1. The LP Gas Rural Energy Challenge

2. Introduction
Access to affordable, reliable energy services is a prerequisite for sustainable development and for achieving the Millennium Development Goals
Two billion people worldwide lack access to electricity and a further two billion people depend on traditional fuels (wood, dung) for cooking and heating
Energy distribution to rural areas is often difficult or not in place

3. What is the LP Gas Rural Energy Challenge?
A Public – Private Partnership (UNDP/WLPGA)
Address lack of access to clean energy through the use of LP Gas
Improve living standards
Contribute to achieving the Millennium Development Goals
Create viable and commercially sustainable LP Gas markets in rural / suburban areas of developing countries
for domestic consumption
for industrial productive uses
Through identifying and addressing barriers to rural market development

4. The WLPGA - Members and Partners
150 member organisations headquartered in 50 countries worldwide
WLPGA unites international and local, private and state companies involved in one, several or all activities of the LP Gas industry.
Producers, marketers, shippers, equipment manufacturers, distributors, national and regional LP Gas associations and consulting firms are all represented.
WLPGA has many partners at a global level including:
The World Bank
The United Nations Development Programme
The United Nations Environment Programme
The International Energy Agency

5. LP Gas - The product
A readily available, clean-burning, modern energy carrier; Liquefied Petroleum Gas (LPG) is one option to support sustainable rural development
LPG has demonstrated health and environmental benefits compared to traditional fuels
LPG is critical for household and productive uses
However, availability of fuel, canister size, financing of first costs, refilling costs and transportation are constraints to LPG use by poor people

7. Why did we form a partnership?
Complementary competencies and resources
Global reach
Experience with partnerships
Access to the worlds major private sector companies
Comparative advantages as partners
e.g. LP Gas is a privately traded good that depends on public sector determined policies
Different entry points (profit vs. non-profit)  same goal (improved standard of living)

8. Expectations and Indicators
UNDP creates awareness and mobilizes financing to address clean fuels issues
Establishment of new, viable markets for LP Gas delivery and consumption
Rural people increase access to LP Gas and appliances
Development of markets that adhere to both good safety and good business practices
Lessons learned from public-private partnership are publicized and replicated

9. Programme plan
First key step for the partners was the selection of 6 countries for multi-stakeholder workshops:
Ghana; Honduras; Morocco; South Africa; Vietnam and China
Objectives of these workshops are:
Initiate dialogue between all stakeholders (public sector, private sector and consumers)
Agree priority actions to remove barriers to development
Identify projects to demonstrate feasibility of rural market development.

10. Multi-stakeholder workshops held in :
Ghana (August 2003)
Honduras (September 2003)
South Africa (April 2004)
Morocco (May 2004)
Vietnam (October 2004)
China (July 2005)
Similar Partnership Outcomes
Interestingly, despite cultural diversity, the 6 workshops highlighted similarities in terms of barriers
High taxation
Minimum purchase volumes often high
Alternative may be seen as free or very low cost (firewood)
Lack of consumer credit
Irregular supply of LP Gas in remote rural areas

11. Barriers Low density of LPG target population
Low purchasing power and even sometimes barter communities
Need for local credit facilities
Inadequate cylinder size
Lack of safety culture and poor enforcement of regulations
Strong competition of cheaper alternative energy sources (sometimes subsidized)
Inadequate energy State policy to stimulate LPG development (sometimes driving major players away)
Weakness of LPG distribution networks in remote rural area

12. Outcomes Workshop recommendations
To set up a transversal national LPG industry association
To initiate a transparent dialogue with the State, on structure, incentives, safety and law enforcement levels, to create convergence of interests
To develop affordable and appropriate appliances
To activate current local micro-credit facilities
To seek and tap bilateral/multi-lateral funding
To test recommendations in field project samples

13. Outcomes in South Africa
A First Pilot Project
Local LPG marketers are involved in a large scale pilot project, to demonstrate opportunity/feasibility to local government
Description of pilot project:
Provide 250,000 poor suburban households currently using kerosene with small LP Gas cylinders
Demonstrate feasibility to government and evaluate consumption/cost/investment
Develop an “approved cooking appliance” switching fund

14. Outcomes in South Africa
Current Status
$3 million invested by Private Sector on new (small) cylinders, logistics and business development
$60 million fund available from state utility for switching to LP Gas
Phase 1 target (end August 2006): 500,000 new LP Gas fueled households
Phase 2 target: 3 million households by 2009

16. Outcomes in Morocco
WS established need of specific credit modalities adapted to rural households
3 key industry players joined forces with microfinance institution
Extreme pressure on forests additional incentive to promote a switch from fire wood to LP Gas
Microfinance pilot to be launched in 2006
Focus on small scale commercial use of LP Gas:
Communal hamams (baths)
Communal baking ovens
Coffee/tea shop
Drying fruits etc.

17. Learning Process More accurate evaluation of environment variables:
Lack of precise information on regional differences, social classes, purchasing power, internal migration,…
Rural households consumption habits
Examples: Cylinder size, role of retail credit, specific rural applications, different perceptions of risk, widespread use of alternative energies (firewood, candles, batteries, dung,…)
Differences in time/urgency perception
Positive or Negative aspects: Lack of pricise information on regional differences?

18. Learning Process More accurate evaluation of the limits of players:
Willingness of Private Sector to risk capital
The budget/treasury limitation of the States
The capacity of States to implement large scale new projects
The existence of competitive energy lobbies
The lack of local consumer associations
Avoid « positive aspects »

19. Learning Process
More accurate evaluation of how to efficiently organize the selection and implementation of the projects
Necessity of exchanging info in a more transparent way (government  private)
Necessity to reinforce the local LP Gas industry association
Interest of exchanging info with other countries (“do not reinvent the wheel”)
Need to integrate all the actors of the (direct) supply chain in the talks and/or in the industry association
Interest of exchanging info with other markets (“do not reinvent the wheel”)

20. Future Challenges & Possible Solutions
Different objectives for UNDP, WLPGA, governments, industry
No local permanent operational staff ( “lack of time”)
Slow pace leading to reduced interest/involvement
from all participants
Initiative from UNDP and/or local industry associations to hire a local operational coordinator

21. Future Challenges & Possible Solutions
Rural Challenge objectives could appear incompatible with governments general policy
Local industry association to start an early and long term negotiations with government with backing of UNDP-WLPGA
Difficulty for UNDP/WLPGA to identify funding for large scale key pilot projects
Necessity for UNDP/WLPGA to look for alternative multilateral / bilateral, private / public funding
Rural Challenge objectives appear incompatible with governments general policy

22. Energy for Sustainable Development
1.6 billion live on less than $1/day
2.6 billion live on less than $2/day
2.0 billion people worldwide lack access to electricity
2.0 billion depend on traditional fuels (wood, dung) for cooking and heating
Access to affordable, adequate energy services is a prerequisite for sustainable development

23. MDG 8: Develop global partnership
Energy and the MDGs
Energy
MDG 8: Develop global partnership
MDG 2: Achieve
universal primary
education
MDG 1: Eradicate
extreme poverty
and hunger
MDG 4: Reduce
child mortality
MDG 5: Improve
maternal health
MDG 3: Promote
gender equality
and
empower women
MDG 7: Ensure
environmental
sustainability
MDG 6: Combat
HIV/AIDS, malaria
and other diseases

24. Rural Energy Challenges
Access to electricity and the services it provides (illumination, mechanical power, cooling) is extremely limited
Majority of heat energy needs come from traditional biomass (cooking, heating, agricultural processing) such as wood, agricultural residues, charcoal and dung
Family energy needs met largley by women and girls
Fuel and water collection limit girls participation in school, impact literacy, fertility and economic options
Low levels of public services (education, health, etc) impacted by lack of energy
Rural jobs and agricultural value added limited by lack of energy

25. Rural Energy Solutions
Access to electricity: especially decentralized systems – both renewable and conventional
Access to modern fuels: higher efficiency, more heat, less local pollution – LPG is one option
Government policies must target rural energisation and link to other sectors
Subsidies should target access not consumption; business models can really help
Focus should be on services not supply

26. Energy for Subsistence
Energy is key for meeting basic needs
Domestic uses (heating and cooking)
Household tasks (water pumping, grinding and milling)
Productive purposes (brick and ceramics firing, metal working, fish smoking)
Social services (health care, education)

27. WEA Findings on Rural Energy
Technology is necessary, but is not the only ingredient for increased energy equity
New institutional measures
Financing to cover initial capital costs of devices and equipment
Energy initiatives are most successful when combined integrated with other policies
Local populations must be involved in making decisions about energy systems

28. Women and Energy
Lack of access to energy affects women and girls disproportionately
Health: carrying tens of kilos of fuelwood over long distances; indoor air pollution
Literacy: girls are kept from school
Fertility: illiteracy increases family size
Safety: household fires, personal attack
Economic opportunities: heat using activities
Energy policy: gender neutral or gender blind?
(see Generating Opportunities, UNDP 2001)

29. Two Distinct Energy Issues
Electric energy
Key for providing services such as lighting, access to communication tools (radio, phones, internet)
Clean fuels (e.g. Liquefied Petroleum Gas)
Reduces drudgery (less time collecting fuelwood)
Also frees time for productive purposes
Health benefits (reduces indoor air pollution)
Environmental benefits (reduces deforestation)

30. WSSD Government Agreements
Support the transition to the cleaner use of liquid and gaseous fossil fuels, where considered more environmentally sound, socially acceptable and cost effective
Assist … through public-private partnerships, the access of the poor to reliable, affordable, economically viable, socially acceptable and environmentally sound energy services

31. The LPG Challenge
Use of traditional fuels results in: respiratory disease from indoor and local air pollution, drudgery, reduced productivity, land degradation, and constrained income-generation
A readily available, clean-burning modern energy carrier—Liquefied Petroleum Gas (LPG)—is one option to support sustainable rural development
LPG has demonstrated health and environmental benefits compared to traditional fuels
However, availability of fuel, financing of first costs, and refilling costs are constraints to LPG use

32. A Public-Private Partnership
Issue: Affordability
UNDP Strengths
expertise on financing mechanisms
capacity building to support governments in policy development
collaboration with local organisations to stimulate investment and employment generation
Issue: Availability
LPG Industry Strengths
expanding storage capability for imported LP Gas to capture shipping economies of scale
addressing recurring user costs through investment in the production of smaller, more affordable bottles

33. Expectations and Indicators
UNDP creates awareness and mobilizes financing to address clean fuels issues
Establishment of new, viable markets for LP Gas delivery and consumption
Rural people increase access to LP Gas and appliances
Development of markets that adhere to both good safety and good business practices
Lessons learned from public-private partnership are publicized and replicated

34. Next Steps Identify further pilot countries
Define clear and feasible projects based on workshop findings
Secure project financing from private and public sources
Hire a local coordinator in each selected country
Execute projects and scale up
Monitor and report on progress
Transfer knowledge
Coordinator in each country

35. Conclusions
LP Gas is a readily available, clean-burning, modern energy carrier
Safety and affordability for consumer is key
Whilst allowing for suitable distributor margin
Taking account of alternative traditional fuels
Progress is measured differently by the stakeholders
Private Sector vs Public Sector priorities can be different
Success will come from recognising a win-win-win solution is both possible and necessary

36. LP Gas Rural Energy Challenge