Business models for the delivery of modern thermal energy services: the cases of Ghana and Tunisia

Author(s): Sustainable Thermal Energy Services Partnerships (STEPs)

Publication date: May 2014

Publication type: Report

Executive Summary:

Liquefied Petroleum Gas (LPG) Cooking Fuel Program in Ghana

In 1990, the Government of Ghana created a program to replace wood-based cooking fuels (wood and charcoal) with LPG, thus helping reduce forest-cutting and improving the living standard of households that rely on wood-based fuels.

The program began by having LPG produced by the country’s only refinery, the Tema Oil Refinery. At that time, LPG was provided to large bulk oil marketers, which then sold it to LPG distribution companies, which then provided the LPG to a network of LPG filling stations. Households who wanted to use LPG had to purchase an LPG stove, a canister, and related equipment. The price was too high for many families. Despite subsidies and LPG price controls, nearly all the LPG consumption was in Accra and other urban areas. To encourage rural households to switch to LPG, the government even enacted a special subsidy for households living beyond 200 km from the Tema refinery. But the subsidy was insufficient to persuade rural communities to start using LPG. In addition, there were distribution problems and breakdowns at the refinery, resulting in supply disruptions.

There was another problem: since the price of LPG was subsidized by a surcharge on gasoline, taxi drivers and other commercial transport operators found that LPG was cheaper to use than gasoline. Many converted their vehicles to run on LPG and a significant volume of LPG was diverted from household customers.

Over time, the government modified the program. The Tema refinery’s LPG output is now being supplemented by LPG imports. So, now there is enough supply of LPG, and even enough for taxi drivers. But at the beginning of 2013, the Government eliminated the price controls and subsidies. So it is no longer cheaper to fuel motor vehicles with LPG. There have been protests against the LPG price increases and the news media reported that charcoal sales were at an all-time high as many families switched back to charcoal from LPG. The Government denied this and said that the decreased LPG consumption was due to supply disruptions.

Although there are no figures regarding the impact of the LPG program on forest-cutting, the program has had a moderate impact on urban households’ use of cooking fuels. While charcoal is still the dominant cooking fuel in 52.7 percent of the urban households, LPG is the main fuel in just under 20 percent of the households, with wood at 17.8 percent.

In rural households, wood is still the dominant cooking fuel, with 81.6 percent of the rural households using it as their primary fuel. Charcoal is used as the dominant cooking fuel in 11.6 percent of the rural households and LPG is the dominant fuel in just 1.1 percent of the rural households.

In 2014, the Government initiated a new subsidy program to attract rural users to use LPG. Cylinders and associated equipment are being provided to households free of charge. It is too soon to know if this latest initiative will be successful.

In the late 1980s, the Government of Tunisia established a program to use solar flat plate collector systems to replace natural gas and LPG as the fuel for heating water in households. The purpose of the program was to reduce imports of natural gas and LPG, thus improving Tunisia’s energy security.

The solar water heater (SWH) program progressed through several phases, during which various incentives and promotional programs were put in place by the Tunisian government. During the early years of the program, solar thermal equipment was exempted from VAT and their import duties were cut to 10%. Later, solar panels were subject to testing and labeling to ensure quality, and a certification program was established for SWH installers. Then, a EUR 75 per m² subsidy on solar panels was established, paid for by revenues from import duties on air-conditioners and taxes on automobile license plates. None of these measures caused a major increase in SWH sales, which were usually below 500 units per year until 2005.

In 2005, the program, renamed PROSOL, began to offer affordable consumer credit. The credit system allowed customers to repay their SWH loan over five years on their electric utility bills, a practice widely used in the West for financing home energy-efficiency improvements. Utilities have found that this “on-bill financing” approach has resulted in a very low default rate because households are aware that if they fail to pay the loan through their utility bills, their electricity can be cut off by the utility. As a result of the establishment of the on-bill financing program, sales of SWHs have started to rapidly increase from sales below 500 units per year and are now at over 3,500 units per year.

In addition to the credit system, the PROSUL program certifies SWH systems and installers. Households can thus be assured that they enjoy good-quality products installed by qualified contractors.

As of 2011, the PROSUL program installed 561,690 m² of solar collectors for an installed capacity of 393 MWth, generating 41,054 toe in savings per year and reducing CO2 emissions by 123,161 metric tonnes/year. The program is now being expanded to hotels and other commercial establishments.

In 2012, the PROSOL program became eligible to sell carbon emission reductions under the UNFCCC’s Clean Development Mechanism (CDM), as a small-scale Program of Activities (SSC PoA), and the certified emissions reductions achieved by replacing LPG and fossil-based electricity generation with solar energy were sold to carbon brokers.