta, has succeeded in reducing the nation’s kerosene consumption by encouraging households and small- and medium-sized enterprises (SMEs) to switch to LPG. Historically, kerosene has been heavily subsidized in Indonesia. By 2006, the kerosene subsidy accounted for 57 percent of all subsidies for petroleum products. The rationale for switching to subsidized LPG was based on the end-use caloric value of delivered cooking energy and the subsidy per unit of fuel, which is significantly lower for LPG. Although based on energy-equivalent calculations, the government chose to equate 1 liter of kero- sene with 0.39 kg of LPG (instead of 0.57 kg of LPG) to determine the subsidy. The Indonesian government’s main activity for promoting the conversion program has been distributing ready-to-use start-up packages (paket perdana), each consisting of a filled 3-kg LPG cylinder, a gas stove, hose, and regulator. Supporting activities have included education and socialization, data collection, and monitoring use of the start-up packages among beneficiaries. By 2010, more than 27 million households were using LPG as their main cooking fuel, about five times as many as in 2007 . As of 2011, the conversion program had distributed some 53 million start-up packages. Infrastructure planning and implementation occurred swiftly to ensure that supply and distribution networks could meet the new demand. Per- tamina, the program’s sole implementing agency, invested with the private sector to improve and expand all stages of the LPG supply chain, from production, bulk transport, and storage facilities (LPG depots), to filling stations and wholesale and retail distribution. By June 2012, Pertamina had withdrawn 8.2 million kl of kerosene, having replaced it with 3.2 million tons of LPG. The program has reached 23 provinces, with 53.9 million start-up packages distrib- uted. A total of 13 provinces have been designated as “closed and dry, � meaning that distribution of start-up pack- ages has been completed and all subsidized kerosene withdrawn (Annex A). Source: Susanto 2012. was convinced that replacing kerosene with LPG would to determine whether kerosene distribution agents in provide a win-win situation for all parties involved. As a the village could be used to distribute LPG. Four months result, the government stayed on course with a firm pol- later, a second market test was conducted, covering icy of replacing 1 liter of kerosene with 0.39 kg of LPG, as 25,000 households. Finally, in February 2007 , a third test well as providing financial support for the program. was conducted, whereby 10,000 start-up packages were distributed to flood victims in Jakarta. No survey research Effective Marketing and Public-Awareness Campaign. The was conducted for the second and third tests since the implementation arrangement for the Kerosene-to-LPG overall goal was to test the distribution model. In addition Conversion Program consists of one main activity—dis- to market testing and research, Pertamina has carried out tribution of the LPG gas stove, hose, regulator, and one public-awareness campaigns through the mass media, filled 3-kg LPG cylinder—supported by various sub-activ- which have proven quite effective in changing public per- ities, all of which are designed to promote the adoption ception from skepticism to acceptance. and safe use of LPG as the main household cooking fuel. Pertamina has placed equal weight on the main activity Assured Availability of Fuel Supply. From the start, Per- and supporting activities. tamina has been fully aware that an uninterrupted supply of LPG would be required to gain public acceptance and To better understand how consumers and the public at ensure the full conversion of households and SMEs. For large would respond to the massive conversion program, this reason, Pertamina officials involved in the program Pertamina conducted extensive market research and emphasized development of the LPG supply chain infra- testing. In August 2006, the first market test was carried structure, recognizing that the existing infrastructure was out in Cempaka Baru village in Kemayoran, a subdistrict inadequate to accommodate such a large program. The of Central Jakarta. Pertamina distributed free start- tenfold increase in LPG demand over a four-year period up packages to 500 eligible households, whose total has necessitated expanding the supply chain at all levels, household income was less than IDR 1.5 million. Per- including (i) refinery production supplemented by imports tamina worked with an independent marketing research when needed, (ii) bulk transport, (iii) storage depots, (iv) firm to assess household acceptance, perception, and filling stations with to-and-from transport, and (v) sales related issues. The market test also allowed Pertamina agents or retail and distribution. 28 Indonesia: Toward Universal Access to Clean Cooking Based on lessons learned from the market testing, Per- far the most important aspect of the program. Believing tamina was able to determine whether its existing net- that market-based solutions provide a more reliable path works of kerosene agents could be used for the LPG toward sustainability, the BIRU program has emphasized program. Fortunately, non-subsidized LPG had already the development of partnerships with local masons or been available in the market prior to launching the con- builders, known as Construction Partner Organizations version program. Instead of Pertamina having to build all (CPOs). The CPOs are trained not only in the technical new LPG supply infrastructure, it had only to expand the aspects of constructing biogas systems, but also in busi- existing supply chain and create agents for subsidized ness development. In both theory and practice, local LPG. However, expanding the supply chain required partners who have completed the training are expected massive investment at all levels. Pertamina was able to to establish businesses or provide services on construct- use its status as the country’s only national oil company, ing biogas systems in the areas where they live. The combined with the government’s firm commitment and program relies significantly on local partners to help pro- policy, to convince private-sector actors at every level to mote biogas systems in local areas. Since the program invest in expanding the LPG supply infrastructure. emphasizes business development and customer satis- faction, local partners are also trained and expected to Pertamina as Sole Implementing Agency. As the sole imple- provide after-sales service. menting agency for the Kerosene-to-LPG Conversion Program, Pertamina, Indonesia’s largest state-owned Financial Support for Upfront Costs. The BIRU program enterprise, is equipped with the financial resources and recognizes that the biggest obstacle to adopting biogas manpower to implement the program efficiently and systems is covering high upfront system costs, which effectively, thereby bypassing much bureaucracy. The are beyond reach for many farming households without implementation arrangement requires that the enterprise access to financing or credit. This reality suggests that pay in advance and submit bills to the government for a purely commercial approach is likely to capture only a reimbursement. Also, the company has offices located small number of households. To help otherwise qualified on nearly all of Indonesia’s key islands, permitting easy households participate in the program and thus capture a coordination with local governments. larger market share, the BIRU program subsidizes upfront costs and works with financial and other institutions to help Effective Monitoring and Evaluation. Owing to the conver- households obtain access to credit. Recently, the program sion program’s effective monitoring and evaluation (M&E) has begun to explore additional alternatives to ease access processes, the program manager has been able to moni- to financing, including the establishment of a revolving fund. tor, evaluate, and respond with corrective measures in a timely manner. For example, the program management Quality Control and Standards. Recognizing that biogas sys- team was able to identify the coordination failure among tems must be of good quality and adhere to technical the four initially selected ministries. Market research has standards to gain acceptance from farming households, also provided useful information for taking corrective the BIRU program has emphasized the quality of con- measures. For example, the first trial market research struction, with strict quality control and technical stan- showed that consumers wanted more sales locations dards. The program has special inspectors who examine for refilling the 3-kg LPG cylinders. Market research also the installed systems and provide technical support. To confirms that socialization and education on appropriate ensure that all of the systems constructed meet the qual- handling and use of LPG for cooking must continue. As ity standards, local partners are required to make at least part of the market testing, Pertamina was able to test two maintenance visits per year. Both the inspection and monitor and evaluate the LPG distribution model. maintenance reports from the respective quality inspec- tors and local partners are entered into a comprehensive management information system (MIS), which provides Indonesia Domestic Biogas Programme the program an excellent overview of the technical quality The Indonesia Domestic Biogas Programme (IDBP), of each unit and the work quality of each certified biogas known locally as the BIRU (Biogas Rumah) program, constructor and CPO. The ability to track which masons also provides useful lessons for programs that aim to and organizations do not keep up the required technical promote improved biomass cookstoves (box 4.2). The standards facilitates identifying them and undertaking main factors accounting for the program’s success are needed interventions (e.g., additional technical or man- described below. agement training). Market-Based Approach. Based on lessons from past inter- Verification of Results and Procedures. Quality control and national experience in promoting biogas use, the BIRU inspection are used to verify that a biogas system has program adopted a market-based approach, which is by been built and meets all technical standards so that Policies, Programs, and Institutional Players: Lessons Learned 29 BOX 4.2 INDONESIA DOMESTIC BIOGAS PROGRAMME The Indonesia Domestic Biogas Programme (IDBP), commonly referred to as the BIRU (Biogas Rumah) program, was initiated by the Government of Indonesia under its bilateral cooperation with the Kingdom of the Netherlands. Funded by the Dutch government and facilitated by the Government of Indonesia, the BIRU program is a three- year effort with a one-year, no-cost extension (May 2009–December 2013). The Dutch government appointed the Humanist Institute for Development Cooperation (HIVOS) as Program Manager, with technical support provided by the Netherlands Development Organisation (SNV). The program aims to develop the national biogas market, with a target of 8,000 high-quality biogas units for household use. By May 2012, the program had exceeded its target, hav- ing installed more than 8,700 units throughout the country. To ensure that demand is generated among potential household customers, the BIRU program focuses on aware- ness-raising and provision of a subsidy to help farmers overcome high upfront system costs. The starting price for the smallest-sized household biogas system (four m3) is about US$500. To further incentivize interested farming house- holds, the program actively works with financial and other institutions to provide households credit for investing in a unit. In the past, the BIRU program succeeded in helping several dairy farmer cooperatives secure bank loans used to re-lend money to cooperative members to help pay for biogas system units. On the supply side, the BIRU program selects and trains local masons or construction contractors, called Con- struction Partner Organizations (CPOs), to actively promote and market household biogas systems and provide high-quality after-sales service. This grooming process includes technical training, introduction to technical innova- tions, management training, and other training deemed necessary to ensure that the CPOs can satisfy potential user demand. To support this process, the BIRU program develops user-training modules for partners and standard operating guidelines to which partners must adhere to ensure that quality standards are maintained. The program also works with biogas appliance and parts manufacturers to further ensure the development and sustainability of the biogas market. Finally, the program has developed a comprehensive management information system (MIS) used to accurately track the number of biogas units constructed under the program, their locations and owners, and system sizes and technical features, indicating which units, masons, and partners show quality defaults. The MIS is also used to track and verify the results of biogas units constructed by the CPOs (Annex B). Source: de Groot 2012. payment to the constructor or local partner can be made. and a firm policy objective are critical. With full support In addition, the MIS can be used to track payment. It from the government, the implementing agency will have should be noted that final payment is made only when full confidence in carrying out its mandate, as in the case the constructor or local partner has completed the sec- of Pertamina. Like the conversion from kerosene to LPG, ond of the two annual maintenance visits. switching from traditional to fuel-efficient stoves requires strong government commitment, as well as assurance of Local Management. The BIRU program emphasizes local an ongoing supply of good-quality stoves and after-sales management to ensure that local staff will be fully service; otherwise, gaining household acceptance is dif- capable of running the program after international donor ficult. Moreover, any promotion of improved stoves that funding ends and thus ensure the ultimate transfer of requires specific or unique fuels must be accompanied program operations to the local level. by activities to ensure the availability of an uninterrupted fuel supply, which is key to program sustainability. The BIRU program’s insistence on quality control and adher- Summary of Lessons Learned ence to standards are also vital features of any program It is evident that the key ingredients for the success of to promote clean biomass stoves. Other key program Indonesia’ LPG conversion and BIRU programs can be components include the use of M&E and a MIS—tools adapted to designing a program to promote improved that allow program management to verify results and biomass cooking solutions in the country. As discussed procedures, take needed corrective actions, and mea- in the previous section, strong government commitment sure program results. 30 Indonesia: Toward Universal Access to Clean Cooking Lessons from the BIRU program confirm that over- eradication that targeted pneumonia was outlined in the coming high upfront costs is vital to making products Strategic Plan of the Department of Health (2005–09). A affordable to most households and thus capturing a governmental program (P2ISPA) was also established to larger market share. In the case of more technologically eradicate ARI in Indonesia. These initiatives and motiva- advanced stoves, which obviously cost more than tradi- tions will be important to public health components of the tional types and models, the high stove price could pre- proposed clean biomass stove initiative; however, like so vent otherwise interested households from making the many other relevant areas in energy policy and planning, investment. The BIRU program demonstrates the effec- ARI-related regulations have yet to recognize biomass tiveness of combining a market-based mechanism with energy use as a primary cause of respiratory illnesses. financial incentives to promote better products whose The Ministry of Health, including its key agencies, has upfront costs are higher. Finally, the program’s success in recognized HAP , having issued regulations containing working with local market players to promote and market guidelines for indoor air quality that identify smoke from new products has the potential for practical application in cooking activities as a factor affecting household respi- a program to promote clean biomass cooking solutions. ratory illness.5 Unfortunately, the potential role of clean biomass stoves in overcoming these problems is not yet recognized. Most official suggestions are for households Conclusion to use LPG, which is not feasible given the widespread, ingrained use of biomass fuel by about 40 percent of the This review has identified key issues related to Indone- country’s households. sia’s existing laws and policies that could be relevant to developing and implementing household energy and At the same time, the health and environmental hazards health initiatives moving forward. Biomass-related issues linked to the use of household biomass energy have will need to be integrated into and expanded within the been taken seriously by NGOs in Indonesia for several framework of existing policies. Policies published by the decades. Acting independently and mostly at the grass- MEMR emphasize improving energy access specifically roots level, various international and local NGOs have run for remote and poor populations, which, to a large extent, programs seeking to influence communities to use better address biomass-using populations, who tend to be poor cooking tools. The biggest challenge for improved cook- and/or reside in more remote areas. To date, however, stove programs in Indonesia remains their inability to these regulations have been used more for commercial enter existing stove markets because of major obstacles fuel, and have yet to be applied to issues pertaining to on both the supply and demand sides. Indonesia lacks a household biomass energy. In addition, policies are in structured market for improved biomass cookstoves, and place that allow for government support of renewable efforts to introduce such stoves to the market have been energy–related topics through various incentives for devel- hampered by a lack of access to distribution and retail oping related businesses and markets. But these policies networks, relying instead on less sustainable, time-lim- have yet to be applied to household biomass energy. Fur- ited NGO partnerships. Because households lack aware- thermore, HAP has not yet been recognized as an environ- ness and education about improved cookstoves and their mental risk factor in public discussions of preventing acute substantial health and environmental benefits, consumer respiratory infections (ARIs). In short, there is an overall demand remains low. To date, efforts by various actors to policy gap for the integrated management of household introduce improved biomass cookstoves have lacked an energy and health issues. integrated focus on consumer awareness and demand, product affordability and availability, and producer capa- Indonesia’s national government has previously priori- bility to make uniform products according to standards. tized minimizing, if not eradicating, pneumonia, an ARI Therefore, a clean biomass stove industry has as yet to that studies have shown as a major death-causing dis- be established. ease in children under age 5. This health threat to young children has driven various initiatives that aim to alleviate 5. Ministry of Health Decree (Peraturan Menteri Kesehatan RI) No./ high prevalence of the disease. A program on disease Menkes/PER/5/2011. 5 Toward Universal Access to Clean Cooking: Key Policy Recommendations As discussed in the previous chapters, the main disad- nongovernmental organizations (NGOs), and academia. vantages of biomass energy for cooking using primitive The sections that follow present the main barriers to cookstoves are linked to incomplete fuel combustion. As scaled-up access to clean biomass cooking solutions; previously mentioned, indoor emissions from traditional this initiative’s recommended strategy, including an inno- biomass cookstoves are responsible for about 165,000 vative financing approach focused on delivery of results premature deaths—mainly those of women and chil- and integration of the identified priorities; and the pro- dren—each year in Indonesia (Lim et al. 2012). In addi- posed next steps in moving the country along the road to tion, in areas where demand for biomass fuels exceeds universal access to clean cooking solutions. sustainable supply, fuelwood collection can lead to defor- estation, land degradation, and desertification. Access Barriers and Strategy Overview Yet under conditions of sustainable production and more efficient fuel use, biomass energy is a renewable The main obstacles to scaling up access to cleaner- resource that is affordable to the poor. Biomass fuels are burning, fuel-efficient biomass cookstoves in Indonesia abundant in Indonesia, can be burned without further can be grouped according to stove supply, household processing, and are cheaper than most alternative fuels demand, and institutional issues (table 5.1). (e.g., gas, kerosene, or electricity). In addition, technolo- gies and techniques for sustainable production and effi- The suggested strategy for the Indonesia CSI comprises cient use of biomass energy are available. Thus, if used in several interrelated pillars—creating an enabling environ- an efficient and clean way, biomass stoves could contrib- ment, stimulating user demand for clean stoves, and ute significantly to the country’s green growth agenda. supporting the market and supply-side business develop- This, in turn, could lead to poverty reduction, better ment—with institutionalization at the center (figure 5.1). health and gender equality, and less pressure on the local This strategy builds on and is consistent with the sector ecology and global environment. Now there is a window transformation strategy developed by the Global Alliance of opportunity to harness the momentum from the suc- for Clean Cookstoves (GACC) and the World Bank’s “one cessful LPG conversion program to focus on promoting goal, two paths� approach to achieving universal access clean cooking solutions using biomass cookstoves. to modern energy in the East Asia and Pacific region (World Bank 2011a). This chapter summarizes the main barriers that Indone- sia faces in achieving universal access to clean cooking At this stage, institutionalization of clean biomass cook- solutions by 2030 and suggests key policies for reaching ing solutions is vital to designing, preparing, and imple- that goal. These recommendations build on results from menting such a large-scale program. It is essential for the Indonesia CSI stocktaking review, presented in the supporting all three pillars, whose successful implemen- previous chapters, as well as the two national consulta- tation, in turn, will help to reinforce institutionalization, tion workshops held with key stakeholders representing which is critical to the long-term sustainable develop- central and provincial governments, stove producers, ment of a clean biomass cookstove market. The following 31 32 Indonesia: Toward Universal Access to Clean Cooking TABLE 5.1 MAIN OBSTACLES TO SCALED-UP ACCESS TO CLEAN BIOMASS COOKSTOVES Obstacle type Description of key issues Stove supply • Producers are small-scale and scattered and use the traditional Artisan Production Model; they have limited working capital, are more concerned about stove durability and heat than efficiency, and are hesitant to produce clean cookstoves without demonstrated consumer demand. • Producers of advanced cookstoves do not yet have a market/demand for their products. • Wholesalers and retailers are mainly concerned about selling stoves and are unaware of stove performance. • Supply chain is limited mainly to the islands of Java, Sumatra, and Sulawesi and is missing in areas with the highest biomass fuel use (e.g., Maluku, islands in Nusa Tenggara Timur, Papua, and Kalimantan). Household demand • Household consumers are accustomed to inexpensive stove prices; they are unaware of the harmful effects of HAP on family health and the benefits of various types of stove performance. They often use a mix of fuels. Institution related • Biomass cooking fuel has not been afforded attention and is often neglected when calculating primary energy consumption. To date, no institution has championed clean biomass fuel for cooking, and there is no roadmap for its development. Official data is lacking on cookstoves and producers, and all levels of government lack awareness about the health and environmental effects of biomass fuel use; there are no standards or testing facilities for biomass cookstoves. Source: Authors. activities surrounding the development of clean biomass FIGURE 5.1 OVERALL STRATEGY TO SCALE UP CLEAN technology will remain fragmented and sporadic. To insti- BIOMASS COOKSTOVES IN INDONESIA tutionalize clean biomass cooking solutions, this study recommends establishing and strengthening (i) an insti- Create an tutional champion; (ii) a cross-sector coordination mecha- enabling nism; and (iii) a platform for networking, communication, envirionment and knowledge sharing. Institutional Champion. It is recommended that the Direc- torate-General of New and Renewable Energy and Energy Institutionalization Conservation (EBTKE) of the Ministry of Energy and Min- eral Resources take the lead in developing a roadmap or master plan to scale up access to clean biomass cooking solutions in Indonesia. The role of institutional champion Support the is a good fit for EBTKE, given that it has taken the initia- Stimulate user market and supply- tive to explore the issue and that clean cooking solutions demand for side business clean stoves are part of the household energy agenda and biomass development energy is part of the renewable energy agenda. Further Source: Authors. support would be needed to strengthen EBTKE’s tech- nical and implementation capacity as the lead agency to develop and implement the master plan for the envi- subsections provide more detail on the priorities for insti- sioned national program. tutionalizing clean biomass cooking solutions, as well as for each of the three mutually reinforcing pillars. Cross-Sector Coordination Mechanism. Considering the cross-sectoral nature of this agenda, a cross-sector coor- Institutionalization dination mechanism will be needed to coordinate with other government departments. The initiative’s long-term To date, issues related to biomass fuel use have not success will depend on key areas of technical research, been afforded attention or understood by many of the gender equality, and community health promotion, actors who must play key roles in the proposed inter- requiring the cooperation of various other government vention. Until such issues are taken seriously and insti- sectors at all levels (i.e., national, provincial, and local). It tutionalized by the central government, the decentralized is recommended that a steering committee for national Toward Universal Access to Clean Cooking: Key Policy Recommendations 33 clean biomass cookstoves be established, chaired by standards for evaluating cookstove efficiency and EBTKE and including ministries representing key areas emissions will be a crucial step in building the initia- of involvement. Participating ministries may include, but tive’s capacity for national change. These standards are not limited to, the following: should be established and governed centrally by Indonesia’s Bureau of Standardizations (BSNI). Cur- • Ministry for Women’s and Children’s Empowerment rently, the BSNI oversees standards for kerosene (KPPA). Women are overwhelmingly the primary and LPG fuels and technologies, but has yet to users of cooking technology in households through- establish similar standards for biomass cookstoves. out Indonesia; thus, any intervention should encom- • Ministry of Industry (Perindustrian) and Ministry for Small pass facets of gender mainstreaming to sustainably embed clean cooking technology into Indonesian and Medium Sized Enterprises (Koperasi dan UKM). communities. These two ministries may be able to compile and • Ministry of Health (Kementarian Kesehatan). A primary monitor stove producers and businesses throughout driver of the cookstove intervention is family health Indonesia. They may also be instrumental in estab- improvement by reducing high levels of household lishing and ensuring adherence to national stove air pollution (HAP) linked to traditional cooking meth- standards. ods. The Ministry of Health will be instrumental in driving needed community education and aware- Platform for Networking, Communication, and Knowledge ness campaigns to increase user demand for clean Sharing. A national platform, such as an Indonesian alli- cooking technology. This should include a focus on ance for clean cookstoves, should be established to clean cooking technology, particularly biomass, and promote networking, communication, and knowledge involve educating communities about additional sharing among all key stakeholders, including the pub- ways to combat HAP in households (e.g., better ven- lic and private sectors, NGOs, and academia, as well as tilation methods and kitchen designs). international partners. Experience from such countries • Ministry of Research and Technology (RISTEK). Further as China demonstrates how such a platform can play an research and development will be required for devel- oping and improving available forms of clean cooking instrumental role in promoting sector development (box technology and fuels. RISTEK could encourage and/ 5.1). The platform could be hosted within an established or coordinate technical research efforts in both the NGO to leverage existing networks and resources. Initial private and public sectors. support would be needed for establishing the platform • Bureau of Standardizations (BSNI). Developing national and strengthening its implementation capacity. BOX 5.1 CHINA ASSOCIATION OF RURAL ENERGY INDUSTRY The China Association of Rural Energy Industry (CAREI), also known as the China Alliance for Clean Stoves, which it initiated, has played a critical role in developing China’s stove industry. Founded in 1992 when the country’s national stoves program was under way, CAREI is the country’s only national-level organization focused on the rural energy industry. Affiliated with the Ministry of Agriculture, CAREI has 1,076 members, representing enterprises, research institutes, universities, and societies engaged in technology R&D, manufacturing and processing, construction, and marketing and sales. In addition to an editorial office that publishes news and reports, the association has six special- ized committees across various rural energy–related fields, including solar thermal utilization, energy-saving stoves, biogas, bioenergy conversion technology, small-scale electricity power, and novel liquid fuels and associated burners. CAREI’s main functions are to safeguard the legitimate rights and common interests of its members, reflect the aspi- rations and demands of enterprises, implement national policies and regulations, play a bridging role between gov- ernment departments and its members, and assist the government in carrying out industry management. Through advancing industrial technology, improving product quality, and strengthening technical and economic cooperation domestically and internationally, the association comprehensively improves the quality and economic benefits of the entire industry; realizes rural energy services with a focus on energy conservation, renewable energy development, and comprehensive utilization of resources; improves the ecological environment; and promotes the country’s sus- tainable development. Sources: CAREI 2012 and CAREI Platform 2012. 34 Indonesia: Toward Universal Access to Clean Cooking Creating an Enabling Environment advanced cooking technologies appropriate to the coun- try’s diverse conditions. R&D is also needed for develop- In addition to the institutionalization priorities described ing fuel-processing technologies since many advanced above—by far the most critical ingredients to creating biomass stoves require processed fuels to ensure better an enabling environment for clean biomass cooking performance. In such cases, advanced biomass stoves solutions—support is required for (i) establishing and can even compete with LPG stoves to mitigate the gov- strengthening stove standards, testing, and certification; ernment’s fiscal burden of LPG subsidies. (ii) conducting research and development on improved and advanced stoves and fuel processing technologies; Master Plan Development and (iii) developing a master plan for a national clean bio- A master plan is recommended to harness the momen- mass cookstoves program. tum from the successfully implemented Kerosene- to-LPG Conversion Program to focus on developing a Stove Standards, Testing, and Certification national clean biomass cookstoves program with clear International standards and testing protocols are in the targets and related government policy and financial sup- process of being formulated for biomass stoves. For port. Like the LPG conversion program, strong govern- example, the International Workshop Agreement, issued ment commitment, including the possibility of issuing in February 2012, provides an intermediate rating frame- a presidential decree to provide a policy foundation, will work that includes four performance indicators (fuel effi- be critical to the success of implementing the national ciency, total emissions, indoor emissions, and safety) program. and five tiers (0–4). Indonesia needs to actively partici- pate in formulating international standards and making its national standards compatible with the international Stimulating User Demand for Clean framework so that certified national clean stoves can be Biomass Stoves recognized internationally. It is recommended that the Survey results and field inquiries reveal a low level of EBTKE, together with the BSNI, establish national stan- public awareness throughout Indonesia about the health dards and testing protocols and actively participate in the hazards of HAP linked to biomass cooking smoke and the discussion and formulation of international standards. many benefits of clean stoves and cooking technology. Without consumer demand coming to permanently influ- Testing centers need to be created for evaluating stove ence the clean stove market supply, any market interven- performance (i.e., whether stoves meet standards) tion is unlikely to be sustainable. However, if the public and recommending continuous improvements in stove can be educated about the characteristics and benefits design and development. Such centers could be hosted of using modern, high-quality stoves over inefficient tra- by research centers, universities, or NGOs with multiple ditional technologies, changes in user preferences can functions (e.g., testing, education, research and develop- influence the direction of market development (box 5.2). ment, and advisory service for design development). In addition, competitions could be organized to identify top- The required large-scale public health campaign must be performance stoves. a far-reaching, comprehensive effort, involving multiple sectors. It will require cooperation among officials and A certification system that is open, fair, and transparent representatives from both technical and health-related needs to be established to ensure stove quality. Testing fields. Possible venues for a public health intervention centers that are qualified to conduct stove certification could include local health clinics, with the involvement of need to be accredited, and the accreditation process physicians and other medical authorities who play a day- must be open, fair, and transparent. This will be partic- to-day role in the public health of communities. Women’s ularly important when stove certification is linked with groups should be involved or targeted since women, the government incentives. primary users of household cooking technology, often influence the types used. Research and Development Numerous NGOs, individual researchers, and institu- Public outreach may include road shows and cam- tions have developed improved cookstoves in Indonesia; paigns released through various media channels that to date, however, such decentralized efforts have been emphasize the link between clean cooking technologies scattered and uncoordinated, with a lack of resources. and benefits for family health. Employing public health Tackling these barriers to at-scale dissemination of methods in campaigning can help to spread awareness clean cooking technology in Indonesia requires further about the detrimental health effects of inefficient fuel research and development (R&D) on improved and technologies and encourage families to reject traditional Toward Universal Access to Clean Cooking: Key Policy Recommendations 35 BOX 5.2 SOCIAL DRIVERS FOR ADOPTING IMPROVED STOVES: FIELD ASSESSMENT IN YOGYAKARTA A field assessment was conducted in DI Yogyakarta to better understand the social factors that influence household adoption of improved stoves. Two villages, one rural and the other peri-urban, were selected to study differences in stove-use patterns and identify distinct adoption challenges. Each area had prior exposure to improved cookstoves via NGO activity, yet neither had achieved universal adoption. A conceptual framework was developed to identify key social drivers—social processes/arrangements central to community practices reflective of sociocultural norms, structures, and values—that can be modified to change stove practices and thus lower HAP within a specific com- munity. Structural drivers, which were identified based on prior research, were explored through field research and analyzed for their potential impact on influencing stove adoption. The assessment results were organized around these structural drivers and non-health outcome (see table below). Cooking practices and Awareness of Fuel availability Availability of improved perceptions HAP health effects and cost cookstoves Consumer needs vary greatly Most users are unaware that Biomass, especially wood, Improved stove designs that if cooking for household use smoke from cooking with will still be a major fuel source are compatible with the target only versus household and biomass is linked to health in rural areas due to its abun- community needs will be industrial use. problems, such as respiratory dance and availability. easier to disseminate. illnesses. Demonstrations may convince Switching fuels from biomass Information about stove avail- users that the new stoves are Influencing adoption must to gas (LPG) is more likely to ability should be distributed truly effective, especially with include HAP education for occur in peri-urban areas and proactively and widely, with- regard to appropriate heat. policy makers, health provid- among the young generation. out assuming that people will ers, and local community share this information. Consumers may need to alter Rural populations, especially leaders. their cooking behavior. palm sugar producers, are Sustainability can be achieved Health providers are trusted unlikely to switch from wood by involving local stove Appropriate training on how to local sources of information. to gas, meaning that improved producers and convincing con- operate new stove models will cookstoves will be important sumers to purchase their own be needed. Sanitarians who track house- for this group. This reality is stoves (e.g., through credit hold ventilation could also Adoption will be influenced less understood by better- schemes). spread information about HAP by continuous promotion and educated, urban populations. prevention. community-based learning. Gender Community cohesion/ Physical structures/ Non-health norms social structure built environment outcomes Relevant health data should be Introducing new cookstoves An easy first step for many Economic benefits derived reported by sex and age. at a level higher than the households would be opening from improved cookstoves village should be considered up a ventilation window in the may drive their adoption. Men are an important target to ensure that people feel ceiling or installing a chimney. group for stove-related Saving fuel may not motivate included and demonstrations information, especially when switching to an improved are conducted with all relevant stoves are linked to household stove model, especially in subgroups. income. Men have shown areas where biomass fuel is interest in technical aspects Charismatic and enthusiastic freely available. of stove design, as well as the promoters can be influential, if Saving time collecting damaging health effects of not critical, in converting com- firewood and/or cooking will biomass fuel smoke. munities to new technology. appeal more to women in peri- urban areas, where younger women are more likely to earn an income outside the home. The study found a general lack of awareness among government officials about the links between poor health and HAP caused by biomass fuel smoke. Where they were aware of the health links, they and other community mem- bers—even doctors—had not taken action toward preventing or improving harmful conditions. The findings also show that communities may be unwilling to switch to new fuels when wood is freely available. They may not trust using a stove without a visible fire or the ability to directly touch the cooking pot, and local social networks can either help or harm communication channels. Thus, an effective strategy will consider the influences of age, geography, available resources, opinions of locally respected authorities (e.g., doctors and community leaders), adequate stove supply and availability, and public perceptions about new technology. Source: FHI 360 2012. 36 Indonesia: Toward Universal Access to Clean Cooking and dangerous cooking methods in favor of modern, about the benefits of using the new stoves. Without cleaner options. Any public campaign should be aware this investment of time and training, it will be difficult of the gender implications of its messages to maximize to achieve the full behavioral change required to convert the impact on technology adoption. Finally, the campaign cookstove users to the new technology. could organize such promotional events as competitions, exhibitions, and seminars. Provide Training within the Cookstove Supply Chain. The initiative’s public health goals will be more sustainable if Indonesia’s cookstove supply chain can be trained to Supporting the Market and Supply-Side recognize, create, and market clean cookstove models. Business Development In addition to campaigning among producers to raise Since most households that rely on biomass fuel for awareness about clean cookstove models, the entire cooking reside in rural areas and are relatively poor, the supply chain (i.e., producers, wholesalers, and retailers) stove business that targets these customers is not prof- should be the focus of training on the benefits of the itable and may not be fully commercialized. Therefore, more efficient models and how to produce them. Owing it is necessary that the government support and direct to the decentralized character of the Indonesian cook- the sector to produce and sell better and cleaner stoves. stove market, reaching remote producers to be trained in However, government support needs to fit Indonesian creating and marketing new cookstove models presents conditions and target long-term sustainability. an enormous challenge. Be Sensitive to Regional Differences in Cookstove Supply Ensure Quality Control over Clean Cookstoves. Establishing Chains. The supply of biomass stoves varies regionally in quality control mechanisms is critical to ensuring that Indonesia. In Java, Sumatra, and some parts of Kaliman- producers creating new cookstove models are doing so tan and Sulawesi, the commercial sale of cookstoves in accordance with stove efficiency and emissions stan- has long been present through pre-existing supply chains dards, which must be tied to established public health comprising traditional stove producers, wholesalers, and standards. In this regard, stove production methods may retailers. However, in such regions as East Nusa Teng- also need to be improved. Currently, most stove designs gara, Papua, Maluku, and other parts of Kalimantan and are produced manually. Semi-mechanical production is Sulawesi, the commercial sale of cookstoves would limited to mixing clay with other materials, while stove be unprecedented. Households in these communities construction is still done manually. Some models (mostly cook mainly on three-stone open fires, which they con- improved stoves) are created using a mold to ensure struct themselves. Thus, developing and implementing a uniformity of size, thickness, combustion chambers, and national program strategy should take these two distinct other aspects. Whether stoves are produced locally or conditions into account. remotely, quality control mechanisms must be estab- lished and integrated into each stage of the supply chain Where Stove Supply Chains Already Exist, Build Awareness to ensure that stoves reaching consumers comply with and Capacity. Survey results demonstrate that, while some national and international efficiency standards. Imperfect cookstove suppliers are aware of clean cookstoves, most field implementation of an otherwise optimally-designed have not yet come into contact with more efficient mod- laboratory stove model could fail to deliver the desired els and are content to continue producing the traditional health effects to communities where stoves have been models demanded by communities. Most suppliers are disseminated. reluctant to produce new models without benefiting financially, but would be eager to expand their product Develop and Provide Training on New Business Models and offerings if doing so would result in a profit. Further R&D Entrepreneurship. While it is hoped that public campaigns is required to develop highly efficient stove models that, will influence consumer demand for cooking technology, in turn, can be easily and safely replicated by local pro- this could be strengthened by working with the supply ducers throughout Indonesia. chain to develop effective promotional and marketing techniques for stove products. Most producers in Indo- Where Stove Supply Chains Do Not Exist, Bring Cookstove nesia use traditional business methods, and do not keep Supply Chains to New Communities. In communities where records or track calculations that would enable them to households build their own cookstoves and lack access appropriately price a cookstove according to production to the stove market and supply chains, significant time and market conditions. Therefore, producers may need and resources will need to be invested in building local to be trained in entrepreneurship and business in order supply chains and educating both producers and users to improve the quality of stove products and business Toward Universal Access to Clean Cooking: Key Policy Recommendations 37 practices. Survey results have shown there is a desire price. This approach can quickly aggregate demand and among suppliers, particularly retailers, to develop more deliver stoves; however, problems are likely to result. For effective business models and marketing techniques to example, users may not like the stoves and decide not further develop their businesses. Incorporating clean to use them. Users may not cherish the free stoves and cooking technology into these new business models fail to properly maintain them. Households who did not could promote the overall supply of clean cooking tech- receive free stoves may expect to receive them in the nology, particularly if members of the supply chain view future and thus decide to stop purchasing stoves. the new technology as having greater potential for profit. International experience has shown that more innovative Provide Financial Incentives for Delivering Clean Cooking subsidy schemes are required to develop a sustainable Solutions to Households. To direct the current biomass market and thus make government funding support more stove market toward cleaner and more efficient stoves, effective and efficient. One such scheme is Results-Based it is necessary to provide financial incentives to attract Financing (RBF), which disburses public resources against more suppliers to deliver clean cooking solutions to demonstrated, independently verified outputs or outcomes households. The traditional subsidy approach uses a instead of project inputs. This distinguishing feature can public-procurement procedure to purchase clean stoves mean more effective and efficient use of public funds and disseminate them to households for free or at a low and improved support of market interventions (box 5.3). BOX 5.3 WHAT IS RESULTS-BASED FINANCING? Results-Based Financing (RBF) is a concept comprising a range of public policy instruments, whereby incentives, rewards, or subsidies are linked to the verified delivery of pre-defined results. RBF is often used to enhance access to and delivery of basic infrastructure and social services, such as improved access to water and sanitation, energy, and health care. In most cases, the funding entity—typically a government, development agency, or other agent— deals directly with the service provider (e.g., private firm, public utility, civil society organization, or financial institu- tion). Some of the better-known RBF approaches include output-based aid (OBA), conditional cash transfers, carbon finance, and advance market commitments. Unlike traditional public procurement, which uses public resources to purchase the inputs and contract service pro- viders to deliver them to users, the RBF approach uses private-sector resources to finance the inputs and service delivery and public resources to reimburse the service provider upon delivery of the pre-defined results. This key difference gives RBF the potential to improve the efficiency and effectiveness of disbursing public resources and support of market-based interventions (see figure below). DISTINGUISHING RBF FROM TRADITIONAL PUBLIC PROCUREMENT Traditional approach RBF approach Inputs Inputs (stoves) Private (stoves) finance Service provider Service provider Public (e.g. stove distributor) (e.g. stove distributor) finance Reimbursement for results delivered Service recipient Service recipient (stove user) (stove user) Source: Adapted from Brook and Petrie 2001. 38 Indonesia: Toward Universal Access to Clean Cooking Support Market Research. The promotion of clean cook- The RBF approach focuses on results that the public sec- ing solutions should understand market segmentations, tor cares about and rewards the private-sector suppli- adapt to local conditions, and be consistent with and ers who can deliver them. Investment and performance adjust to long-term development patterns. Therefore, it is risks shift from the public to the private sector. In turn, recommended that market research be supported to bet- private-sector suppliers have the flexibility to innovate in ter understand market needs that can be used to design designing, producing, and selling defined clean stoves government-supported programs and help stove suppli- that are eligible for targeted incentives. This flexibility is ers adjust their products. vital to stoves market development since stoves must fit local conditions, including customary cooking practices, affordability, and availability of local resources and after- A New Approach to Promoting Clean sales service. The success of stove suppliers depends on Stoves: Results-Based Financing understanding such local conditions. The traditional public-procurement approach to promot- Chain of Results ing clean stoves makes public entities responsible for the technical specifications of stoves and identifying eli- Promoting clean stoves can contribute to the broader gible service providers, delivery methods, and end users development objectives of reducing poverty, improv- to receive the subsidized stoves; payments are made ing health and gender equality, and mitigating climate against the stoves purchased and associated delivery change (figure 5.2). Replacing fuel-inefficient, polluting service. By contrast, under the RBF approach, public stoves with those that have better energy-combustion entities specify the intended results, verification meth- properties can help poor households climb out of pov- ods, and associated subsidies, and the service provider erty by reducing their fuel expenses. The health of fam- is paid against verified delivery of the stoves and their ily members who spend long hours in the household operational performance. cooking environment—primarily women and their young FIGURE 5.2 SAMPLE RESULTS CHAIN FOR CLEAN STOVES PROMOTION PROGRAM Results level Objectives Funding Improved health and Climate change Impact Poverty reduction gender equality mitigation Increase access to modern energy Reduce carbon/particulate emissions Outcome Improve fuel efficiency Increase use of renewable energy Results-based Output Certified clean stoves sold to and used by households financing Strategy/policy development Capacity building Technical Activities Institutional strengthening assistance Awareness-raising campaign Domestic public funding Inputs Concessional lending Grants Source: Authors. Toward Universal Access to Clean Cooking: Key Policy Recommendations 39 children—will benefit from reduced HAP . Women’s freed- and safety) and five tiers (0–4). Laboratory and field up time from collecting fuelwood and preparing meals testing might be included, and the certification process with traditional cookstoves can be spent on more pro- should be transparent and fair. A research center or uni- ductive activities. The local ecosystem and global envi- versity with multiple functions (e.g., testing, education, ronment also benefit from fewer carbon emissions and research and development, and advisory service for less black carbon due to the burning of solid fuels. design development) could host the testing centers to ensure their sustainability. Also, competitions could be To achieve these impacts, the RBF incentive would be organized to identify top-performance stoves. linked to the verifiable output: certified clean stoves sold to and used by households. Also critical to success would Results-Based Incentives. The level of incentive (subsidy) be technical assistance activities for strategy and policy should be linked to stove performance and its disburse- development, capacity building, institutional strengthen- ment to monitoring and verification of results. Eligibility ing, and awareness-raising campaigns. criteria should be clearly outlined and the amount adjusted according to the level of stove performance and geo- graphic preferences. Those who apply for incentives (the RBF Framework market aggregators) are those willing to take investment The conceptual framework for using RBF in programs to and performance risks. These may include producers, promote clean stoves could include three key building wholesalers, retailers, and project sponsors. To receive blocks—defined clean stoves, results-based incentives, payment, they must produce stoves that can be certified and a monitoring and verification (M&V) system—sup- as “clean, � design according to customer preferences, ported by the pillars of institutional strengthening/capac- and convince customers to buy and use the stoves. ity building and awareness-raising campaigns (figure 5.3). Design of an incentive payment system requires a thor- Building Blocks ough understanding of the cost structure and profit Defined Clean Stoves. Defining a clean stove requires margin (supply side) and consumers’ willingness to pay establishing a standards/rating system, testing and (demand side), as well as the economic benefits of the certification protocols, and testing centers. The stan- incentive provided. Advance disbursements could be dards/rating system should consider compatibility with designed to help finance stove suppliers. The incentives the rating framework provided by the International Work- could be implemented through a financial institution to shop Agreement, which includes four performance indi- leverage the existing network and traditional financing cators (fuel efficiency, total emissions, indoor emissions, instruments. FIGURE 5.3 RBF FRAMEWORK WITH THREE BUILDING BLOCKS AND TWO SUPPORTING PILLARS Results-based incentives • Number of stoves • Establish clean stove standards/rating system delivered • Level of subsidies is • Establish testing and linked to stove • Number of stoves used certification protocols performance • Verify actual • Establish testing centers • Disbursement of subsidies performance of stoves is linked to monitoring and used verification results Defined clean Monitoring and stoves verification system Institutional Awareness- strengthening & raising capacity building campaign Source: Authors. 40 Indonesia: Toward Universal Access to Clean Cooking Monitoring and Verification System. A critical part of Awareness-Raising Campaigns. To motivate both sup- the RBF design is monitoring and verification (M&V), ply and demand, awareness-raising campaigns should be which triggers payments. The M&V system could conducted at all relevant levels. Campaigns could focus combine self-reporting and third-party verification, using on informing the public about the program and the avail- sampling methods to balance the trade-offs between ability of results-based subsidies and other associated accuracy and costs. To incentivize efforts to achieve sus- program benefits and raising awareness about the nega- tainable clean cooking, results-based incentives could be tive health impacts of HAP linked to biomass cooking linked to specific stages of M&V results, including stove smoke. Using a celebrity ambassador could be an effec- installation, operation, and performance (figure 5.4). The tive way to raise such public awareness. detailed design of the M&V system can also benefit from the experience of carbon finance methodology for clean The RBF framework not only integrates all of the iden- stoves projects. However, carbon finance focuses exclu- tified priorities described under the initiative’s overall sively on carbon emission reductions, while clean stoves strategy; more importantly, it helps to clarify the roles are also related to other benefits, as illustrated in figure of government and the private sector in delivering the 5.2; therefore, RBF can be designed more flexibly to fit results: Government plays a facilitating role to provide program objectives. policy support and financial incentives to motivate mar- ket development, while the private sector responds to Supporting Pillars the incentives and delivers the results. Institutional Strengthening and Capacity Building. Institutionalizing clean stoves would be an important step However, it should be noted that the RBF approach may toward providing an enabling environment. Key elements not always be the most effective or efficient way to could include an institutional champion; a cross-sector achieve results. The traditional government procurement coordination mechanism; and a platform for communica- approach has the advantages of easy demand aggrega- tion, learning, and cooperation. Technical assistance in tion and fast implementation. For the more remote and capacity building is also needed to improve the perfor- poorer areas, characterized by little market activity, high mance of all market players, ranging from designers and delivery costs, and low affordability, which cannot attract producers to market aggregators, financiers/investors, the private sector, the traditional government procure- testing professionals, and M&V specialists. ment approach, which can be integrated into poverty FIGURE 5.4 EXAMPLE OF LINKING RESULTS-BASED INCENTIVES TO MONITORING AND VERIFICATION STAGES • Sales report/installation record (user details, stove details, date of installation, Stove installation baseline stove/fuel). • Third-party verification of the sales report using simple random samples. $$ • After-sales service report (1st–6th month) (whether stove is being used and functions well) Results- Stove operation • Third-party verification of the after-sales service based report using simple random samples. operation $$ • Third-party verification through on-site tests and surveys using simple random samples Stove performance • Feedback also sent to the testing and certification system. $$ Source: Authors. Toward Universal Access to Clean Cooking: Key Policy Recommendations 41 alleviation or social programs, is probably the most effi- high-emission cookstoves for years to come. Thus, cient and effective way to achieve results. Similar cases achieving universal access to clean cooking solutions by might include post-disaster relief programs. For the tradi- 2030 will require scaled-up adoption of clean biomass tional public-procurement approach, it is recommended cookstoves, in addition to the continued expansion and that bidding documents and contract arrangements be improved sustainability of the LPG conversion program carefully designed in terms of technology selection, and biogas adoption in areas with suitable conditions. delivery method, and post-delivery service. It is also important to keep options and approaches open. To estimate how many clean biomass cookstoves would be needed to achieve universal access to clean cook- In addition, other innovative financing mechanisms may ing solutions by 2030, this study conducted a scenario be developed and utilized based on local conditions. For analysis. The year 2010 was taken as the baseline, at example, many communities in Indonesia have long which time approximately 24.5 million households used employed supportive community groups and communal biomass as their primary cooking fuel and penetration financial mechanisms, which could be tapped for financ- of clean cookstoves was minimal (figure 5.5). Under the ing clean stoves. Various credit schemes and soft loans universal access scenario, which accounts for continued may also be explored for their potential use in promoting population growth and urbanization and increased adop- clean cookstoves. tion of LPG as the primary cooking fuel due to better infrastructure and higher income levels, it is estimated that approximately 20 million households would still use Vision Toward Universal Access to biomass as their primary cooking fuel by 2020 and 18 Clean Cooking Solutions by 2030 million by 2030. Forty-percent market penetration of clean biomass cookstoves by 2020 would mean 8 mil- Indonesia has made significant progress toward achiev- lion households using clean biomass cookstoves (figure ing universal access to clean cooking solutions in recent 5.6). Considering that multiple cooking fuels and cook- years, thanks in large part to the successful implemen- stoves are common in Indonesia, it is estimated that at tation of the Kerosene-to-LPG Conversion Program. least 10 million clean biomass cookstoves would need Yet 40 percent of primarily rural households, who lack to be delivered by 2020 to be on the path to universal access to affordable modern fuels, are expected to con- clean cooking solutions—100 percent market penetra- tinue using traditional biomass fuels with low-efficiency, tion—by 2030. FIGURE 5.5 SCENARIO ANALYSIS OF HOUSEHOLD FIGURE 5.6 SCENARIO ANALYSIS OF HOUSEHOLDS PRIMARY COOKING FUELS USING PRIMARILY BIOMASS FOR COOKING 80 30 70 25 60 Millions of households Millions of households 20 50 15 40 30 10 20 5 10 0 0 Baseline Universal access Universal access Baseline Universal access Universal access (2010) (2020) (2030) (2010) (2020) (2030) Scenario Scenario Users of traditional Users of clean Other fuels Gas/LPG Kerosene Firewood biomass stoves biomass stoves Source: Authors. Source: Authors. 42 Indonesia: Toward Universal Access to Clean Cooking To reach such an ambitious target, it is recommended laboratory that certifies eligible stoves for pilot promo- that two consecutive national programs be implemented. tion; and (iii) establishing a biomass cookstove test- These will require a high level of government commit- ing laboratory that provides advisory services for stove ment and financial support and adoption of a market- design improvements and organizes stove competitions based mechanism to support development of the clean to identify top-performance biomass cookstoves. Fur- biomass stoves sector, using a phased approach with thermore, as international standards for clean stoves gradual geographical expansion (figure 5.7). are being formulated, efforts will be made to encourage Indonesia to actively participate in the process and make its national standards compatible with the international Next Steps framework so that certified national clean stoves will be recognized internationally. The overall Indonesia CSI strategy, the proposed RBF approach for implementation, and the vision for achieving Strengthen Institutions and Build universal access to clean cooking solutions by 2030 were discussed at the second CSI national consultation work- Stakeholder Capacity shop held in Jakarta in July 2012. The public and private Phase II will also involve strengthening and building Indo- sectors agreed with the overall strategy and expressed nesia’s institutional capacity to address biomass energy great interest in the RBF approach. It was agreed that the for cooking. An Indonesian Alliance for Clean Stoves will approach will be piloted in selected areas and the master be established, with support provided to key institutional plan will be prepared for the scaled-up national program. players across Indonesia’s energy landscape. Training Thus, to support strategy implementation to scale up activities will be provided to key market players, with access to clean stoves, it is proposed that four areas of learning activities organized at both regional and inter- activity, described below, be undertaken under phase II national levels. Sample activities may include advisory of the initiative. services for design improvement, market analysis/con- sumer behavior analysis for market aggregators, train- ing and study tours for testing professionals, marketing Establish Stoves Standards/Testing/ advice, and a service to match designers and investors. Certification System Defining “clean stoves� is a priority for promotion pro- Design and Implement Pilot Program grams, but Indonesia does not yet have standards and testing protocols. Thus, the priority for phase II is to Indonesia’s national program will be preceded by a pilot establish stoves standards, testing, and a certification program rolled out in two areas selected for their rep- system. Activities would include (i) developing a roadmap resentativeness and scalability: the central Java area for setting up the stoves standards, testing, and certi- and Sumba Island. The design of the pilot program’s fication system; (ii) establishing a biomass cookstove RBF approach will include selecting eligible stoves for FIGURE 5.7 ROADMAP TO UNIVERSAL ACCESS TO CLEAN COOKING SOLUTIONS BY 2030 2nd National 100 Program National market penetration (%) Clean biomass stove Program Stage III 40 Stage II Stage I Pilot Minimal penetration 2010 2014 2020 2030 Year Source: Authors. Toward Universal Access to Clean Cooking: Key Policy Recommendations 43 promotion based on a trial standard/testing/certification following concrete steps can be taken to further develop system, allocating performance-based subsidies, and a sustainable intervention: (i) institutionalize biomass implementing a M&V system. A public campaign will be fuel and clean stoves with strong centralized guidance conducted to raise awareness and stimulate demand for from the national government, (ii) establish one or more clean cooking technologies, and advisory services will be clean biomass cookstove testing centers and determine provided to key market players. national stove testing protocols and standards, (iii) select areas for conducting a small-scale pilot program, (iv) select the clean stove designs to be disseminated, (v) develop Design and Prepare Master Plan for appropriate RBF methods, (vi) increase user awareness National Program of clean cookstove benefits, and (vii) apply rigorous moni- The scaled-up national program for clean biomass cook- toring and quality control mechanisms during all program stoves, phase III of the Indonesia CSI, is envisioned to phases. As phase I of the Indonesia CSI concludes and begin in 2014. Support will be provided to design the the lead-up to the national program accelerates, phase master plan for the national program. The detailed imple- II will focus on establishing stove standards and testing mentation plan and preparation activities will be devel- protocols, strengthening institutional capacity, support- oped in consultation with key stakeholders. ing pilot programs, and designing and preparing for the national program rollout in phase III. The Road Ahead Over the next 10–20 years, it is expected that national economic development will continue to enrich Indone- Achieving universal access to clean cooking solutions by sian citizens and influence the increased adoption of 2030 requires actions on several key fronts. It is recom- LPG. It is also expected that those who continue to use mended that the LPG distribution network be strength- biomass fuel will do so with a clean stove. By 2020, a ened and expanded and ensure subsidies are well target has been proposed for achieving 40 percent use of targeted. The biogas program should also be expanded clean biomass stoves (10 million stoves delivered), with where appropriate, based on community resources. momentum leading to 100 percent penetration by 2030. Developing a successful clean cookstove market requires The private sector—including stove designers, produc- overcoming significant supply- and demand-side obsta- ers, wholesalers, and retailers—is in the best position to cles, as well as institutional constraints. To influence clean know its customers; thus, the public sector will provide stove adoption, an enabling environment must be created the private sector sufficient incentives and support to that allows for the institutionalization of biomass-related enable it to reach its customers. Ultimately, the market issues, increased demand for clean cooking technology, should decide which customers and locations to target and improving or creating clean biomass cookstove sup- and what types of technologies and fuels to focus on, ply throughout Indonesia. Within these broad goals, the with the freedom to innovate over time. ANNEX A Kerosene-to-LPG Conversion Program: Case Study Summary6 Indonesia’s Kerosene-to-LPG Conversion Program is for cooking declined by 25 percent (from 37 to 12 per- considered one of the world’s largest efforts to promote cent). By late 2011, subsidized use of LPG totaled some cooking fuels. Since its inception in 2007 , the program 3.26 million tons. has succeeded in changing the landscape of Indone- sia’s household cooking fuels. By 2011, more than 50 Historically, kerosene, like other petroleum products, million households and small and medium enterprises was heavily subsidized by the Indonesian government. (SMEs) had been encouraged to switch from kerosene Before 2005, households and SMEs without access to to liquefied petroleum gas (LPG) as their main cooking electricity used kerosene as their main cooking and light- fuel, with a total of 53 million start-up packages distrib- ing fuel. Although parliament imposed a quota on the uted. Compared to kerosene, LPG burns more efficiently volume of kerosene use, the subsidy rose along with oil and cleaner and has a higher heating content. Over the prices and, to some extent, a growing population. The 2007–11 period, the proportion of households using LPG government removed the kerosene subsidy for indus- as their main cooking fuel grew by 35 percent (from 11 to trial consumers in mid-2005, yet government spending 46 percent), while the proportion using mainly kerosene on the subsidy continued to rise (figure A.1). Despite FIGURE A.1 RISING COST OF INDONESIA’S KEROSENE SUBSIDY, 2001–08 13.5 12.3 11.7 11.8 11.9 12.0 11.4 Kerosene volume (million kl) 10.5 10.0 9.8 9.0 7.8 7.5 Kerosene volume (million kl) 6.0 5.2 Subsidy (US$ billion) 4.5 3.8 4.1 3.0 2.0 1.3 1.4 1.5 1.6 1.5 0 2001 2002 2003 2004 2005 2006 2007 2008 Year Source: Pertamina. 6. This annex summarizes the August 2012 report, “Indonesia: Kerosene to LPG Conversion Program, � by Voravate Tuntivate of the World Bank, � by Edi Susanto, a local consultant under supervision of Yusep Caryana, which, in turn, is based on the report “LPG Case Study in Indonesia, Directorate General of Oil and Gas (MIGAS), Ministry of Energy and Mineral Resources (MEMR) (Susanto 2012). Supplemental data from other studies was also collected and analyzed for the case study. 45 46 Indonesia: Toward Universal Access to Clean Cooking successful attempts to reduce subsidies on transport Conversion Policy fuels, the kerosene subsidy still accounted for more than half of all subsidies for petroleum products. Justification for reducing the government’s subsidy bur- den is based on a few simple concepts. First, the end-use Thus, to further reduce kerosene consumption, the caloric value of energy delivered is higher for LPG than Indonesian government was prompted to launch the for kerosene, requiring households to use less energy to Kerosene-to-LPG Conversion Program in 2007 , encourag- cook. Second, the subsidy per unit of fuel is significantly ing households and SMEs to switch to LPG for cooking. lower for LPG, meaning the government allocates less The program has been highly successful, with subsidy of its budget to subsidize LPG than kerosene since the savings in the first four years averaging more than US$1 unit of LPG used for household cooking is smaller than billion annually. that of kerosene. In terms of energy equivalence, 1 liter of kerosene is equal to 0.57 kg of LPG. However, in design- ing the conversion program, the Indonesian government Implementation Arrangements chose to equate 1 liter of kerosene with 0.39 kg of LPG,7 meaning that every liter of subsidized kerosene with- The Presidential Decree (“Keppres�) for the Conversion drawn is replaced by 0.39 kg of subsidized LPG. Based Program, No. 104/2007 , was released in December 2007 , on the 2006 subsidized and non-subsidized prices of ker- five months prior to the official launch date. Initially, imple- osene and LPG, every liter of kerosene withdrawn would mentation arrangements involved Pertamina, the state- save the government US$0.285.8 owned national oil company, and four ministries (i.e., the Ministry of Industry was assigned to procure gas stoves, hoses, and regulators, the Ministry of Small and Medium Program Eligibility and Activities Enterprises was in charge of distributing LPG start-up packages, the Ministry of Women’s Empowerment was Presidential Decree 104/2007 designated the conversion assigned to carry out socialization activities, and the Min- program’s beneficiaries as those households and SMEs istry of Energy and Mineral Resources [MEMR] was to that have been using kerosene as their main cooking fuel coordinate program implementation). As coordination and have never used LPG. To receive the start-up pack- among these ministries became increasingly difficult, it age, heads of households and SME owners are required was decided that the MEMR would lead overall coordi- to have valid identity or seasonal resident cards and fam- nation of the program with Pertamina, while the other ily cards registered in the program conversion area, with a three ministries would be assigned supporting roles. The conversion program’s budget is appropriated annually; 7. This ratio is based on research and laboratory experiments con- ducted by the University of Trinity (Universitas Trisakti) in Jakarta and Pertamina, the sole executor, finances all implementa- the State Ministry for Women’s Employment. tion activities and is subsequently reimbursed by the 8. Based on an exchange rate of US$1 to IDR 9,450 and an LPG price government (box A.1). of IDR 4,250 per kg. BOX A.1 INDONESIA’S FUEL SUBSIDIES PROCESS Each year the Indonesian government announces the cost of fuel subsidy in its Annual State Fiscal Plan, which is then sent to parliament for approval. BPH Migas, the downstream regulatory body for oil and natural gas, calculates the subsidy cost by estimating the quantity of fuels to be subsidized and the international market price for the com- ing year. The state budget is commonly adjusted during the fiscal year. How often changes are made to the amount allocated to fuel subsidies depends on the stability of international crude prices, the exchange rate between Indone- sian and U.S. currencies, and the subsidy policy. Pertamina is Indonesia’s sole distributor of fuel products. At the end of every three months, it is reimbursed for the below-market products it has sold during the period. Payment size is based on monthly reports the company must submit to the Ministry of Finance, detailing the volume and value of the subsidized fuel sold and the international benchmark price. The process is audited once a year by the Audit Board of the Republic of Indonesia, known as BPK (Badan Pemeriksa Keuangan). Source: Beaton and Lontoh 2010. Annex A. Kerosene-to-LPG Conversion Program: Case Study Summary 47 maximum income of about US$166.7 per month (provable Supply and Demand by salary receipts, monthly expenditure not exceeding this amount, or statement from subdistrict authority regard- By 2011, total LPG demand in Indonesia had reached ing insufficient funding to support activities). more than 4.3 million tons. The subsidized portion to meet the cooking needs of low-income households and To promote LPG adoption, the government introduced SMEs (distributed in 3-kg cylinders) represented three- one main activity—distributing a start-up package (paket quarters of this demand. Non-subsidized LPG to meet perdana) consisting of a filled 3-kg LPG cylinder, one the cooking needs of middle- and upper-income house- single-burner gas stove, hose, and regulator—and vari- holds (distributed in 6- and 12-kg cylinders) accounted ous supporting activities designed to increase public for another one-fifth of demand. Only 5 percent was acceptance (e.g., education on the benefits of using LPG being used by the commercial (3 percent) and industrial as the main cooking fuel and safe use, monitoring and (2 percent) sectors, down from 30 percent in 2000–07 . evaluation, ensuring distribution of start-up packages to Thus, as a result of the conversion program, the house- target audiences, and ensuring adequate LPG infrastruc- hold sector and SME subsector dominate Indonesia’s ture and uninterrupted supply). LPG market, accounting for 95 percent of total demand. To avoid supply disruption and thus potential hardship for From 2000 to 2005, Indonesia had been a net exporter households and SMEs, kerosene withdrawal is carried of LPG; however, the domestic demand created by out only in areas where conversion packages have been the conversion program has outpaced domestic pro- completely distributed in systematic steps (Budya and duction.12 To meet the added demand, Indonesia has Arofat 2011). The withdrawal is accomplished by gradu- become a net importer of LPG, having started importing ally cutting agents’ allocation and supply.9 For example, about 1 million tons a year since 2008. The government if conversion packages have been distributed to 80 per- can easily manage the level of LPG subsidy on the non- cent of the targeted beneficiaries in an area, then a 50 imported portion of demand due to the domestic LPG percent withdrawal of the kerosene allocation is carried price regulation. But there is potential difficulty in man- out the following month. In the weeks that follow, the aging the imported portion owing to fluctuations in the withdrawal amount is increased a minimum of 10 per- international market price of LPG and currency exchange cent, taking any special field situations into account, until rates; that is, the larger the portion that would have to complete. If withdrawal causes any serious disturbances be imported to meet local demand, the harder it would in the local community, kerosene is temporarily restored be for the government to manage the LPG price subsidy. in the amount of 10 percent of the total kerosene with- Despite the potential for longer-term fiscal challenges, drawn from the area. the price subsidy burden is significantly less for LPG than kerosene. Costs and Benefits LPG Price Regulations The conversion program has significantly reduced the fis- cal burden of the kerosene subsidy. From 2007 to 2011, The retail price for LPG in 3-kg cylinders for households the cumulative total program cost was high, at about and SMEs at agent (penyalur) is IDR 12,750, including US$2.3 billion;10 yet over that period, about 23.4 million taxes and marketing margin for the agent (i.e., penyalur kl of kerosene were withdrawn and replaced by only 8.3 margin). This ceiling price is applied within a 60-km radius million tons of LPG.11 Beyond the reduced volume of sub- of the dealer as transfer point (figure A.2). The retail price sidized cooking fuel, the cost of the subsidy per kilogram cap is equivalent to IDR 4,250 per kg (about US$0.45).13 of LPG is lower than the cost of the subsidy per liter of Beyond this 60-km radius, the local government deter- kerosene. mines the retail price ceiling. 9. In accordance with this process, agents and retailers also function to supply LPG to converted areas. 12. LPG production from oil refineries has been relatively stable over 10. Including the investment cost of the start-up packages and recur- the past decade, at about 700,000–800,000 tons per year; however, ring subsidy cost for LPG refilling. production from gas refineries has fluctuated, with total production 11. The amounts of kerosene withdrawn provide direct financial ben- dropping from a high of about 2 million tons to only 1.4 million tons efits since they are reallocated to sell in more profitable markets in 2006–07 . (e.g., jet fuel). 13. Based on an exchange rate of US$1 to IDR 9,450. 48 Indonesia: Toward Universal Access to Clean Cooking FIGURE A.2 SUBSIDIZED LPG SUPPLY CHAIN AND PRICE CAP Source: Susanto 2012. Note: Retail price at custody transfer points is IDR 4,250 per kg, determined under Presidential Decree No. 104/2007 and Energy and Mineral Ministerial Decree No. 28/2008. The retail price for non-subsidized LPG (i.e., sold in 6-, Supply Chain Infrastructure: 12-, and 50 kg cylinders) fluctuates periodically; however, Expansion and Development there is a de facto price cap, which Pertamina proposes to the government using the reference international LPG As a result of the conversion program, LPG demand has price (CP Aramco). Prices are settled after discussion increased more than tenfold in just four years (2007–11). with the government and approval by parliament. Cur- To accommodate the new demand, the existing supply- rently, the price of 6- and 12-kg cylinders at the dealer as chain infrastructure must be expanded at all levels and transfer point is IDR 5,850 per kg (US$0.62 per kg), while new infrastructure must be built in most parts of the coun- that of 50-kg cylinders is IDR 7 ,355 per kg (US$0.78 per try. The LPG supply chain consists of refinery, transport, kg).14 These figures reflect the latest price settlement of and storage facility or depot; while the distribution chain October 2009. The settled prices appear relatively stable, consists of filling station, agent (penyalur), and sub-agent while the international price has fluctuated consider- (subpenyalur). Both domestically produced and imported ably. In recent years, there has been an overall upward LPG are usually transported by tanker for bulk supply price trend, exceeding US$1,000 per ton; subsequently, transport to LPG storage facilities or depots located stra- the price declined to about US$600 per ton (April–July tegically throughout the country, thus ensuring available 2012).15 When the international price changes, Pertamina market supply. Generally, volumes larger than 10,000 absorbs any losses or gains. The price cap is considered tons are refrigerated during transport and storage, while a key factor that may inhibit private businesses from a high-pressure tank is used for volumes smaller than investing in the LPG market. 3,000 tons. A transport vessel with semi-refrigeration is used for medium-sized volumes (3,000–10,000 tons). In most cases, transport from the storage depots to the 14. Based on an exchange rate of US$1 to IDR 9,450. filling stations is over land using a skid tank; however, 15. The state-run Saudi Aramco sets the monthly contract prices for in areas without a storage facility, sea tankers are used. propane and butane, which, in turn, provide a benchmark against Distribution from the filling station to consumers is car- Middle East sales of LPG to the Asia market. Aramco prices set for March 2012 reached a peak of US$1,230 and $1,180 per ton, respec- ried out by the LPG sales agent (penyalur) or sub-agent tively, having since dropped to $575 and $620. (subpenyalur). Annex A. Kerosene-to-LPG Conversion Program: Case Study Summary 49 Pertamina is fully aware that gaining consumers’ accep- Depot Storage Facilities tance of LPG requires that an uninterrupted supply be Before being distributed to LPG filling stations and available at all times. Thus, it has moved rapidly, often industrial customers, both domestically produced and working with the private sector, to invest significantly in imported LPG are stored in the LPG depots. In anticipa- improving and expanding all stages of the LPG supply tion of the rapidly increasing demand for LPG, Pertamina chain—from production, bulk transport, and storage at has also utilized floating storage facilities and has accel- the LPG depots to transport to filling stations and whole- erated the construction of storage facilities designed to sale and retail distribution. be expandable. Currently, the storage capacity of all LPG depots totals 147 ,182 tons. Bulk Transport Pertamina has taken a number of additional steps to fur- As demand for LPG increases, Pertamina immediately ther ensure the availability of LPG in all program areas. increases LPG production from its gas refineries. Also, For example, it has converted two refrigerated LPG ter- LPG transport networks from gas refinery terminals to minals in Java that receive both domestic and refriger- storage facilities or LPG depots have been added. Cur- ated imported supply into the backbone of LPG storage. rently, LPG bulk transport capacity totals about 300,000 In addition, it has established pressurized storage termi- tons. More than two-thirds of all bulk transport is by sea, nals to facilitate distribution to filling stations through- using special tanker carriers (i.e., five with a 45,000 ton out the country. Contracted storage facilities owned by capacity, six with a 10,000 ton capacity, and nine smaller- BMU in Eretan, Indramayu, West Java, with a capacity of sized vessels with a 1,800 ton capacity). Economies of 10,000 metric tons (MTs), have been in operation since scale in the marine transport of LPG translate directly 2008. A contract awarded for pressurized LPG storage at into cost savings for the subsidy program. In addition, three locations in Java will add storage and filling facilities pipeline transport is used from the Balongan Refinery to in Semarang, Surabaya, and Tanjung Wangi, each with a the Balongan Depot. 10,000 MT capacity (figure A.3). FIGURE A.3 LPG PRODUCTION AND STORAGE INFRASTRUCTURE Source: Pertamina. 50 Indonesia: Toward Universal Access to Clean Cooking Furthermore, Pertamina has taken strategic steps to sub-agent. About two-fifths of sales agents are located ensure LPG supply security and terminal availability (i.e., in Region II, which has the highest number of LPG users. receipt, storage, conversion, and distribution), working with a supplier to offer 5- and 10-year contracts. Finally, Typically, sub-agents are owners of local conve- it has encouraged and worked directly with private-sec- nience shops or kiosks (warung) who provide retail sales tor players to invest in the construction of LPG storage directly to consumers. For their services, sub-agents get facilities. a fixed margin set by the government. Currently, the mar- keting margin is set at IDR 300 per kg (IDR 900 per 3-kg Transport to Filling Stations and Filling Station Infrastructure cylinder). The number of sub-agents for the 3-kg LPG cyl- Each LPG filling station has at least one skid tank, a inders has increased rapidly since the end of 2007 . The special storage truck used to transport LPG over land. key reasons include the growing demand for the 3-kg cyl- In addition, many distributors hire skid tankers. Skid inders resulting from the conversion program, which the tank capacity usually ranges from 8 tons, to 9.5, 15, and sub-agents view as a business opportunity. Also, invest- 25 tons. There are also skid tanks with a small payload ing in a 3-kg cylinder is relatively cheaper than a 12-kg capacity (e.g., 2, 4, and 6 tons) commonly used by sales cylinder per unit, allowing the sub-agent to purchase a agents for industrial customers. In areas with adequate limited number of cylinders. Furthermore, competition road infrastructure, skid tanks with a 15- or even 25-ton among agents means that one agent may be willing to capacity are used for bulk transport from the storage provide another cylinders in return for it agreeing to act depot to the filling station, especially on the Island of as sub-agent. Finally, since selling 3-kg cylinders does not Java. require a large space, this business can be conducted along with selling other consumer goods. Currently, LPG filling stations are divided according to subsidized and non-subsidized distribution. More than 200 stations service the subsidized 3-kg LPG cylinders— Summing Up that number is expected to increase significantly—while about 60 service non-subsidized cylinders (i.e., 6-, 12-, The Kerosene-to-LPG Conversion Program has created and 50-kg capacity), as well as bulk capacity for industrial another LPG market tier; namely, a subsidized LPG mar- customers.16 Since the number of LPG users has out- ket with strict price control and a predetermined profit paced the expansion of new filling stations as a result margin. Creating a market-based LPG supply chain with of the conversion program, those stations that service strict price control and a predetermined profit margin is non-subsidized LPG are also being utilized to fill the 3-kg not easy since investors need assurance there will be no cylinders. At the government’s request, Pertamina has reversal of policy that would harm their investment. Per- created opportunities for the private sector to invest in haps surprisingly, nearly all expansion and development building private filling stations for the 3-kg cylinders gen- of the LPG supply-chain infrastructure have been carried erally and in specific areas based on throughput capaci- out by private investors. Key reasons for this success ties ranging from 30 to 50 tons per day. Pertamina is also include the government’s commitment and firm policy, tasked with setting standards and specifications for the as well as Pertamina’s strong leadership in LPG business design and construction of filling stations. development. These factors are discussed in more detail in the section that follows. Distribution and Retail Currently, there are 3,000 LPG sales agents (penyalur) Lessons Learned throughout Indonesia, responsible for LPG refilling and consumer retail distribution, which may also involve sub- The Kerosene-to-LPG Conversion Program’s lessons in agents (subpenyalur). The LPG sales agent is an entity success, described below, offer useful insights for other with legal status (PT/Cooperative). In practice, the agent national programs, especially those related to household buys LPG in cash from Pertamina through a bank. Distri- fuels. bution activities include transporting empty tubes back to the stations for refilling and then distributing/sell- Government’s Strong Commitment and Firm Policy Objec- ing to customers either directly or through an agent or tive. Under tremendous fiscal burden to subsidize kero- sene, the Indonesian government was searching for a 16. The 3-kg cylinders require refilling every 6–8 days. good alternative. It was convinced that the conversion Annex A. Kerosene-to-LPG Conversion Program: Case Study Summary 51 program would significantly reduce its fiscal burden cre- Assurance of Available Fuel Supply. Throughout the pro- ated by the kerosene subsidy. Amid a rapidly increasing gram, Pertamina has been aware that gaining public kerosene subsidy, the government acted in an urgent acceptance to ensure the complete conversion of house- manner. The initial plan, as proposed by Pertamina, was holds and SMEs from kerosene to LPG requires assur- to complete the conversion program in six years; how- ance of an available, uninterrupted fuel supply. Thus, ever, the government shortened the implementation Pertamina officials have emphasized development of the time frame to three years. Another sign of government LPG supply-chain infrastructure. Fortunately, non-subsi- commitment was its willingness to act immediately to dized LPG was already available on the market prior to reorganize program execution when, during the initial the conversion program; thus, Pertamina did not have to stage of implementation, coordination among ministries build all new supply infrastructure; rather, it had only to was poor and ineffective. As previously discussed, only expand the existing LPG supply chain and create agents the Ministry of Energy and Mineral Resources was kept for subsidized LPG. At the same time, supply-chain to coordinate the program, with Pertamina appointed as expansion required massive investment at all levels (i.e., the main implementing agency. Swift corrective action domestic refinery production supplemented by imports, has enabled the program to complete on time. Finally, bulk transport, terminal/storage facilities/depots, fill- the government was convinced that replacing kerosene ing stations and transport to and from them, and sales with LPG would provide a win-win situation for all parties agents/retail and distribution). Pertamina has been able involved. As a result, it has continued a policy of replacing to use its status as the country’s only national oil com- 1 liter of kerosene with 0.39 kg of LPG, as well as provid- pany, in combination with the government’s commitment ing financial support. and firm policy objective, to convince the private sector at every level of the supply chain to invest in expanding Effective Marketing Campaign for Public Awareness, Safety, LPG supply infrastructure. and Acceptance. Another reason for the conversion pro- gram’s success has been the equal weight placed by Per- Pertamina as Sole Implementing Agency. As sole implement- tamina on the program’s main and supporting activities. ing agency for the conversion program, Pertamina was Along with the main activity (i.e., distributing the LPG gas able to bypass bureaucracy, which might have delayed stove, hose, regulator and one filled 3-kg LPG cylinder), program implementation. As the largest state-owned various supporting activities are designed to promote the enterprise, Pertamina has both financial and manpower adoption and safe use of LPG as the main cooking fuel. resources to implement the program. As previously dis- To discover how consumers and the public at large would cussed, implementation arrangements require Pertamina respond to the massive conversion program, Pertamina to pay for the conversion program in advance and submit used three test markets and conducted market research. bills to the government for reimbursement. In addition, The first market test was conducted in Cempaka Baru Pertamina has offices and/or operations in nearly all key Village, Kemayoran District, Central Jakarta. In August islands of Indonesia, making it easy to coordinate with 2006, Pertamina distributed free start-up packages to 500 local governments. households, whose total household income was less than IDR 1.5 million. Pertamina worked with an independent Effective Monitoring and Evaluation. The effectiveness marketing research firm to assess household acceptance, of the conversion program’s monitoring and evaluation perceptions, and other factors. The market test also per- (M&E) processes has made it possible for program man- mitted Pertamina to test the use of existing kerosene dis- agement to take corrective measures in a timely manner. tribution agents in the village for LPG distribution. Early on, for example, the program management team identified the failure of coordination among the four The second market test, covering 25,000 households, ministries. Marketing research has also provided useful was conducted in December 2006; while the third, which information for taking corrective measures. For example, distributed 10,000 start-up packages to flood victims in the first trial market research showed that consumers Jakarta, was conducted in February 2007 . No survey wanted more sales locations for refilling the 3-kg LPG research was conducted for the second and third market cylinders. Market research also confirmed the need to tests since the overall goal was to test the distribution continue socialization and education on the proper han- model. Beyond market testing and research, Pertamina dling and use of LPG for cooking. As part of market test- has carried out public-awareness campaigns through ing, Pertamina was able to test monitor and evaluate the the mass media, which have proven quite effective in LPG distribution model. changing public perception from one of skepticism to acceptance. 52 Indonesia: Toward Universal Access to Clean Cooking Bibliography IISD (International Institute for Sustainable Development) and Institute for Essential Services Reform. 2006. A Citizens’ Beaton, Christopher, and Lucky Lontoh. 2010. Lessons Learned Guide to Energy Subsidies in Indonesia. Winnipeg: Inter- from Indonesia’s Attempts To Reform Fossil-fuel Sub- national Institute for Sustainable Development. sidies. Winnipeg: International Institute for Sustainable Pertamina. 2012. “Providing Cleaner Energy Access for Indone- Development (IISD). sia: Case Study from Kerosene to LPG Conversion. � Pre- Budya, Hanung, and Muhammad Yasir Arofat. 2011. “Providing sentation at Practitioner Workshop on Energy Access for Clean Energy Access in Indonesia through the Megapro- Urban and Peri-Urban Poor, ESMAP-Cities Alliance-World ject of Kerosene Conversion to LPG.� Energy Policy 39: Bank, Washington, DC, May 7–8. 7575–86. � Unpublished Susanto, Edi. 2012. “LPG Case Study in Indonesia. Chen, Kimball. 2012. “Indonesia LPG Business Acceleration: report prepared for the Indonesia Clean Stove Initiative, Kerosene to LPG Conversion Effect. � Presentation at World World Bank, Washington, DC. LPG Association Sub-Continent Regional Energy Summit, LP Gas: Exceptional Energy for the Sub-Continent, New Delhi, February 14–15. ANNEX B Indonesia Domestic Biogas Programme: Case Study Summary17 Biogas technology, first introduced to Indonesia in the materials, human resources, physical infrastructure, 1970s, did not take off immediately, owing mainly to fuel farming practices [e.g., zero grazing], potential partners, subsidies provided by the Indonesian government, the and attitude of local government). Dairy cooperatives on high cost of fixed dome biodigesters, and the wide avail- the island of Java are viewed as a suitable starting point ability of fuelwood. In recent decades, however, stricter for developing Indonesia’s biogas sector since they indi- enforcement of forest regulations and scarcity of kerosene cate areas with high cow densities and well-organized have increased the economic attractiveness of biogas as cattle owners familiar with biogas and use of credit. an alternate cooking fuel. The cost of chemical fertilizers, although subsidized, has also played a role in potential Indonesia’s climate conditions, which feature year-round users opting for biogas. After decades of unsuccessful high temperatures, are favorable for biogas. In such dissemination efforts, more effective methods are now densely populated areas as Java and Bali, cows are sta- being developed to introduce and construct household- bled day and night. However, in sparsely populated areas based biogas digesters as a means of enhancing energy with free-ranging cattle or buffalo or in areas with limited access and reducing greenhouse gas (GHG) emissions. water availability or space for the digesters, the potential The many direct benefits for farming households include for biogas is less favorable. savings on energy, fertilizer, and time spent collecting and cooking with fuelwood; while indirect advantages Obviously, financial considerations are vital to a farm- include better health and a higher quality of life. er’s decision to invest in a biodigester. In the past, the Indonesian government constructed a large number of fully subsidized digester units; however, farmers were Biogas Market: Potential Demand unaware of the potential return on the investment. Many farmers on Java could significantly reduce their monthly In 2008, a feasibility study, proposed by the Government expenditure on cooking fuels by switching to biogas. For of Indonesia and funded by the Dutch government, was example, the average household cost of subsidized LPG conducted by the Netherlands Development Organ- is about IDR 70,000 per month (3–4 small canisters). isation (SNV) to assess the total potential household Those who tend to buy kerosene pay 10,000–13,000 per demand of one million biodigesters. This figure is based liter (one day requires up to 1 liter), while fuelwood pur- on an assessment of the technical market potential, chasers spend up to IDR 200,000 a month. estimated at several million households, combined with key social and economic criteria, including affordability In Indonesia, farmers are accustomed to using credit. and willingness to pay, as well as an array of contextual Indeed, the current biodigester market is mainly limited to factors (price levels, availability of suitable construction areas where credit is made available—provinces of East 17. This annex summarizes the June 2012 report, “Case Study: Indonesia Domestic Biogas Programme (IDBP),� prepared by Robert de Groot of the Humanist Institute for Development Cooperation (HIVOS) for the Indonesia Clean Stove Initiative. 53 54 Indonesia: Toward Universal Access to Clean Cooking and West Java—where four-fifths of biogas households with broad experience in domestic biogas programs. The utilize the credit system. Repayment of a low-interest BIRU program aims to develop a commercial, market- loan for a partially subsidized six m3 household biodi- oriented biogas sector through which household bio- gester requires a monthly outlay of about IDR 150,000 digesters are disseminated as a local, sustainable energy over a three-year period or IDR 100,000 a month over source. Over a three-year period (May 2009–May 2012), five years.18 In addition, if the farmer uses bioslurry as the program installed more than 8,700 biogas systems an organic fertilizer, the monthly expenditure on chemical throughout the country. The approach to biogas sector fertilizer can be reduced by about IDR 75,000.19 A recent development adopted by the BIRU program has been biogas user survey finds that the average farming house- successfully applied in various Asian and African coun- hold’s energy savings could reach up to 44–71 percent tries. A key implementation strategy is future institution- per month (JRI Research 2012). alization of the program in a local foundation through a gradual process involving both HIVOS and SNV to ensure that program quality, momentum, and appropriate man- Biogas Supply agement are maintained and working in close coopera- tion with the Ministry of Energy and Mineral Resources In the past, biogas construction services in Indonesia (MEMR), donors, and other stakeholders. were limited to a small number of government agencies, nongovernmental organizations (NGOs), and private- The BIRU program focuses on developing both biogas sector companies. The Indonesian government invested demand and supply. To stimulate farming household mainly in pilot programs to showcase the benefits of demand, the program conducts awareness-raising meet- biogas, while the government and international donors ings and other promotional and marketing activities and used NGOs to construct biodigesters and work with the provides access to credit, making it more economically beneficiary communities. Only a small number of biogas feasible for farmers to invest in biogas. On the supply companies have been developed, and the manufacture side, the program selects and trains partner organiza- of biogas appliances has been limited. Models were usu- tions to become active biogas construction agencies that ally copied from those in other countries, such as Nepal provide high-quality services to the biogas market. and India, and the digesters were of low quality. Since the year 2000, however, interest in biogas as a form of renewable energy has increased in response to ris- Promotion and Marketing ing fuel prices and international acknowledgment of the The key to developing a sustainable biogas sector is con- need to reduce carbon emissions. vincing farmers of the benefits of biogas so that they demonstrate a strong willingness to invest in biogas services. If biogas is easily adopted by farmers, insti- Developing a Sustainable Biogas tutionalization of the promotion can easily be done by Sector: BIRU Program providing initial incentives to Construction Partner Orga- nizations (CPOs), cooperatives, or farmer groups. If pro- The Indonesia Domestic Biogas Programme (IDBP), bet- moting the digesters is difficult, it may be necessary to ter known as the BIRU (Biogas Rumah) program, was engage commercial promotion/advertisement agencies, initiated by the Government of Indonesia through the NGOs, or other organizations (including government), Joint Energy Working Group under bilateral cooperation as well as the CPOs financially and/or in kind to conduct between the Indonesian government and the Kingdom awareness-raising and biogas sensitization meetings to of the Netherlands. The program is funded by the Dutch enhance interest. government and facilitated by the Government of Indo- nesia. The Humanist Institute for Development Coop- eration (HIVOS), an international NGO, was appointed Access to Credit by the Dutch government as Program Manager, with Most farmers cannot afford the US$500 required upfront technical support provided by the Netherlands Devel- to purchase a six m3 biodigester, whose total cost is $720, opment Organisation (SNV), another international NGO $220 of which is subsidized. In 2010, the BIRU program successfully concluded lengthy negotiations with the 18. A six m3 biodigester produces an average of 1,500 liters of gas Dutch RABO Bank Foundation (RBF), which agreed to each day, which can provide six hours of cooking, enough for a provide 1.8 million in credits for the majority of the 8,000 household of five. 19. In addition, the farmer could realize savings from increased agri- planned biodigesters, with an attractive interest rate of cultural output. 8 percent (effective). The first loan to a dairy cooperative Annex B. Indonesia Domestic Biogas Programme: Case Study Summary 55 in Bandung for credit covering 1,000 digesters was center ensures that those trained in biogas construc- actualized in only a few months. However, developing tion develop a strong awareness of quality and sense of a credit mechanism, including its institutional aspects, responsibility to ensure that biogas users do not run a for individual farmers proved more challenging. When risk by investing in a biogas system. The Bandung-based developing promotional activities for farmers, a concrete Training Education Development Center (TEDC) has credit system is a sine qua non, even if the interest rate accepted the offer to receive biogas training for its staff is high.20 The BIRU program learned that working with a and develop a curriculum for training staff of vocational large Indonesian banking agency that is able and willing schools. It is expected that these schools in the BIRU to provide small loans to individual farmers is a better target areas will soon be able to provide theoretical and option for further upscaling. practical on-site training for their pupils. Standardizing Technology and Skills Bioslurry Management Training Development Training in bioslurry management can improve farmers’ To develop the supply side of the biogas sector, the BIRU income while relieving pressure on the environment. Bio- program selects the best biodigester model for the tar- slurry has a high level of nutrients, making it an appropri- get area, provides research and development (R&D) for ate basis for composting. It can be applied on farmers’ improving biogas appliances, implements quality inspec- fields to enhance yields; it can be processed, dried, and tion protocols, and provides user training. The program sold or sold immediately to the private sector for pro- selects CPOs for training in biogas construction. Devel- cessing. Ensuring appropriate use of bioslurry requires oping a pool of certified masons and supervisors permit- numerous interventions, including training in bioslurry ted to build biodigesters certified by the BIRU program use and processing, developing the value chain, meeting creates local ownership for the biogas technology, ensur- the logistical challenge of bioslurry collection, and devel- ing high-quality construction in the target area. oping private-sector entities to handle slurry processing and trade. The program also focuses on developing the appliance manufacturing sector, which is the supplier of general Gender Mainstreaming construction materials (e.g., sand, cement, and PVC pipes), along with an array of specific parts, including the Women and children benefit especially from the BIRU main gas valve, galvanized gas pipe, water drain, manom- program, given that switching to biogas cooking reduces eter, gas tap, and the biogas stove and lamp. With the indoor pollution, is safer to user, reduces cooking time, exception of the main gas valve, all items can be pro- and results in a cleaner cooking environment. A respon- duced locally. sible gender approach is recommended to ensure that women are involved in biogas investment decisions, Standardizing biogas technology and skills development which can affect technical decisions (e.g., location of the is the responsibility of the MEMR. Educational institutes digester and appliances). On the supply side, women impart knowledge and skills through implementing train- play potentially significant roles as masons and bioslurry ing courses or developing curricula for vocational training managers. at polytechnic and other schools. Basic skills develop- ment for biogas users is achieved through user training Strengthening Management of Biogas and bioslurry management training. A train-the-trainers Sector Actors approach is applied, whereby partner organizations are trained to disseminate knowledge, with support and To ensure the development of an independent, market- monitoring provided by the BIRU program team. based biogas sector that is well run, partner organiza- tions, tasked with constructing biodigesters and providing biogas services, must be institutionally strong. While Institutionalizing Biogas Education and Training larger cooperatives and other well-established organi- To ensure that high-quality human resources remain zations may only require limited support in developing available beyond the lifetime of the program, BIRU has their biogas divisions, newly created entities with limited selected a center for biogas education and training. The management experience, organization, and structure are likely to require more intensive support and guidance. 20. Interest rates above 12 percent for cooperatives and 16 percent Such institutions may have difficulty accessing credit due for individual farmers are usually considered high. to their limited bankability from the perspective of fund 56 Indonesia: Toward Universal Access to Clean Cooking providers. Management support, R&D funding, aware- After at least six months, the CPO begins maintenance ness training, and other forms of capacity building will visits (within the following three years, at least two vis- allow them to contribute to developing the value chain its must be made). Upon receiving the CPO’s invoice, and local entrepreneurship, thus helping to build a sus- the BIRU program does not immediately reimburse the tainable biogas sector. organization entirely. Two small portions of the total pay- ment are withheld until the maintenance reports are filed. In this way, the BIRU program keeps better track Partner Organizations of maintenance, and the CPO has a commitment to the program. In addition to CPO supervisory practices and The BIRU program has three major types of partner maintenance visits, the BIRU program maintains its own organizations: (i) Construction Partner Organizations quality inspectors, who regularly check the digesters and (CPOs), (ii) appliance manufacturers, and (iii) Lending file reports that are entered into a special database. With Partner Organizations (LPOs). In addition, the program such comprehensive data, the BIRU program can score has worked with various government agencies inter- the quality of the digesters and work of the CPOs and ested in developing the biogas sector and private-sector masons. Well-scoring CPOs can expect extra benefits, companies. while low-scoring ones can expect training or instruction to improve their results. Construction Partner Organizations Appliance Manufacturers The development of the CPOs into professional business Developing locally produced biogas appliances is an enterprises is a core goal of the BIRU program. CPOs important part of the BIRU sector development strat- (including dairy cooperatives, NGOs, and private-sector egy. To the extent possible, the program aims to use companies) are selected in areas where a significant local manufacturers to reduce dependence on imported biogas potential has been detected based on a mar- materials. Today, only one of the eight biogas appliances ket assessment. Selection of the CPOs is based on a being made, the main gas valve, is imported. KITZ, the set of criteria, as well as practical considerations (e.g., brand approved by the BIRU program, is made in Thailand high cow density, availability of water and construction (the brand is known to be imitated) and can be bought materials, availability of other potential partners, proxim- in nearly all Indonesian cities. Currently, the program ity to the field, existing networks, and readiness of local has a limited number of local appliance manufacturers, government). comprising individual producers, organized home indus- tries, and small and medium enterprises (SMEs). Even The CPO recruits a team of masons based on prescribed though most of the biogas appliances have a fairly low selection criteria. The BIRU program provides an eight- level of technical complexity, manufacturing durable and day training session, including theory and practice, which reliable products requires strong monitoring and accu- results in the completion of a six m3 biodigester. Sub- rate technical quality standards. The BIRU partners order sequently, the CPO begins building biodigesters, with such simple tools as mixers and galvanized gas pipes every five masons having a supervisor responsible for from local workshops. Most water drains, as well as gas maintaining quality of the work and monitoring prog- taps and simple manometers are made by the company ress. The CPO makes site visits to assess the eligibility P. T. Khazana Bahari and sold to the other CPOs. Since of cattle farmers becoming biogas users. Basic data is manometer construction is quite easy, the company has registered on a pre-construction form, which is sent to offered to disseminate the scale and have partners make BIRU for review; subsequently, a building permit and the product or outsource production. One or two other plant ID are issued, meaning that the digester is entered partners also make water drains. into the BIRU program database. The CPO and biogas user enter into a household agreement, which explains Development of a manufacturing line of approved biogas the user’s rights and obligations, the BIRU subsidy, and stoves is a key part of the BIRU program. To date, the the extent to which the farmer can provide materials and program has approved six biogas stoves made by four labor. After completing the biodigester, the CPO asks the partners: P. T. Khazana Bahari, Butterfly in Malang, Utama user to sign a completion report (signed by both husband Graha in Solo, and Metalindo in Bogor. An improved and wife), which, together with a copy of the household model is usually tested and evaluated before being agreement, is sent to the BIRU program for registration approved. The stoves still exhibit some shortcomings in the database. and improvements are needed to satisfy users, who may Annex B. Indonesia Domestic Biogas Programme: Case Study Summary 57 complain of corrosion or badly performing units. Indone- feeding (in the correct amounts and dung:water ratio), sian manufacturers have done a good job in developing do regular checks, open the water drain every 10 days, quality, gas-efficient biogas lamps, based on a few Chi- and keep the stove clean. Quality control, including after- nese models. To date, the program has approved two sales service, is also necessary to keep the biogas mar- biogas lamps made by P . T. Khazana Bahari and Butterfly. ket growing. As previously mentioned, the BIRU staff Addresses of these companies are available on the BIRU members have a monitoring role as quality inspectors website. in relation to the CPOs, who are committed to making maintenance visits. CPO maintenance and BIRU inspec- tion reports are entered into a comprehensive MIS, Lending Partner Organizations which provides an excellent overview of the technical Lending Partner Organizations (LPOs) play the key role quality of each digester, as well as the quality of each of providing access to financing for household biodigest- certified biogas constructor and CPO. By tracking which ers. Most LPOs are cooperatives, many of which are also masons and CPOs do not keep up the required technical CPOs. HIVOS engaged early on with the RABO Bank standards, decisions can be made for interventions (e.g., added technical or management training). Foundation, which makes loans available at affordable interest rates. Only a limited number of suitable micro- finance institutions (MFIs) have been identified. Indeed, Standardization lack of available LPOs has proven to be a weak link in the BIRU program. More recently, the program has met Before being introduced to Indonesia, the fixed dome with various potential funding institutions, including the digester model had already undergone a process of United Nations Environment Programme (UNEP), Bank intensive standardization over a 20-year period in many Mandiri, and BRI Syariah. As yet, a properly working Asian and African countries. In 2011, the MEMR took the credit mechanism has not been put in place. Clearly, the initiative to standardize the fixed dome model through a consultative process with various biogas actors, includ- program would benefit from close cooperation with a ing the BIRU program. By late 2011, discussions had nationwide bank that is able and willing to provide small been finalized, and the MEMR confirmed that, in 2012, it loans directly to farmers—especially those in remote would issue the standardized fixed dome model, enforce areas with low cow densities—at a reasonable, prefer- it, and begin standardizing various biogas appliances, ably subsidized, rate. This would offer the farmer an including the biogas stove and biogas lamp.21 attractive package: biogas with a subsidy component and affordable credit, combined with a technical guarantee of three years, user training, and guidance on bioslurry Cost-Cutting Strategies management. The BIRU fixed dome design is cost- and production- efficient, which, using the BIRU construction approach, can be produced at fairly low cost while maintaining Developing a Self-Reliant Sector quality. A 2010 technical assessment indicated that a six m3 digester, if well-managed, can produce 1,300–2,300 To develop a more self-reliant, market-based biogas sec- liters of biogas per day, while an average family requires tor, the BIRU program limits support to its partners. For only about 1,200 liters to meet its daily cooking needs. example, the subsidy support for investment subsidies This result led the BIRU program management to start is limited to 40 percent. Also limited is direct support to recommending the four m3 digester for households with promote biogas partners’ entrepreneurial efforts (e.g., limited daily cooking times (less than four hours with one awareness-raising meetings, development and dissemi- stove). Even so, the IDR 4 million required to invest in the nation of public outreach materials, special media events, four m3 digester, after the subsidy deduction, is beyond and exhibitions). Finally, external support from govern- reach for many farming households. In addition, many ment, donors, and the private sector is limited for direct cattle farmers lack the minimum required space, 24 m2, investment subsidies on top of the one provided by the for constructing the digester. However, producing a fixed BIRU program. dome made of bricks and concrete smaller than four m3 would not be cost-efficient and would violate techni- cal standards. Recently, drawings have been made and Quality Control accepted, showing a more creative way of dealing with It is vital that farming households receive appropriate the slurry pit layout to reduce the required space. training in biodigester management and maintenance. It requires discipline for users to consistently undertake 21. At an earlier stage, the fiber digester had been standardized. 58 Indonesia: Toward Universal Access to Clean Cooking Overcoming Upfront Costs Scaling Up Creating a sustainable biogas market requires financing The untapped potential for expanding Indonesia’s house- mechanisms to reduce high upfront costs for potential hold biogas market is quite large. Over the 2013–17 period, buyers. The level of investment incentive is based mainly the BIRU program anticipates constructing another on calculations regarding the return on investment for 30,000 biogas units. Ensuring the creation of a strong, farmers; however, other factors also play a role. The BIRU market-based biogas sector requires addressing key program has opted for a flat subsidy of IDR 2 million technical, financial, and institutional issues identified dur- (about US$220), which represents about 37 percent of ing the program’s first phase. In terms of technical inno- the market price for the smallest digester (4 m3) and 23 vations, a smaller yet efficient digester is being designed percent of the price for the largest one (12 m3). In addi- for farmers with only two cows and limited funds. Manu- tion to the investment incentive, access to credit/financ- facturing will continue to focus on developing better-qual- ing is a secondary option to reduce upfront costs. As ity appliances, particularly the biogas stove. The program mentioned above, the BIRU program has an agreement will work closely with a nationwide bank to extend credit with the Dutch RABO Bank Foundation, which provides to individual farmers. The average farming household will loans to cooperatives and microfinance agencies that can need a loan of about IDR 5 million at an effective interest be used to make loans to biogas users at affordable inter- rate below 12 percent, with a repayment period of up to est rates. In areas where the program has not been able five years. Under these terms, a farmer’s monthly install- to create access to credit, traditional savings systems are ment would be about IDR 100,000, which is less than a possible financing solution. In East Java, dairy farmers the average monthly cost of cooking fuel plus chemical can obtain interest-free credit through their cooperatives’ fertilizer. After five years, the farmer would still have 10 milk buyer, PT Nestle Indonesia. In addition, inputs from years of free use of the digester. biogas users themselves (e.g., construction materials and labor) can lower expenses. For low-income groups, As envisaged, institutional localization can be achieved government agencies may provide partial funding for by establishing a local foundation dedicated to develop- construction of units. Finally, in more remote and poorer ing biogas or renewable energy in Indonesia. Setting areas, investment subsidies of up to 80 percent are pro- up such a foundation can achieve local ownership, with vided directly to local funding partners by donors’ corpo- HIVOS and SNV available to provide support for fundrais- rate social responsibility (CSR) departments. ing, management, technical assistance, and monitoring. If needed, the foundation could act as a coordinating and management entity for a carbon credit mechanism. A Lessons Learned legal option is to have a company under the foundation function as the actual implementing agency. The Indone- Development and penetration of the biogas market in a sian government will play a key facilitating role in support- country as vast as Indonesia takes time. While it is rela- ing the foundation’s work (e.g., introducing it to regional tively easy to convince wealthier farmers to invest in a government branches and networks). The government biodigester, poorer farmers are more reluctant, despite can also play a mediating role where cooperation with high-quality construction standards and reliable after- other government agencies (e.g., husbandry, agriculture, sales service. Many farmers have been disappointed in public works, and environment) is required. the past by failed biogas systems. In addition, they tend to wait for government initiatives to provide support for Financial autonomy and commercial self-reliance are farming innovations, for which credit is readily available. long-term aspirations of the BIRU program; yet scaling Even if interested, farmers tend to prioritize other pro- up will not be possible without first providing consider- duction and consumption investments. For many, neither able external funding. Over the next four years (2013–17), the immediate financial nor the non-financial gains are the additional 30,000 biodigesters will require about obvious. While they can imagine the benefits of spend- US$16 million (including subsidies) in external funding. ing less time collecting fuelwood or cooking, they are Farmers will invest a total of US$20 million (30,000 x IDR less aware of the potential benefits of a cleaner kitchen, 6 million, including interest); while carbon revenue, esti- better health, or a better environment. That said, interest mated at US$2 million through 2017 , can be used to train in biogas continues to grow. As fuel subsidies become farmers or assist them with subsidies.22 larger and more unwieldy, it is expected that farmers will increasingly become interested in the benefits of a qual- ity biodigester constructed of high-quality parts and the 22. Carbon money is obtained from farmers who relinquish their availability of good organic fertilizer from bioslurry. credit rights to the program. Annex B. Indonesia Domestic Biogas Programme: Case Study Summary 59 Developing a sustainable and viable, market-based bio- HIVOS (Humanist Institute for Development Cooperation). 2009. gas sector in Indonesia requires more time and invest- “Final Proposal, Indonesia Domestic Biogas Programme. � ment. Localization of the program and credit component; April. phasing out of subsidies; and strengthening of partners Indonesian-Netherlands Association. 2011. “Report and Rec- and the profitability and viability of their business, appli- � ommendation on the Institutionalization of BIRU II. ance manufacturing, and bioslurry management are December. all areas deserving of further review and discussion to enhance program quality and scale-up. Developing the � January. JRI Research. 2012. “Biogas User Survey, biogas sector in a decentralized way requires continued van Nes, Wim, et al. 2009. “Feasibility of a National Programme support of the program partners, especially in the initial on Domestic Biogas in Indonesia. � Final Report, SNV stages, to ensure sustained, localized development in all Netherlands Development Organisation, January. target areas. Thus, the need for capacity building remains strong. Wibowo, Edy, H. Clemens, Ibnu Syahrudin, and Wim J. van Nes. 2012. “Feasibility of the Continuation of the Indonesia Domestic Biogas Programme Beyond 2012. � Final Report, Resources March. http://www.smecda.com/DATA%20KOPERASI/data_koperasi. BIRU (Biogas Rumah). 2011. “Standard Operating Guidelines for asp?page=237 the Indonesia Domestic Biogas Programme (IDBP). � Ver- sion 5 (August 29), Indonesia version (December 23). http://www.spi.or.id/?p=1496 de Groot, Robert. 2011. “Governance and Institutional Aspects of Decentralized Dissemination of a Sustainable Biogas http://sipuu.setkab.go.id/PUUdoc/17288/LAMPIRAN%201%20 Sector in Indonesia. � Renergo Workshop, University of 612011.pdf Wageningen, May. ANNEX C Biomass Cookstoves in Indonesia: Case Study Summary23 Today a majority of households in Indonesia continue to areas; for example, there are more biomass fuel users rely on solid biomass fuels to meet their daily cooking in Central and East Java, compared to West Java, where needs. Biomass resources are freely or cheaply available, income levels are higher overall. In urban areas, house- particularly in rural areas, and are less costly than such holds particularly favor LPG as a result of the Indone- alternate fuel choices as electricity or gas. According to sian government’s recent Kerosene-to-LPG Conversion recent surveys by the Renewable Energy, Environment, Program. Urban areas usually benefit from more devel- and Solidarity Group (GERES) and Yayasan Dian Desa oped fuel access and distribution networks, which make (YDD), more than three-fifths of Indonesia’s 23 million cleaner fuels like LPG easier to obtain. Despite urban- rural families, in addition to several million more house- rural disparities and geographical variations in fuel choice, holds in semi-rural and urban areas, use biomass fuel. biomass is likely to remain a key component of the coun- In all, 42 percent of the country’s 59 million households try’s household fuel mix for years to come. or 24.78 million households—85 percent of whom live in rural areas—rely on biomass as their primary cook- ing fuel. The numerical majority of solid biomass users Household Air Pollution and reside on the island of Java, Indonesia’s most densely Incomplete Combustion of populated island; yet biomass use is proportionately Biomass Fuel higher in less developed areas, including islands in the eastern part of the country and rural areas generally. Although biomass accounts for 70 percent of household energy consumption in Indonesia, it is being used inef- ficiently. Owing mainly to the use of traditional biomass Trends in Household Fuel Use stoves, a significant amount of potential biomass energy is wasted during the combustion process. As a result, Recent household energy-use surveys conducted by the more than 24 million households that rely on the tra- GERES and YDD have sought to characterize biomass ditional biomass cooking technology are exposed to large fuel and stove use in the provinces of Central Java and amounts of household air pollution (HAP). Exposure to DI Yogyakarta. The surveys reveal that many households pollutants generated from the incomplete combustion of depend on fuelwood, supplemented by LPG and kero- household fuels has been associated with the increased sene, for cooking. A family’s choice of fuels depends on risk of acute lower respiratory infections (ALRI), includ- such factors as geography, the area’s level of economic ing pneumonia, chronic obstructive pulmonary disease development, and local availability and cost of cooking (COPD), and tuberculosis (TB). The World Health Orga- fuel. Biomass use tends to be higher in lower-income nization (WHO) has found strong evidence linking solid � prepared by Yayasan 23. This annex summarizes the draft report, “Biomass Fuel Use in Yogyakarta and Central Java, Indonesia: A Case Study, Dian Desa (YDD) for the Indonesia Clean Stove Initiative in June 2012. 61 62 Indonesia: Toward Universal Access to Clean Cooking fuel cooking with an increased risk of ALRI in children technology. In 1991, the DJLPE opened a competition to under age 5. In Indonesia, ALRI currently accounts for 20 find the best performing cookstove. The winner was a percent of all deaths among children 0–14 years of age. A two-pothole pottery stove developed by YDD, known as recent meta-analysis found that children living in house- the Sumarni stove, later referred to as the SAE stove. holds using solid fuels have 1.78 times the odds of ALRI Although the DJLPE and YDD wanted to disseminate compared to children in homes without solid fuel use the SAE stove to other areas of the country, a market (Dherani et al. 2008). Recent research also highlights the was lacking for the product. Subsequently, various NGOs many potential health benefits associated with improved initiated their own improved stove programs; however, stove combustion and reduced exposure to cooking those were small in scale, scattered, and covered only smoke (Smith, Mehta, and Maeusezahl-Feuz 2004; Ful- limited geographic areas. In addition, stove testing did lerton, Bruce, and Gordon 2008; Rehfuess, Bruce, and not include emissions, focusing only on stove efficiency Smith 2011). and thermal-heat and fuel-saving characteristics. The YDD survey showed that 82 percent of households Currently, Indonesia has various improved, or even in Indonesia cook inside a kitchen. In 45 percent of Indo- advanced, stove designs that may have higher levels of nesian households, the kitchen is an integral part of the efficiency; however, due to a lack of testing, the actual house, meaning that cooking smoke enters all house performance of these stoves remains unknown. Various spaces. Although no detailed study has been conducted private-sector actors who recently embarked on produc- on the relationship between HAP and kitchen layout, it ing advanced stoves have since determined that market was found empirically that smoke becomes highly con- demand is insufficient to sustain new stove production. centrated in kitchens that are closed with little or no Local producers make a limited number of advanced ventilation. Such associated HAP mainly affects women, stoves based on the orders they receive; however, such who are usually the primary cooks, and their young chil- stoves are not yet available on the open market. dren, who stay close to their mothers in the cooking area. Indonesia’s Ministry of Health has issued a decree that provides guidelines on achieving healthier indoor Characteristics of Biomass Fuel Use in household air. Decree PMK no. 1077 , 2011 raises key Central Java and Yogyakarta issues about biomass fuel consumption and its impact on health, even mentioning the need to develop appropri- In Central Java and DI Yogyakarta, the rate of fuelwood ate technologies, such as smoke-free stoves, to treat it. use is currently 40 percent; yet the region’s high popu- It is well established that LPG will not reach all Indone- lation density means that this percentage represents a sian households over the next decade, given the prohibi- large number of households. An estimated four million tive cost of extending the LPG network to more remote households in these areas still rely on biomass as their and sparsely populated rural areas. Thus, any successful primary household fuel. Owing to the Indonesian gov- intervention will need to provide alternatives to house- ernment’s Kerosene-to-LPG Conversion Program, which holds’ current methods of burning biomass fuel. heavily targets provinces in Central Java and Yogyakarta, LPG is taking a greater market share, while kerosene use has decreased sharply. Status of Improved Cookstove Technology Drivers of Household Fuel Choice Improved cookstove technology has been known in Indo- Both the YDD and GERES surveys demonstrate that a nesia since the early 1980s. The first improved stove was household’s fuel choice is based mainly on accessibil- the owner-built mud stove. Until the 1990s, few organiza- ity and cost. For example, in the YDD survey, “easy to tions addressed matters relating to improved stove tech- obtain� and “economy� were each cited by 38 percent nology. YDD—among the most active nongovernmental of respondents as reasons for choosing cooking fuels; organizations (NGOs) promoting improved cookstoves— “availability� and “safety� were each cited by 13 per- was the first NGO to introduce the mass production of cent of respondents. In the GERES survey, the reasons pottery stoves, as well as the concept of using existing respondents gave for switching fuel use were also related supply chains to move improved cookstoves through the mainly to accessibility or availability and cost; 26 percent commercial market. Since the early 1990s, Indonesia’s of respondents said they were looking for a cheaper fuel, Ministry of Energy, through the office of the Directorate 32 percent switched because of subsidy changes (also General of Electricity and New and Renewable Energy related to cost), and 15 percent changed because the (DJLPE), has focused on the benefits of improved stove new fuel was easier to obtain (figure C.1). Annex C. Biomass Cookstoves in Indonesia: Case Study Summary 63 collection consists mainly of cutting branches and twigs FIGURE C.1 REASONS FOR HOUSEHOLD FUEL SWITCHING (71 percent) or picking up dead wood lying on the forest floor (20 percent); only 9 percent involves cutting down whole trees. Thus, fuelwood collection is done sustain- Others ably and is not contributing to large-scale deforestation. 8% The survey shows that the gender division of labor is quite Cheaper well-divided in these provinces. About three-quarters of 26% fuelwood collection, considered a heavy task, is done by the household’s father figure or adult male over 25 years of age; while one-fifth is done by women over 25 years Government of age. Among children, sons have more responsibility (6 subsidy percent) than daughters (1 percent). related to LPG 32% Better taste Cleaner The average quantity of fuelwood collected per trip shows to food 2% Easier to 1% a large amount of variation. The average small-quantity obtain 15% collection is about 25 kg per trip, with 86 percent carried by hand (either on the collector’s back or shoulders) or Easier Difficulty by bike. The average large-quantity collection is 1,630 kg, to use in obtaining usually carried on a small truck. The overall average col- 8% previous fuels lection per trip is 212 kg. Given the distance needed to 8% travel to collect fuelwood (up to 1 km), the vast majority Source: GERES 2009. of households collect in small quantities. In rural areas of Central Java and Yogyakarta, most survey Features of Household Cookstove Use respondents reported fuelwood as their preferred cook- ing energy because it is abundantly available, usually free Families that use biomass stoves as their primary stove of charge, and alternate fuels may not be available. The often have a second stove in their household, which is GERES survey found that, in rural areas, 74 percent of usually fueled by kerosene, gas, or electricity (e.g., rice respondents use fuelwood, followed by kerosene (19 per- cooker). In most cases, wood-burning stoves are the cent) and LPG (3 percent). In urban areas, only 26 percent household’s primary stove. Other stoves, such as an LPG of respondents use fuelwood as their main cooking fuel. In one, often function as a family’s secondary stove, used for fast or small-quantity cooking (e.g., boiling water to Yogyakarta, 80 percent of rural households use fuelwood make tea or coffee). as their main cooking fuel, although kerosene and LPG are frequently used to supplement it. Very few households— Households generally use two methods to obtain their mainly those in peri-urban or urban areas—purchase their primary stove. About 45 percent make their own out of fuelwood.24 This reality makes household expenditure for mud or brick and cement, based on their own knowledge. a megajoule of usable energy of fuelwood effectively The other 55 percent generally buy their stoves in nearby zero and thus the most cost-effective option for house- markets or small shops. The types of stoves vary, and holds within easy access of collecting fuelwood. some households use more than one. The survey results show that mud stoves (i.e., homemade mounds of mud Obtaining Fuelwood and Division of Labor formed in accordance with the user’s knowledge) are the most commonly used primary stove, cited by 40 percent The GERES survey results show that a majority (69 per- of respondents; 33 percent use cement to make their cent) of households that use solid biomass for cooking— own stoves, while 18 percent use other materials, includ- mainly lower-income households—collect it from around ing stone, scrap metal, and recycled oil drums. As men- their houses or in their fields. Only a small percentage tioned above, many households use LPG stoves as their (9 percent) of families in Central Java obtain their fuel- secondary stove. Like fuel choice, the types of stoves wood from the forest; among those that do, fuelwood selected are closely related to level of household income. 24. This analysis found that, when fuelwood is purchased, it is not Among the households that purchase their stoves, 49 the cheapest form of cooking energy. Per megajoule of potential percent buy in the local market, 21 percent purchase power, the upfront cost of wood energy is lowest; however, burn- ing fuelwood subjects it to the inefficiency of wood-burning cooking from mobile traders, 16 percent buy directly from the appliances and subsequently a large loss of usable cooking energy. producer, and 12 percent purchase from local shops. 64 Indonesia: Toward Universal Access to Clean Cooking The stoves available on the market tend to be of tradi- activities and behavior of cookstove producers, wholesal- tional designs and inefficient. The average lifetime of a ers, and retailers in order to better understand the trends household’s primary cookstove is 3.7 years. However, and issues affecting cookstove supply. These three cat- when larger groupings of the average stove lifetimes are egories of the cookstove supply chain were questioned observed, it is found that stoves are commonly used for about their business practices, the price and cost of their either 1–2 years or 4 or more years. These figures may business transactions, challenges faced, and their knowl- reflect that homemade stoves are repaired on an ongo- edge about and interest in new and/or improved cook- ing basis and can thus remain usable for many years. stove models. Also, there is a tendency for households to believe that a stove can continue being used as long as it functions.25 The survey found that the regional demand for cook- stoves is higher than the area’s production capacity, especially for fuelwood stoves. This is demonstrated by Low Stove Efficiency and Limited the willingness of wholesalers and retailers to pay cash for stoves, with some even making advance payments to Awareness of Incomplete Fuel obtain their stove supplies. In Central Java, annual stove Combustion production is about 77 ,500, while biomass fuel users total some 3.5 million. Despite the long usable lifetime Most traditional biomass stoves used for cooking are of a stove, typically 3.7 years, there remains a large gap notably inefficient. The GERES survey found that, when between cookstove supply and demand in Central Java. wood is actually burned in a kitchen stove, only a por- By contrast, in Yogyakarta, supply and demand are more tion of its potential energy is converted into usable heat balanced, with about 267 ,300 stoves produced each for cooking, with the rest lost to heat and pollution. year to supply some 415,200 biomass-using families. Indeed, such incomplete combustion in most biomass Demand for biomass-burning technology remains quite stoves often converts just 15 percent of the fuel’s poten- high for the foreseeable future, and has the potential to tial energy into usable energy for cooking. This figure generate profitable businesses for cookstove producers, correlates closely with national data, which shows that wholesalers, and retailers. fuelwood (comprising nearly 75 percent of Indonesia’s national household energy share) serves about the same Strong cookstove supply chains through which biomass number of households as LPG (comprising only 9 per- stoves of various designs are sold already exist in Cen- cent of the nation’s household energy share) owing to its tral Java and Yogyakarta. The materials used to make the low efficiency. Thus, by improving the efficiency of bio- stoves vary from pottery to stone, while the stoves’ main mass stoves, more primary energy can be obtained from fuel types tend to be wood, charcoal, and sawdust. Wood the biomass burned and thus save energy overall. is the most commonly used fuel and also the most in demand, reflecting the resource’s abundant availability in Households generally have limited awareness about the these areas. inefficiencies and health risks associated with traditional biomass fuel use, explaining why demand for traditional cookstoves remains quite high. Smoke in the kitchen Producers is considered a common occurrence. However, when Cookstove producers, scattered among two districts in asked for more detail, women who serve as the primary Yogyakarta province and several districts in Central Java, household cooks identified some inconveniences related tend to run small-scale, family-based businesses using to smoke production during cooking. traditional methods. The YDD survey results show that 94 percent of producers are continuing their family busi- nesses, which are passed down from one generation to Cookstove Supply Chains in Central the next, and that 93 percent of the stove production Java and DI Yogyakarta process is done manually. These family businesses are also managed traditionally, with no records or bookkeep- In 2012, YDD conducted a survey that sought to charac- ing and no mechanism for recording production inputs terize cookstove supply chains in Central Java and Yogya- (e.g., the cost of labor, materials, firing, and space used). karta. Completed in the same areas of the 2009 GERES The survey results show that 89 percent of producers biomass survey, the YDD survey analyzed the business do not calculate their labor costs, and 63 percent do not even calculate the cost of input materials. The only busi- 25. Ninety-three percent of survey respondents reported using their ness calculations involve the cash payments they need to primary stove every day of the week. produce their next stoves. Using such traditional business Annex C. Biomass Cookstoves in Indonesia: Case Study Summary 65 practices, it is not possible to calculate the cost of construct- Wholesalers ing a single stove, which may explain why stove prices in More than half of wholesalers have been in the stove the local markets tend to be quite low. Many stoves last- business for more than 30 years, demonstrating that ing six months to a year cost less than IDR 10,000.26 cookstoves are a good business option and that the mar- ket is stable. Seventy-eight percent of wholesalers pay Most producers do not employ paid workers and tend to producers cash, while 8.5 percent make advanced cash work in the production center themselves. Though most payments before receiving stoves from the producers, do not actively market their products, they do not experi- demonstrating that (i) market demand is good enough ence any problems in selling their products due to their that wholesalers are willing to pay cash, even in advance well-established relationships with stove wholesalers and and (ii) producers may not have enough capital to pro- retailers. Patterns of payment and business transactions duce and stock stoves. among producers, wholesalers, and retailers indicate that the stove market, however small-scale and locally based, The majority of wholesalers are small-scale; 44 percent is quite healthy. The Indonesian government’s Kerosene- of those surveyed supply stoves to 2–6 retailers. About to-LPG Conversion Program does not seem to have four-fifths of the wholesalers interviewed reported pur- influenced the traditional stove market. According to 87 chasing and selling 50 or fewer stoves per month. The percent of the producers surveyed, biomass stove sales small minority of larger-scale wholesalers may supply have remained stable since the conversion program began more than 22 retailers. Forty-two percent of wholesalers in 2007 , while 3 percent reported increased demand. Suf- use their own homes for stocking and selling the stoves. ficiently high demand for biomass stoves means that a Others pick the stoves up from the producer rather than number of wholesalers and retailers must issue advances maintaining a stock and transport them directly to the in order to obtain their stove supplies. retailers. Still others double as retailers; that is, they main- Among the traditional artisanal producers surveyed, tain stocks at home and also sell stoves in the market about 80 percent said they construct fewer than 100 or small shops. The per-stove price margin taken by the stoves per month. Their operational weaknesses include wholesaler ranges from IDR 1,000 to 25,000, depend- limited work space, labor, and capital. Most reported ing on the stove model and size. The business models having a working area of about 50 m2, a limitation that used are predominately direct and traditional, with most may affect their readiness to produce new stove types wholesalers preferring cash payments. or designs. Nearly half of the producers interviewed do not have their own kilns, which may also limit production Most wholesalers bear the cost of transporting the stoves capacity. In addition, the geographic area of coverage from the producers. However, in cases where producers tends to be small, with less than 9 percent of produc- deliver the stoves directly to the wholesalers, the costs ers in Central Java selling their stove products outside tend to be divided. To transport a stove shipment, whole- their province or between provinces and none from Yog- salers typically use motorbikes equipped with a bamboo yakarta doing so.27 container on the back or rented pick-up trucks. Thirty- eight percent of the wholesalers interviewed reported Given that most producers lack extensive access or net- difficulty in maintaining stove quality during transport, works beyond their home village, few are aware of new indicating that many stoves break in transit, and produc- cookstove designs. Even so, nearly three-quarters of the ers do not usually make guarantees or offer to replace producers interviewed expressed interest in producing the broken ones. In addition, 21 percent of wholesalers a new stove design. Most tend to believe that explor- had difficulty transporting the stoves, mentioning that ing new cookstove models would require stove samples, renting the pick-up trucks used to transport them adds market demand, equipment, materials, and capital.28 to the cost. 26. About half of all wood and charcoal stoves are sold from the Most wholesalers have limited knowledge about the producer at IDR 4,500 or less; about 20 percent sell for IDR 4,600– performance of the stoves they sell. When asked about 7,000, and only 6.4 percent sell for more than IDR 40,000. The most stove performance related to efficiency, 79 percent of expensive stoves, which tend to be constructed of stone, sell for about IDR 60,000 or more. respondents said they did not know. Likewise, when 27. This may indicate that demand for stoves in Yogyakarta exceeds asked which stove was the more durable, 81 percent the production capacity of the province’s local stove producers. said they did not know. Wholesalers’ limited knowledge 28. The request for stove samples should be carefully weighed about cookstove performance is further demonstrated by since, without appropriate training and quality control, an imperfectly produced stove could result in a “look-alike� version that appears to their not providing buyers any advice on which stoves be improved without providing the associated benefits. they consider worthwhile or a good choice. 66 Indonesia: Toward Universal Access to Clean Cooking Like producers, wholesalers have little knowledge about supply chain would depend on its ability to be sold. Price new stove designs; however, among those surveyed, the would also factor into the decision to sell a new stove vast majority (98 percent) expressed a willingness to sell design since customers are used to purchasing stoves at new types of biomass stoves if doing so would be profit- quite low prices. Finally, the survey results demonstrate able. Eighty-nine percent estimated the price of such a that introducing a new stove model would require train- cookstove at more than IDR 65,000, while 11 percent ing supply-chain members in production design and qual- said the price would be more than IDR 35,000. ity, as well as business development. Given the strength of the existing traditional supply chain, it is vital to involve these actors in the distribution of clean stove designs. Retailers Cookstove retailers are variously located in markets, shops, and smaller shops (warungs). Others travel from Scaling Up house to house on motorbike or bike to sell their stoves. Among the retailers surveyed, about half have been A sustainable intervention to influence clean biomass involved in cookstove retailing for at least 20 years. Forty- fuel use in Indonesia should involve the growth and sup- seven percent depend on wholesalers to obtain their port of a healthy improved stove market driven by user stove stock, while 51 percent buy directly from produc- demand and supplied with clean stoves of standard- ers. The business relationships between retailers, whole- ized quality. Such a successful intervention will need to salers, and producers are informal, based on mutual trust, involve areas of institutionalization, public knowledge with most transactions conducted in cash payments. and education, stove supply development, and innova- Just 0.6 percent of producers—mainly the largest pro- tive financing methods, all of which will be improved and ducers who sell across provinces—utilize formal con- enforced by ongoing research and development (R&D). tracts. Retailers that receive their stove supplies directly Cooperation among various sectors and levels of govern- from producers typically cover the transport costs, while ment, as well as key public- and private-sector players, wholesalers that supply retailers usually bear such costs. should be institutionally embedded within the govern- More than four-fifths of retailers sell 10 or fewer stoves ment and promoted by a national clean cookstove net- per month, while less than 1 percent sell 30 or more. work, which has access to similar international networks. National standards of efficiency and testing protocols Like wholesalers and producers, retailers have limited for biomass combustion methods must be established, knowledge about stove performance and are primarily possibly through one or more centralized stove testing concerned with how many stoves they are able to sell. centers. User demand for clean stoves should be fos- Nearly three-quarters of the retailers surveyed were tered through public-awareness campaigns and events, unaware of which stoves they sell are the most durable while bolstering stove supply should be a regionally sen- or efficient. Also similar to wholesalers and producers, sitive effort emphasizing quality control and achieving retailers’ knowledge about new stove designs is quite set standards of efficiency, probably involving training limited; at the same time, the majority (70 percent) and business development to members of the existing expressed interest in learning about new stove designs. stove supply chain. The clean stove models and available technologies should continue to be developed and diver- sified through R&D. Financial intervention and possible Cookstove Supply Chain: Summing Up subsidies can be justified by the negative externalities associated with indoor biomass combustion, but should There is limited knowledge about stove performance be developed carefully using a results-based approach. throughout the supply chain, with most producers, whole- salers, and retailers primarily concerned with selling as All of these principles should be channeled into a pilot pro- many stoves as possible, without regard for the stoves’ gram undertaken in two geographic areas of Indonesia: one efficiency or fuel-saving features. Most of these actors with a pre-existing supply chain and one without. The pilot lack a strong concept of what an improved or clean stove program should be carefully monitored and evaluated in might be. Thus, a new stove model’s acceptability to the order to better plan a future at-scale national intervention. Annex C. 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