BioLPG for Clean Cooking in Sub-Saharan Africa: Present and Future Feasibility of Technologies, Feedstocks, Enabling Conditions and Financing
Abstract
:1. Introduction
1.1. How LPG Is Produced and How It Could Be Produced Renewably
1.2. Aims and Significance of This Paper
2. Materials and Methods
2.1. Country Screening and Project Identification
Triage Process to Identify Focus Countries and Candidate bioLPG Projects
- First triage: National intentionality and action to develop the LPG sector. Evidence of (a) national need for clean cooking, (b) stated intentions to scale up the national LPG sectors, and (c) planning and implementation steps to accomplish LPG sector scale-up. Application of these screens to SSA (see Table 1) identified six countries as candidates for deeper investigation of bioLPG project potential: Cameroon, Ghana, Kenya, Rwanda, Senegal and Tanzania.
- Second triage: Enabling environment and capability of political system. Government commitment and support are of the utmost importance in order to induce the financing and implementation of an infrastructure system for biofuels. The literature is replete with emphasis on the importance and primacy of state policies and institutions. In Europe, studies note that the main barriers to renewable energy production in agriculture are frequent changes in policies, complicated legislatures, and a general perception of unpredictable national policy instruments [29,30].
- Third triage: Selection of technical process options. Choice of technical options required simultaneous and interactive consideration of process feedstock needs and availability of suitable feedstocks in adequate quantity. The technical options and their triaging are described in more detail in Section 2.2.
- Fourth triage: Feedstock selection and identification of project possibilities. Scanning of feedstock potential (viable quantities, siting, and notional economics of MSW or agricultural waste) was conducted in order to identify promising project types in Ghana, Kenya and Rwanda; this final triage yielded the results and five project choices analysed in detail in Section 2.3.
2.2. Triaging Technical Pathways to bioLPG Production
2.2.1. Fermentation
2.2.2. Hydrolysis and Hydrodeoxygenation of Triglycerides
2.2.3. Direct Thermochemical Conversion of MSW
2.2.4. Waste to Biogas and Biogas Conversion
2.3. Availability of Appropriate Feedstocks in Triaged Countries
2.3.1. Feedstock Evaluation Criteria
2.3.2. Results of Feedstock Analyses for Ghana, Kenya and Rwanda
2.4. The ‘Enabling Environment’ in Ghana, Kenya and Rwanda
3. Results
3.1. Cost Estimates and Financial Feasibility Considerations for the Identified bioLPG Plant Projects
3.1.1. General Framework for Cost Estimation
3.1.2. Capital and Operating Costs (Not Including Feedstock) of IH2 and Cool LPG Plants in Ghana or Rwanda
3.1.3. MSW for IH2 or Cool LPG in Ghana and Rwanda
3.1.4. Agro-Residues for Cool LPG in Kenya
3.2. Candidate Project Financial Models and Their Results
- A bioLPG plant capacity of 10,000 tpa is modelled for AD + Cool LPG. A bioLPG plant capacity of 25,000 tpa (the preferred size for IH2′ economies of scale) is modelled for IH2.
- The capital cost of the 10,000 tpa AD + Cool LPG plant is projected at US$ 32 million, which is the US$ 40 million capital cost for a 10,000 tpa plant presented in Table 5, with the US$ 24 million Cool LPG component adjusted downward by the 65% adjustment factor described in Section 3.1.2. The capital cost of the 25,000 tpa IH2 plant is projected at US$ 188 million, as presented in Table 4, Capacity 1.
- The imported fossil LPG prices against which bioLPG must compete are analysed for LPG delivered in bulk to filling plants (a) located in/near Nairobi, Kenya, US$ 779/tonne; (b) in/near Accra, Ghana, US$ 796/tonne; and (c) in/near Kigali, Rwanda, US$ 903/tonne (higher fossil LPG logistics costs due to Rwanda being landlocked). These costs (as of mid 2020) includes, (i) for Kenya and Rwanda, the average historical Saudi Aramco Contract Price for butane and, (ii) for Ghana, the average historical ex-refinery and import parity price for LPG, ocean transportation, terminal and handling charges at the port, land transport; miscellaneous costs, duties and levies.
- Gasoline is the main product produced by the IH2 process and gasoline revenue is assumed at US$ 800/tonne.
- Gating/tipping fees might be received or be paid for MSW feedstock. Table 6 shows results from modelling gating fees ranging from receipt of US$ 10/tonne to payment of US$ 10/tonne.
- A conservative capital structure with 35% bank/commercial debt @ a 10% interest rate (sovereign debt information on Bloomberg + risk premium), 40% concessional debt from multilateral financial institutions (MFIs) and development banks @ 8% (conservative, based on conversations with DFIs, such as USDFC (formerly OPIC), FMO, and Swedfund using LIBOR + 400–600 basis point premium, depending on country risks and project risks), and 25% equity @ a 20% required internal rate of return (IRR). The blended interest rate is 8.93%, and the blended cost of capital is 11.7%.
- An exit value of five times earnings before interest, tax, depreciation and amortization (EBITDA) was used to reflect the value of the bioLPG plant’s income generating capacity in outer years.
- Borrowings starting in the first year, with only interest paid in the first year, and then principal and interest starting at the end of the second year.
3.3. Financing Issues and Projected LPG Supply Infrastructure and Fuel Costs
- (a)
- The capacity of local commercial financial institutions to lend is often constrained by national regulatory limits, and when faced with attractive local, lower risk investment alternatives (such as government securities). Risk mitigation assistance then becomes critical to induce local capital to flow.
- (b)
- The consensus need of potential major local funders (Ghana Infrastructure Fund, the Development Bank of Rwanda, Stanbic, Ecobank, Kenya Commercial Bank, and Databank in Ghana, Kenya, and Rwanda) was for development finance institutions (DFIs) to assist in various forms: grants, technical assistance (TA) for capacity building, investment capital (debt and equity), first-loss guarantees, investment insurance and other risk mitigation facilities.
- (c)
- The mobilization of international blended financing can be used to “crowd in” meaningful amounts of local funding (OECD: Blended Finance Funds and Facilities), as detailed in LPG Master Plans developed for Kenya, Rwanda, and Ghana [26,27,28]. The specific focus and needs of funding sources must be identified and targeted [78,79].
- (d)
- DFIs are often the most important early money and risk mitigation sources because they are willing to accept less certainty than the private sector due to their development mandates and offer longer tenors (up to 20 years). Additionally, through their TA, guarantees and first-loss protection, DFIs often enhance the expected economic performance and de-risk investments.
- (e)
- There is a wide range of potential public sector financial support for LPG projects. These include development/aid agencies (e.g., FCDO/UKAID, USAID, SIDA) for grants and TA; DFIs (e.g., FMO, IFC, KfW, PROPARCO, Swedfund, and USDFC) for capital and risk products; and development banks (e.g., AfDB and local development banks) for capital and risk products.
- (f)
- Leading DFIs (AfDB, FMO, IFC, Swedfund, and USDFC) have indicated preliminary interest in funding bio-related LPG value chains and LPG-related infrastructure.
- (g)
- Based on all the above, it is concluded that there is financial institutional interest and capability to explore the funding of Cool LPG projects in Ghana, Kenya and Rwanda at a commercial scale, assuming adequate evidence from well-conducted project feasibility studies.
Indicative Estimates of Capital Expenditures (CapEx) Required to Create Physical LPG Capability for an Additional 500 Million New Users in Sub-Saharan Africa
4. Discussion
Next Phases of bioLPG Development
- Fund next steps of technical process development and refinement, which is a general need and not site-specific.
- Fund and carry out detailed feasibility studies for bioLPG demonstration plants in carefully selected sites.
- Finance and build demonstration bioLPG plants, incorporate learnings into commercialization planning.
- Develop and put into service commercially viable bioLPG plants across SSA.
- Stimulation of SSA governments to explore bioLPG as a solution, with coordination across relevant ministries and agencies and complementary stimulation of TA funding.
- Stimulation of international development organizations and funding sources to support bioLPG as a solution and to engage with SSA governments to assess and develop bioLPG production capacity and related feedstock projects.
- Stimulation of finance institutions to build human capacity and decision-maker interest in serving a bioLPG project market and reducing risk premiums included in finance pricing.
- Stimulation of planning and funding of urban MSW capacity, as feedstock for bioLPG.
5. Conclusions
Supplementary Materials
Author Contributions
Funding
Data Availability Statement
Acknowledgments
Conflicts of Interest
References
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Country Name | Has Major Clean Cooking Fuel Need 1 | Has 2030 Target for LPG Penetration 2 | Has LPG Master Plan or Plan-in-Process 3 |
---|---|---|---|
Angola | X | ||
Benin | X | ||
Burkina Faso | X | X | |
Burundi | X | ||
Cabo Verde | X | ||
Cameroon | X | X | X |
Central African Republic | X | ||
Chad | X | ||
Congo, Dem. Rep. | X | ||
Congo, Rep. | X | ||
Cote d’Ivoire | X | X | |
Djibouti | X | ||
Egypt, Arab Rep. | |||
Equatorial Guinea | X | ||
Eritrea | X | ||
Eswatini | |||
Ethiopia | X | ||
Gabon | X | ||
Gambia, The | X | ||
Ghana | X | X | X |
Guinea | X | ||
Guinea-Bissau | X | X | |
Kenya | X | X | X |
Lesotho | X | ||
Liberia | X | X | |
Libya | |||
Madagascar | X | ||
Malawi | X | ||
Mali | X | X | |
Mauritania | |||
Mauritius | |||
Morocco | |||
Mozambique | X | ||
Namibia | X | ||
Niger | X | X | |
Nigeria | X | X | |
Rwanda | X | X | X |
Sao Tome and Principe | X | ||
Senegal | X | X | X |
Seychelles | |||
Sierra Leone | X | ||
Somalia | X | ||
South Africa | |||
South Sudan | X | ||
Sudan | X | ||
Tanzania | X | X | X * |
Togo | X | ||
Tunisia | |||
Uganda | X | ||
Zambia | X | ||
Zimbabwe | X |
Conversion Technology | Feedstock Characteristics | Potential Feedstocks | Volumes Required for 10,000 tpa bioLPG | Comments |
---|---|---|---|---|
Catalytic thermo-chemical conversion | Heterogeneous organic/biomass feedstock. Single input feedstock could be an option (with improved biochar output) but the process can manage mixed feedstock including mixed MSW. | Biomass/MSW | ~70,000 tpa feedstock | BioLPG is a minor volume co-product of the one implemented conversion pathway. |
Biogas to bioLPG (biogas/ syngas reforming) | Heterogeneous biomass suitable for Anaerobic Digestion (AD). Mixed biomass compositions can be used but different feedstocks give different yields of biogas. Consistent supply of biomass preferable for consistent running of AD. Desulphurisation of biogas required. | By-products of agricultural and livestock industries (field and processing residues); sewage and wastewater; organic fraction of municipal waste | ~30,000 tpa raw biogas.Equivalent to approx. 160,000–500,000 tpa feedstock input (depending on type (food waste or biosolids such as animal manure) | Feedstock assessment carried out for preliminary production of biogas via AD. |
Country | Feedstock Potential | References |
---|---|---|
Ghana | Agro-processing residues, field residues and waste from palm oil, fruit, cocoa, maize, rice, millet, sorghum, cowpea, cassava, soybean | [39,40,41] |
Urban waste (sanitary waste and MSW) | [42,43,44] | |
Kenya | Agro-processing residues, field residues and waste from coffee, pineapple, sugarcane refining, cassava, mango, sisal and livestock industries | [31,45,46] |
MSW | [47] | |
Rwanda | Agro-processing residues, field residues and waste from coffee, cassava, fruit processing and brewing industries | [48] |
Urban waste (sanitary and MSW) | [49,50] |
Capacity 1 (25 ktpa) | Capacity 2 (10 ktpa) | Capacity 3 (5 ktpa) | |
---|---|---|---|
BioLPG produced (ktpa) | 25 | 10 | 5 |
Annual MSW input required (ktpa) | 167 | 67 | 33 |
Total capital costs (US$ million) | 188 | 109 | 72 |
Operating cost (US$ 000/year) | 13,503 | 7107 | 4611 |
Capacity 1 (25 ktpa) | Capacity 2 (10 ktpa) | Capacity 3 (5 ktpa) | |
---|---|---|---|
BioLPG produced (ktpa) | 25 | 10 | 5 |
Annual MSW input required (ktpa) | 676 | 270 | 135 |
AD plant capital requirement (US$ million) | 41 | 16 | 8 |
Cool LPG capital requirement * (US$ million) | 46 | 24 | 15 |
Total capital costs (US$ million) | 86 | 40 | 23 |
Operating cost (US$ 000/year) | 3930 | 2440 | 1680 |
Triage Ranking | 2 | 5 | 3 | 4 | 1 |
---|---|---|---|---|---|
Country | Kenya | Ghana | Ghana | Rwanda | Rwanda |
Case | Agro-Residue AD + Cool LPG | MSW IH2 | MSW AD + Cool LPG | MSW IH2 | MSW AD + Cool LPG |
BioLPG Plant Capacity (tpa) | 10,000 | 25,000 | 10,000 | 25,000 | 10,000 |
BioLPG Plant Capex (US$ millions) | 32 | 188 | 32 | 188 | 32 |
Waste input (ktpa) | 270 | 166 | 270 | 166 | 270 |
BioLPG Price (US$/tonne) | 750 | 750 | 750 | 850 | 850 |
Fossil LPG Price (US$/tonne) | 779 | 796 | 796 | 903 | 903 |
Gasoline Price (US$/tonne) | NA | 800 | NA | 800 | NA |
Best Case (High IRR, tipping fee income) | |||||
Tipping Fee (US$/tonne) | 10 | 10 | 10 | 10 | 10 |
IRR (US$ 750/t) | 29.0% | 13.2% | 30.1% | ||
IRR (US$ 850/t) | 15.8% | 34.9% | |||
Base Case | |||||
Tipping Fee * | 0 | 0 | 0 | 0 | 0 |
(US$/t) | |||||
IRR (US$ 750/t) | 14.0% | 11.3% | 15.4% | ||
IRR (US$ 850/t) | 12.3% | 3.5% | |||
Worst Case (Unattractive IRR, tipping fee cost) | |||||
Tipping Fee * | −7 | −10 | −10 | −10 | −10 |
(US$/t) | |||||
IRR (US$ 750/t) | (negative IRR) | 7.6% | (negative IRR) | ||
IRR (US$ 850/t) | 8.6% | (negative IRR) |
Per New User (Based on the 4 Countries Studied) | For 500 Million New Users, 120 Million Households | |||||
---|---|---|---|---|---|---|
National Averages | Industry CapEx | Consumer CapEx | Total CapEx | Industry CapEx | Consumer CapEx | Total CapEx |
Low | $27.6 per new user | $8.8 per new user | $36.5 per new user | $13.8 bn | $4.4 bn | $18.2 bn |
High | $37.8 per new user | $15.0 per new user | $52.8 per new user | $18.9 bn | $7.5 bn | $26.4 bn |
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Chen, K.C.; Leach, M.; Black, M.J.; Tesfamichael, M.; Kemausuor, F.; Littlewood, P.; Marker, T.; Mwabonje, O.; Mulugetta, Y.; Murphy, R.J.; et al. BioLPG for Clean Cooking in Sub-Saharan Africa: Present and Future Feasibility of Technologies, Feedstocks, Enabling Conditions and Financing. Energies 2021, 14, 3916. https://doi.org/10.3390/en14133916
Chen KC, Leach M, Black MJ, Tesfamichael M, Kemausuor F, Littlewood P, Marker T, Mwabonje O, Mulugetta Y, Murphy RJ, et al. BioLPG for Clean Cooking in Sub-Saharan Africa: Present and Future Feasibility of Technologies, Feedstocks, Enabling Conditions and Financing. Energies. 2021; 14(13):3916. https://doi.org/10.3390/en14133916
Chicago/Turabian StyleChen, Kimball C., Matthew Leach, Mairi J. Black, Meron Tesfamichael, Francis Kemausuor, Patrick Littlewood, Terry Marker, Onesmus Mwabonje, Yacob Mulugetta, Richard J. Murphy, and et al. 2021. "BioLPG for Clean Cooking in Sub-Saharan Africa: Present and Future Feasibility of Technologies, Feedstocks, Enabling Conditions and Financing" Energies 14, no. 13: 3916. https://doi.org/10.3390/en14133916
APA StyleChen, K. C., Leach, M., Black, M. J., Tesfamichael, M., Kemausuor, F., Littlewood, P., Marker, T., Mwabonje, O., Mulugetta, Y., Murphy, R. J., Diaz-Chavez, R., Hauge, J., Saleeby, D., Evans, A. W., & Puzzolo, E. (2021). BioLPG for Clean Cooking in Sub-Saharan Africa: Present and Future Feasibility of Technologies, Feedstocks, Enabling Conditions and Financing. Energies, 14(13), 3916. https://doi.org/10.3390/en14133916