Incentivising the private sector to #EndEnergyPoverty in Vietnam

April 2017

Blog

In Vietnam, more than half of the population still rely on on solid fuels for cooking. Cooking on open fires and traditional stoves poses significant health risks such as pneumonia, strokes, heart disease and lung cancer. Furthermore, statistics show that more than 40,000 people in Vietnam die each year due to indoor air pollution. Many households are not yet fully aware of the negative effects of open fires and even less so of the benefits clean cookstoves can offer.

Through the ‘Market Acceleration of Advanced Clean Cookstoves in the Greater Mekong Sub-region, which is implemented under the global multi-donor Energising Development (EnDev) partnership, we aim to start a sustainable market for clean, smokeless cookstoves by triggering the sales of 120,000 devices. How? By using an innovative Results Based Financing (RBF) scheme that strengthens the involvement of supply chain actors in the nascent market of advanced clean cookstoves. This is done through a platform called ‘Stove Auction’.

How does the Stove Auction work in Vietnam?

  1. Registration: We identify potential cookstove producers and invite them to register for the Stove Auction.
  2. Qualification: Cookstove producers who demonstrate the ability to supply “gasifier” stoves (either natural draft or fan/forced-air), need to meet various criteria in terms of efficiency, fuel savings and safety. After the testing, stoves are classified as ‘Standard’ or ‘Premium’, which determines the level of RBF incentive.
  3. Bidding: Once qualified, cookstove producers are notified via email about upcoming auctions, the number of incentive options and the expiry date. The producer with the lowest bid receives all incentive options.
  4. Sales: The winning bidders start selling the auctioned stoves to end-users. They commit to producing the same types of stoves as in the testing phase and to submitting contact details of their customers within an agreed timeframe.
  5. Verification: For each RBF claim submitted by a producer, an auction verification is performed by the Vietnam Women's Union, an independent verification auditor. This includes both calling and visiting the end-users to verify the systems.
  6. Incentive payment: Once all information has been verified, SNV makes the payment to the cookstove producers.

From Sales Agents to Change Agents

"We are very excited to participate in this initiative. Once our cookstove sales have been verified by the Vietnam Women’s Union, we receive the money from the project and have the freedom to use it in ways we think are the most suitable for our company. Now we plan to reinvest all the money in marketing and in expanding our sales network”, said Mr. Nguyen Tuan Anh, Chief Executive Officer, Green Generation (GreenGen) Joint Stock Company.

Being the first cookstove producer in Vietnam to win the Stove Auction, GreenGen has become a real inspiration for other producers. According to Tuan Anh, the biggest challenge is changing people’s mindsets and cooking habits and convincing them to make the investment. Here’s an example of a dialogue between one of GreenGen’s sales agents and a hesitant potential customer.

Sales agent: This stove will help you save time and reduce your fuel costs.

Woman: Well, I have enough time and fuelwood doesn’t cost any money. I just collect it in the forest or the garden.

Sales agent: Do you know that smoke from open fires is very harmful for your family’s health? Our stoves generate much less smoke.

Woman: My family has been cooking on open fires for generations and none of us has ever died of smoke!

Sales agent: Ok, I understand you don't mind the smoke, but I guess you may have problems with mobility?

Woman: Pardon?

Sales agent: You always have to cook in the kitchen. But our stoves can be placed anywhere, both indoors and outdoors. Imagine on a hot summer day, how nice it would be to cook your meal in the front yard!

The woman decides to try one.

Watch the video below to learn more about the Result-based Finance scheme and the Stove Auction.

Expert

Bastiaan Teune

Sector Leader - Energy


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