MEDIUM-SIZED PROJECT PROPOSAL
REQUEST FOR GEF FUNDING
AGENCY’S PROJECT ID: PIMS 3166
GEFSEC PROJECT ID:
COUNTRY: Kenya
PROJECT TITLE: Market transformation for efficient
biomass stoves for institutions and small and mediumscale enterprises in Kenya
GEF AGENCY: UNDP
OTHER EXECUTING AGENCY(IES): RETAP
DURATION: 4 years
GEF FOCAL AREA: Climate Change
GEF OPERATIONAL PROGRAM:
OP5: Removal of Barriers to Energy Efficiency and
Energy Conservation
OP6: Removal of Barriers to Renewable Energy
GEF STRATEGIC PRIORITY:
CC4: Productive uses of Renewable Energy
CC1 : Market transformation for energy-efficient
products
ESTIMATED STARTING DATE: October 2005
ESTIMATED WP ENTRY DATE: August 2005
Pipeline Entry Date: September 2004
FINANCING PLAN (US$)
GEF PROJECT / COMPONENT
Project
PDF A (approved 15/9/2004)
SUB-TOTAL GEF
975 000
25 000
1 000 000
CO-FINANCING (details provided in Part II,
Section E – Budget)
GEF Agency (UNDP)
Government
193 085
Private sector
1 203 382
End-users
4 250 000
Sub-Total Co-financing:
5 646 467
Total Project Financing:
6 646 467
FINANCING FOR ASSOCIATED
ACTIVITIES:
GTZ / BMZ
1 300 000
Shell Foundation
1 000 000
CONTRIBUTION TO KEY INDICATORS OF THE GEF BUSINESS PLAN:
For a GEF expenditure of USD $ 975,000 an estimated 400,000 to 960,000 tonnes of CO2 will
be reduced over 15 years. This equates to a cost per tonne of CO2 of between US$ 2.5 and $1.
RECORD OF ENDORSEMENT ON BEHALF OF THE GOVERNMENT:
Prof. Ratemo W. Michieka, Director General
Date: 5th July 2005t
National Environment Management
Authorit(NEMA);
This proposal has been prepared in accordance with GEF policies and procedures and meets the standards
of the GEF Project Review Criteria for a Medium-sized Project.
Yannick Glemarec
Deputy Executive Coordinator
UNDP/GEF
Date: 5 October 2005
Ademola Salau
Project Contact Person
Tel. and email: 27-82-551-8590
Ademola.salau@undp.org
1
PART 1 – PROJECT CONCEPT
A – SUMMARY
This project seeks to remove market barriers to the adoption of sustainable biomass energy practices
and technologies by institutions (schools and hospitals) and small businesses (restaurants, hotels) in
rural and urban areas of Kenya by: (i) promoting highly efficient improved stoves, and (ii)
establishment of woodlots owned and managed by the institutions and private sector. The project
builds on the successful initiatives of local Non-governmental Organisations (NGOs) and private sector
players and scales up successful existing business models using well-proven commercial technologies
by removing barriers, which are currently limiting the growth of this market. The project builds on and
scales up a successfully implemented GEF Small Grants Programme (SGP) in which a revolving fund
credit scheme to disseminate energy-saving stoves to institutions in Kenya on a commercial basis was
established.
Project outcomes and outputs include:
 Outcome 1: Supportive policies and legal framework for sustainable biomass energy
businesses developed and strengthened: Output 1.1: Policy dialogue facilitated for increased
co-ordination between government sectors, Output 1.2: Coordination and strengthening of
parliamentary support for biomass energy legislation

Outcome 2: Supply chains for both products and financing are strengthened and expanded:
Output 2.1: Delivery infrastructure for seedling supply established with appropriate revenue
and financing structures (mini-nursery pilots for seedling sales), Output 2.2: Increased
liquidity in the institutional, small business (SME) and formal household stove markets, Output
2.3: Reduced product and service costs, Output 2.4: Business models improved and replicated

Outcome 3:Policy makers, financial sector, suppliers and end-users are convinced of benefits
and market opportunities for improved stoves: Output 3.1: Exploitation of applications to drive
market growth and create volume, Output 3.2: Information on costs and benefits of
technologies well known, Output 3.3: Users trained in biomass energy saving techniques and
forest management
The key project indicator is the reduction of CO2 equivalent emissions by an accumulated total of
between 400 000 and 960 000 tonnes by 2020. Domestic benefits include reduced deforestation and
forest degradation, reduced air pollution indoors (and outdoors), improved respiratory and general
health of cooks, reduced cooking times, less time spent gathering fuel, cleaner kitchens, protection for
community forests, reduced fuel costs, and income generation for stove producers and seedling
producers / farmers establishing woodlots.
End-term targets:
 100 000 tonnes of CO2 avoided by 2010, representing a switch of about 3500 institutions and
small businesses to efficient stoves (a penetration rate of 16% against a baseline of 5%).
 15 million tree seedlings planted within the project in managed fuelwood plantations with an
indicative minimum of 75% long-term tree survival rates
Mid-term targets:
 50 000 tonnes of CO2 avoided by 2008
 7.5 million tree seedlings planted within the project in managed fuelwood plantations
1 – COUNTRY OWNERSHIP
a) Country eligibility
Kenya ratified the United Nations Framework Convention on Climate Change (UNFCCC) on
30th August 1994.
b) Country drivenness
The Republic of Kenya has been at the forefront not only in the ratification of international
conventions/agreements relating to climate change in particular (ratifying the UNFCCC in
1994) and environment in general but also in the promotion and dissemination of renewable
energy technologies hosting the first UN conference on New and Renewable Sources of
Energy held in Nairobi in 1981. The recognition of and integration of renewables into national
energy development planning and management started in 1981, thanks to this conference.
Africa's most successful fuel-efficient stove programme has taken place in Kenya with the
Kenya Ceramic Jiko (KCJ) initiative starting in the mid-1980s. With nearly 1.5 million
domestic fuel-efficient stoves sold commercially without subsidies in Kenya1 since its
inception, the country is clearly a leader in seeking to achieve energy-efficiency in biomass
while using local market forces to both adapt and disseminate the new designs. In addition,
approximately 10-15% of education institutions have switched from the traditional, inefficient
open-fire cooking systems to fuel-efficient institutional biomass stoves within the last two
decades2.
The new White Paper on Energy Policy (2004) is so far the most comprehensive, decisive and
progressive policy statement with regard to the biomass sub-sector. In this policy statement,
‘the Government recognizes that biomass energy will continue to be the primary source of
energy for the rural population and urban poor for as long it takes to transform the rural
economy and the informal sector from subsistence economy to a high income economy
capable of paying for modern energy, education, health, food, and decent shelter.’ According
to the Government, ‘the main challenge in the biomass sub sector is primarily to reverse the
current wood fuel supply-demand imbalance, restore our eco-system, through provision of
affordable and efficient energy services for both the rural and urban populations.’ To address
this challenge, the government policy statement includes progressive biomass energy policy
interventions:
 Increasing the rate of adoption of efficient charcoal stove from 47% currently to
80% in urban areas by 2010 and to 100% by 2020. This would translate to a
reduction in demand for fuelwood for charcoal production by 3.36 million tonnes;
 increasing the rate of penetration of efficient fuelwood stoves from 4% currently to
30% by 2020 in both rural and urban areas. This would reduce the overall demand
for fuelwood by 15.4 million tonnes;
 rehabilitate and strengthen the 10 agroforestry centres country wide and increase
them to 20 in order to act as demonstration centres on issues of efficiency and
conservation. These agroforestry centres have big potential as centres of excellence
1
2
Karekezi, S., 2002, Renewables in Africa – meeting the energy needs of the poor, Energy policy, 30 (2002),
1059-1069, Elsevier Ltd
RETAP, 2000, Report on monitoring & evaluation of RETAP projects, Nairobi
3

in disseminating information on biomass demand and supply management.
Agroforestry centres should lead the implementation of strategies recommended on
biomass enhancement and conservation.
promote energy conservation measures at household level, institution and industry
level, namely, drying of wood before burning, soaking of long-cooking grains,
adoption of fireless cookers, and putting off fires after use etc.
Hitherto, similar strategies for achieving energy efficiency in the biomass sub-sector were
reflected and emphasized in several but uncoordinated policy documents such as the Kenya
National Environmental Action Plan (NEAP) of 1994. Kenya's First National Communication
to the UNFCCC underscored the Government’s intention to “encourage use of efficient
stoves” as one of the adaptation options and strategies for the biomass sub-sector. A 2002
study on Energy Demand and Supply in Kenya reports that the deficit between demand and
sustainable supply for biomass was about 57% in 2000 and is projected to increase to 63% by
20203. Of course earlier estimates (1980- Phil O’Keefe and others) had predicted 100% deficit
by 2000, but due to users adjusting consumption as local shortages appear, and as a result of
efforts in greater planting of farmed trees shortages have not been as acute as predicted.
Further evidence of government priority given to biomass energy is the current efforts to
improve charcoal policy. Although it should be emphasized that institutions and small
businesses generally use wood not charcoal a government stakeholder group involving the
Kenya Forestry Research Institute (KEFRI), the Ministry of Energy (MoE), the Ministry of
Environment and Natural Resources (MENR), the Kenya Forest Working Group (KFWG),
and the Centre for Environment and Renewable Energy Studies (CERES), together with
private consultant ESDA has been meeting to tackle this issue.
c) Endorsement
The project has been endorsed by the GEF Operational Focal Point in a letter dated 5th of July
2005. See annex E for a copy.
3
Ministry of Energy, 2002, Study on Kenya’s Energy demand, supply & policy strategy for households, smallscale industries, & service establishments, Final Report, Kamfor Ltd, Nairobi.
4
2 – PROGRAM AND POLICY CONFORMITY
a) Program designation and conformity
This project seeks to remove market barriers to the adoption of efficient biomass stoves and
practices by institutions (schools and hospitals) and small businesses (restaurants, hotels) in
rural and urban areas of Kenya by: (i) promoting highly efficient improved stoves, (ii)
establishment of woodlots owned and managed by the institutions, private farmers and the
private sector. The project builds on the successful initiatives of local NGOs, government and
private sector players and scales up successful existing business models using well-proven
commercial technologies by removing barriers, which are currently limiting the growth of this
market. The project thus aims to transform the market.
The project is therefore fully in line with GEF Operational Programme #5: Removal of
Barriers to Energy Efficiency and Energy Conservation. The establishment of institution /
business owned and managed sustainable wood-lots will mean the market-based
transformation of unsustainable non-renewable biomass harvesting to sustainable renewable
biomass energy at each location, and thus conforms fully with GEF Operational Programme
#6 “Removal of barriers to Renewable Energy”.
The project strongly supports strategic priorities CC1: Market Transformation for energyefficient products and CC4: Productive Uses of Renewable Energy.
b) Project design
Biomass fuel is Kenya’s most significant energy resource. Historical trends show little
evidence of large-scale fuel switching, which implies that Kenya, like most other countries of
sub-Saharan Africa, will remain largely reliant on solid biomass fuels for many years to come.
The proportion of biomass energy (firewood, charcoal, and crop wastes) to overall energy
consumption in Kenya has actually increased in the past two decades: from 74% in 1980 to
80% in 20004. This trend is indicative of slow economic and social development characterised
by rapid population growth (albeit slowing), growing proportion of people below the poverty
line, slow electrification, and limited use of liquid petroleum gas (LPG) by households.
Over 95% of about 20,000 institutions (schools, colleges, hospitals) in Kenya are relying on
fuelwood as the main source of energy for cooking and hot water purposes. While the high
additional costs of buying appliances that run on electricity and gas are prohibitive, the
unreliable supply of electricity and gas, and high running costs are the major deterrents.
With a seed grant from GEF/SGP in 1995 the NGO "Renewable Energy Technology
Assistance Programme" (RETAP) established a revolving fund credit scheme to disseminate
energy-saving stoves to needy institutions in Kenya on a commercial basis. From the initial 19
schools supported during the first cycle of the fund, the number of schools supported has
increased to over 160, through, in part, additional funding received from the Canadian
International Development Agency (CIDA), Kenya Gastby Charitable Trust, the Staples Trust
(UK) and the Ashden Trust (UK). RETAP’s projects have had significant local and national
socio-economic and ecological impacts. It is estimated that a typical school using open-fire
4
Ministry of Energy, 2002, Study on Kenya’s Energy demand, supply & policy strategy for households, smallscale industries, & service establishments, Final Report, Kamfor Ltd, Nairobi.
5
can use up to 30 tonnes of fuelwood/month (or 270 tonnes/yr), and therefore, under conditions
of unsustainable harvesting, would potentially clear approximately 3 hectares of forest cover
per year (Joseph, & Walubengo, 1988)5. The financial savings resulting from a measured
average 70% reduction in fuelwood consumption saves about Ksh650,000 - 80,000 per school
per year. Other benefits include complete eradication of indoor air pollution in kitchens, faster
cooking time, better hygienic standards and an improvement in the overall working and
learning environment – these benefits are in many cases even more convincing than financial
arguments for purchasers. Building on initial successes, and an impressive track record,
RETAP identified an urgent need to integrate sustainable fuelwood production initiatives into
the improved stove projects in schools in 2003. Since then, with the support of the Ashden
Trust, over 100 000 seedlings have been planted in a total of around 50 schools together with
their purchase of one or more high efficiency institutional stoves, and training given in
woodlot coppice management. Within 5 years most of these schools will be self-sufficient in
renewable biomass energy.
This project aims at a transformation of the market by overcoming barriers to a commercial
scale-up of what has been done on a small scale up to now, by building on and strengthening
business models which have contributed to these significant achievements.
2b i) Sector issues, root causes, threats, barriers, etc, affecting global environment.
Although complete combustion of biomass produces little more than CO2 and water,
traditional combustion in an open fire or simple stove results in substantial products of
incomplete combustion (PICs)7 – including methane, CO and non-methane organic
compounds. Thus inefficient combustion of biomass, even if harvested sustainably, causes a
net increase of greenhouse gases in the atmosphere. Moreover, a significant proportion of the
biomass burned in Kenya, and in other countries of sub-Saharan Africa, is not sustainably
replaced meaning an open cycle for biomass fuel. In Kenya the sustainable supply is currently
estimated at about 15 million tonnes per year, whereas demand is 35 million tonnes, meaning
an annual deficit of 20 million tonnes. Non-renewable biomass harvesting is most common in
institutions and businesses because, while households usually depend on twigs and branches
institutions and business users require regular supply of large logs from the felling of mature
trees.
An example can be given from the Central Province (Mount Kenya region) where 100% of
boarding secondary schools rely on fuelwood as their only source of energy for cooking and
water heating8. Being one of the most agriculturally productive and densely populated areas in
the country, the region has about 500 secondary schools with an average of 400 students per
school. A boarding secondary school with 500 students, and cooking three meals per day plus
tea or beverage and using open-fire system, will consume 160-200 tonnes of fuelwood per
year. For the Mt Kenya region it is estimated that a total of around 40 to 50 hectares of natural,
indigenous forest cover is lost in this area each year from school consumption. Environmental
damage is exacerbated by bulk harvesting of wood and use of indigenous and threatened
5
6
7
8
Clearly this is an upper limit since not all wood is harvested from unsustainable sources, and much
regeneration naturally occurs.
Kenyan Shillings: 1 USD = 76.3000 KES (May 2005)
Smith, K., et al, 1998, Greenhouse gases from small-scale combustion devices in developing countries: Phase
III: Charcoal Kilns in Thailand, Summary of Complete Report for USEPA (Nov 1, 1998)
RETAP, 1999, Monitoring and evaluation survey on the use of improved stoves and application of training
on energy conservation in institutions in Kenya, RETAP, Nairobi
6
species such as Camphor, Olea Africana, Ficus Thonnigi, and Vitex kenienis9. These
hardwood species are preferred for their high energy density.
An improved institutional stove reduces greenhouse gas emissions through:
 Improved efficiency meaning 70% less wood10 is required for the same cooking task,
 Reduced emissions of products of incomplete combustion which have higher global
warming potentials than CO2, and
 When introduced together with a sustainably managed woodlot the cycle becomes
closed and therefore 100% renewable.
Full details of the greenhouse gas reductions are given in Annex A ("IC Matrix and Baseline
Calculation").
Barriers to improved energy efficiency and renewable energy
The past initiatives, by government, NGOs and the private sector have shown the potential of
the market, and piloted successful business models using well-proven commercial
technologies. However a number of interrelated market barriers combine to restrict the selfsustaining growth of this market. During project preparation, and in consultation with a wide
range of stakeholders, the following barriers were identified:
Policy barriers
 Government institutions whose activities impinge on wood resources and use, ie. those
responsible for forestry, rural development, land use, employment, industry, environment,
health and energy are insufficiently co-ordinated. Macro-economic benefits from improved
biomass energy efficiency are therefore hidden and integrated energy efficiency policies
have not been developed. A key question is how the various actors/stakeholders can find a
concerted and integrated response, develop opportunities, and participate in the promotion
of improved/modern biomass energy and energy efficiency. This barrier is tackled through
activities under outcome 1 (Supportive policies and legal framework for sustainable
biomass energy businesses developed and strengthened).
 Based on the current knowledge of biomass energy potentials and benefits, the formulation
of strategies for future expansion and transformation of biomass energy can be an
important instrument to give long-term overall-direction and send the right signals to
market actors and consumers. Clear and medium-term policy strategies, commitments and
targets- taking into account the wider social and gender equity, reduction of Greenhouse
Gases (GHGs), poverty reduction, etc,- can help create a conducive environment for longterm investments and provide planning certainty for private investors, tree growers, and
consumers, etc. Enabling market-oriented policies for the development of local
(commercial and high-volume) markets for improved/modern biomass energy services
need to be developed, targeting productive end-uses for income generation and poverty
reduction. This barrier is tacked through Output 3.2 (Information on costs and benefits of
technologies well known), as well as through outputs under outcome 1 which focuses on
policy development
 Information related to the diverse issues on biomass energy markets exists in isolated
'pockets'. Thus policies on integrated biomass energy market development are
insufficiently informed. This is further exacerbated by high staff turnover in Ministries.
9
10
ICRAF, 1992, A selection of useful trees and shrubs for Kenya, ICRAF, Nairobi
Some of this wood will be sustainably harvested, and some not. In Annex A an 'unsustainabilty correction
factor', based on data on fuelwood deficits is used to correct for CO 2 absorption from biomass regrowth.
Details are given in Annex A.
7
There is a low level of knowledge about how to create sustainable biomass energy
markets. This barrier is tackled through activities under outcome 1 (Supportive policies
and legal framework for sustainable biomass energy businesses developed and
strengthened).
Finance barriers
 Due to the informal nature of many stove producers, tree nurseries, and many small
business consumers collateral in the form or land and buildings cannot be given meaning
that bank loans are impossible. Even the three larger institutional stove producers, RTE
(Rural Technology Enterprises), Botto Solar and PDS have real difficulties securing credit
in this sector. Institutional consumers such as schools are not allowed to take bank loans
and are thus very constrained in their purchase of equipment with higher upfront costs.
This barrier is tackled through activities under outcome 2 (Supply chains for both products
and financing are strengthened and expanded), in particular output 2.4 which aims to
scale up the successful business model which has been developed under UNDP-GEF Small
Grants Programme (this model is explained in more detail in section 2 b ii below).
Awareness raising activities under outcome 3 also target financial institutions.
 When producers do manage to secure working capital loans or loans for the purpose of
providing hire purchase facilities to the customer, the bank interest rates are very high. In
the case of schools, they are most able to repay according to school terms – this does not
match the rigid bank repayment schedules and consequently increases the cost of
borrowing significantly. This barrier is tacked through activities under Output 2.2
(Increased liquidity in stove markets) in which a short term credit line is established to
balance bank and school repayment schedules.
 Since the banking sector is not aware of risks, rewards and size/potential for institutional
and SME biomass stoves and tree seedling production, access to capital is limited for both
producers and customers. This barrier is tackled through activities aimed strengthening
financial supply chains (outcome 2) and at raising the awareness of the banking sector
(outcome 3).
 The low density of consumers and related high transaction costs for loans at the level of
smaller stove and tree seedling producers and consumers means that credit is not available
or is extremely costly. This barrier is tackled through Output 2.1 (Delivery infrastructure
for seedling supply established with appropriate revenue and financing structures), as well
as under Output 2.4 (Business models improved and replicated).
Business and management skills barriers
 Tree seedlings have high product and service delivery costs. Sales are thus costly and
delivered close to where nurseries are located. Increasing the supply volume and reducing
costs requires a more efficient decentralized delivery infrastructure. This barrier is tackled
through Output 2.1 (Delivery infrastructure for seedling supply established with
appropriate revenue and financing structures).
 Since many stove producers are small and informal they do not market their products,
cannot provide any form of finance to customers, and are technically oriented (as opposed
to business oriented). They manufacture stoves on demand, as only one of a large number
of other products, requiring cash upfront (which most potential buyers in institutions and
small business consumers are unable to provide). For small producers with very low
orders, quality levels are highly variable, and after-sales service / maintenance usually
non-existent. This barrier is tackled through Output 2.4 (Business models improved and
replicated), as well as under effort to increase large orders from customers to drive market
growth under Output 3.1
8


Appropriate incentives throughout the supply chain are missing thus increasing the cost of
the product – an example being that in some cases workers take as long as possible to
install stoves or plant seedlings. Market-oriented incentives for marketing, production,
delivery, installation, and maintenance are needed. This barrier is tackled through Output
2.4 (Business models improved and replicated)
Although the project focuses on institutional and SME use, it should be noted that rural
household users of improved biomass-burning stoves have generally not taken up
improved stoves in Kenya to date. With an incentive mechanism at the institution or smallbusiness level experience has shown that there is a potential to reach rural household
markets with a high quality mass-produced product. This delivery approach needs
significant development to increase volumes. This barrier is tackled through Output 2.4
(Business models improved and replicated), as well as under effort to increase large
orders from customers to drive market growth under Output 3.1
Information, knowledge and awareness barriers
 There appears to be a significant lack of awareness and knowledge of policy makers in
energy and related sectors (environment, industry, employment, rural development, health,
education). Potential local and global benefits from improved stoves and tree seedlings are
not well known amongst those responsible for the development of enabling policies. This
barrier is directly tackled through activities within outcome 3 (Policy makers, financial
sector, suppliers and end-users are convinced of benefits and market opportunities for
improved stoves), specifically Output 3.2 (information on costs and benefits well known).
Outcome 1 on enabling policy supports the application of increased awareness.
 Awareness of end-users of the availability, costs and benefits of improved stoves and
managed wood-lots is low and misinformation is rife. Thus end-users are unable to make
well-informed objective market decisions. This barrier is directly tackled through
activities within outcome 3 (Policy makers, financial sector, suppliers and end-users are
convinced of benefits and market opportunities for improved stoves). This is also
addressed under Output 3.3 (users trained in biomass energy saving techniques and forest
management).This output includes using trained users in forest management passing on
their knowledge to local communities.
 Suppliers need to know how to identify and capitalize on key market sectors / applications
(market sectors, eg. the tea production industry) for their products, which can be used to
drive market growth. This barrier is directly tackled through activities within output 3.1
(Exploitation of applications to drive market growth and create volume).
 Tree seedlings are in high demand in rural areas where wood resources have been
depleted, and are seen as a profitable long-term investment for farms, schools etc.
Sustainable integrated forest management however requires appropriate knowledge, skills
and supervision, with, for example, correct decisions made on the location of wood-lots to
as not to adversely effect neighbouring farms and water table levels. This is a very low risk
with appropriate management, training and monitoring. This barrier is tackled in Output
3.3 (users trained in biomass energy saving techniques and forest management).
Technology barriers
 The cost of production and delivery of efficient biomass stoves is high. Without sufficient
sales volumes stoves do not benefit from cost reductions and economies of scale. For
example, production of ten stoves at a time can reduce costs by as much as 20%. Stoves
can be made more cost effective through reductions in the cost of production (bulk
importation of some materials, mass production of components, improved cheaper
designs), in delivery (centralized vs. decentralized production / assembly), and installation
9

(less work required on-site for installation). Demand therefore remains low because costs
are relatively high. This barrier is addressed within Outcome 2 (Supply chains for both
products and financing are strengthened and expanded), in particular output 2.3 (Reduced
product and service costs).
The quality of improved stoves from small and informal stove producers is low. This
barrier is tackled through the business model being scaled up, particularly under Output
2.4 (Business models improved and replicated).
2b ii) Project logical framework, including a consistent strategy, and details of goals,
objectives, outputs, inputs/activities, measurable performance indicators, risks and
assumptions.
Overall strategy:
With support of the UNDP-GEF Small Grants Programme as well as a number of other
international funds since 1995, two local organisations RETAP (Renewable Energy
Technology Assistance Programme, a local NGO) and RTE (Rural Technology Enterprises, a
private sector company) have developed an innovative and effective business model. Some
elements of this approach has also been implemented by the other main suppliers of
institutional stoves, Botto Solar and PDS. In this MSP GEF project it is intended to overcome
market barriers to the scaling up of this successful approach through commercial mechanisms,
as well as replicate it in other areas of the country. The basic model is shown diagrammatically
in Figure 1 below:
In this model the private sector company acts as an 'integrator' by aggregating demand,
ensuring quality, marketing, providing hire purchase facilities, debt collection and end-user
training. The NGO acts as fund-raiser, provides training, maintains overall project quality,
conducts awareness raising, and together with the private sector company promotes the project
and products at events, conferences, exhibitions, etc. A typical business transaction for an
improved institutional stove is as follows:
1. The Integrator markets the stoves through exhibitions, teachers conferences etc. The
NGO provides support as necessary, as well as a public sector perspective as required.
2. The Integrator hires Agents to market / sell improved stoves. The Agents receive a
commission for successful sales, which are offered on a hire-purchase basis.
3. The Integrator aggregates demand from a number of agents working in the field, and
therefore is able to do modest material bulk buying and mass production of
components.
4. The Integrator hires Stove Producers (who are typically micro-enterprises producing
multiple metalwork products on demand, stoves being just one), according to the
number of orders
5. The Integrator provides on the job training, supplies materials, monitors quality
6. Stove Producers produce the stoves according to specifications
7. The Integrator arranges delivery of the stoves, installation and training in use
8. The Integrator, through the Agents, collects quarterly payments over a 2-year period
until the hire-purchase is fully paid.
As mentioned above, the NGO carries out the following key activities:
1. Fund raising
2. Banker: Micro-finance services
3. Documentation and report writing
10
4.
5.
6.
7.
Training small business and institutional managers
Quality control
Liason with the government and other NGOs
Networking with other players
While this has proven to be a successful model a number of market oriented and competitive
enhancements are needed. These elements will be ensured during the implementation of the
proposed GEF MSP project. This includes:
 ensuring that the NGO focuses on awareness raising and if supporting marketing provides
equal access to all market players offering good quality products (step 1), so as not to
distort competitive forces through donor funded marketing for one commercial player,
 ensuring that the private sector shares market risk and doesn't have this covered entirely by
grants from donors,
 ensuring equal access of competent private sector players to donor risk sharing,
 ensuring that interest rates adequately reflect risk and that this is not simply covered by the
donor in a sinking and unsustainable fund.
Local / International Financing
Grant
Seedling
provider
sells trees
training
Loan
NGO
Loan
‘banker’
fund-raiser
training
facilitation
quality
awareness
events
Private
sector
quality
aggregate
demand
marketing
hire-purchase
debt
collection
training
Agent
Agent
Stove
maker
Stove
maker
Stove
maker
…
Agent
School
Clinic
SMME
School
Clinic
SMME
School
Clinic
SMME
School
Clinic
SMME
…
…
…
…
…
Home
Home
Home
Home
Home
Home
Figure 1: Successful institutional stove business model
11
In addition to this basic transaction, RETAP and RTE have worked with the Tree
Biotechnology Project to supply trees (typically between 5000 and 10000 seedlings) –
currently provided free to schools which purchase stoves under a grant from the Ashden
Foundation (UK). Since schools are expected to derive economic benefits from the trees
within 5 years, the free supply of seedlings to schools is not considered best and sustainable
practice and will not be replicated within this proposed GEF project. The Tree Biotechnology
Project is a partnership biotechnology transfer project between the Forest Department of the
Ministry of Environment and Natural Resources in collaboration with the Kenya Forestry
Research Institute and Mondi Forests, South Africa. As a package (improved stove and tree
seedlings) this product is highly desirable. Through cost savings in stove production (see
Output 2.3: Reduced product and service costs), RTE believes it would be possible to supply
the stoves and trees for a similar price to the current stove only price, thus eventually
eliminating the need for grants for tree seedling supply.
When the Integrator supplies stoves to schools, they have noticed that there is an immediate
demand for household improves stoves, and a number of orders are generally placed through
the school for these stoves. It should however be noted that schools do not generally go out to
the community collecting orders. The community members some of whom are Board of
Governors, PTA (Parents Teachers Association) members and teaching staff get motivated by
the performances of the new stoves installed in their school kitchen. This particularly happens
during the first training of the cooks. As word goes round about the new stoves, the parents
and others from the neighbourhood go to the school to witness the development. It is at this
point that enquiries are made for domestic stoves. Those interested are requested to register
with the school bursar (finance office) who then contacts the stove producer directly for an
order. If an order is made, the school guarantees the local community members and each of the
numerous members guarantee each other such that in the event of default by any member all
are jointly and severally liable to repay the debt. The security remains the group or school
guarantee and the stove itself. Under rare circumstances where a member may default the
stove is recovered by the respective community members and the school. The school is
nevertheless happy to play a catalyst role and cooperate responsibility role to its staff and
community and therefore there is generally no need for any commissions. Group training after
installation at households is also done at the school compound. As part of the proposed
project, it is the intention to maximize the potential of this opportunity by encouraging this
process (schools already act as brokers, with some parents paying fees with products, and the
school supplementing income through modest farming activities). The potential of an
appropriate incentive mechanism with other types of institutions and in particular small
businesses will be explored under output 2.4.
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Project Goal
The overall project goal is a sustainable reduction of GHG emissions through a transformation
of the institutional and small, medium and micro enterprise high-efficiency stove markets. The
target is an accumulated total of between 400 000 and 960 000 tonnes CO2eq by 2020.
The project end-term targets are:
 100 000 tonnes of CO2 avoided by 2010, from the selling of 5000 improved stoves
(against a baseline of 1500 stoves during the project period, ie. the project will result in
the selling of an additional 3500 improved stoves during the 4-year project period).
This is a penetration rate of 16% against a baseline of 5%.
 15 million tree seedlings planted within the project.
This Medium Scale GEF project will be implemented within 3 main components focusing on
policy (Outcome 1: Supportive policies and legal framework for sustainable biomass energy
businesses developed and strengthened), business and management skills (Outcome 2: Supply
chains for both products and financing are strengthened and expanded), and awareness
(Outcome 3: Policy makers, financial sector, suppliers and end-users are convinced of benefits
and market opportunities for improved stoves). Details are given below
Outcome 1: Supportive policies and legal framework for sustainable biomass energy
businesses developed and strengthened
Overall biomass energy policies provide the framework within which business operates. Under
this outcome a policy dialogue will be facilitated for increased co-ordination between
government sectors, facilitated dialogue between business and government, and efforts to
coordinate and strengthen parliamentary support for market oriented biomass energy
legislation.
The end-term indicator for this outcome is "Integrated biomass energy policy bringing
together forestry, energy, environment, and industry sectors adopted" with the mid-term target
of "Integrated biomass energy policy draft bringing together forestry, energy, environment,
and industry sectors under discussion"
Output 1.1: Policy dialogue facilitated for increased co-ordination between government
sectors
Under this output support will be given to existing inter-ministerial co-ordination structures in
Government, under the leadership of the Ministry of Energy, to develop further integrated
biomass energy policies. The main challenge/barrier is to design and implement a coherent
policy framework that levels the playing field for biomass, internalises external costs, provides
specific and targeted incentives for market development of biomass energy as well as energy
efficiency, brings down technology costs through targeted R&D efforts, and encourages
energy service supply for productive end-uses for poverty reduction. Unlike other renewables
(e.g., solar PV, wind, small-hydro, etc), the role/contribution of biomass energy is the least
appreciated and raising the profile of biomass energy is important. For instance, the myth that
energy is synonymous with electricity has arguably led to costly preoccupation with provision
of electricity using solar PV, which cannot be used for cooking, in rural areas of Kenya in
particular and Africa in general (Kirubi, 2004, McDade, 2004, Karekezi, 2004). In addition,
13
biomass energy has to compete with kerosene and liquefied petroleum gas (LPG) – the
government subsidizes the latter which are imported fuels but criminalizes charcoal
businesses, thus potentially jeopardizing nearly 100,000 local jobs and livelihoods, while
missing energy efficiency opportunities and multiple benefits of efficient charcoal
making/trading in Kenya.
Based on the current knowledge of biomass energy potentials and benefits, the formulation of
strategies for future expansion and transformation of biomass energy, can be an important
instrument to give long-term overall-direction and send right signals to market actors and
consumers. Clear and medium-term policy strategies, commitments and targets- taking into
account the wider social and gender equity, reduction of GHGs, poverty reduction, etc,- can
help create a conducive environment for long-term investments and provide planning certainty
for private investors, tree growers, and consumers, etc. Key (guiding) questions on policies
include:
a) What are the steps/barriers that have to be addressed in order to level the playing field
for biomass energy vis-à-vis other renewables (PV, wind, etc) and fossils fuels
(kerosene and LPG)?
b) What is needed in order to formulate equitable but differentiated support policies and
to find specific instruments for different forms of renewables? (NB: in the past, in most
Government documents/statements, renewables have either been treated as one
homogenous type of energy resource and/or as synonymous to solar PV. Thus even
“framing” policy communication for biomass is a key barrier).
c) How can local (commercial, high-volume) markets for improved/modern biomass
energy services be developed, particularly in rural areas targeting productive end-uses
for income generation and poverty reduction?
d) How can the various actors/stakeholders find a concerted and integrated response,
opportunities, and participation in the promotion of improved/modern biomass energy
and energy efficiency?
Activities under this output will be carried out in co-ordination with other similar activities
currently underway, including those of the Ministry of energy, and a DFID charcoal project
being implemented by Energy for Sustainable Development – Africa (ESDA) which is also
interacting with the existing Inter-ministerial co-ordination meeting structure.
This output will aim at an end-term indicator of an "Integrated biomass energy policy bringing
together forestry, energy, environment, and industry sectors adopted"
Indicative activities:
1.1.1 Review the operational modalities of the existing inter-ministerial multi-stakeholder
taskforce responsible for energy and working within the scope of developing government
policy and multi-sectoral strategy for biomass energy, including mandate, scope of
responsibilities, participating entities, organizational structure and budget
This activity will build on work already carried out through a stakeholder group on charcoal
production and use involving the Kenya Forestry Research Institute (KEFRI), the Ministry of
Energy (MoE), the Ministry of Environment and Natural Resources (MENR), the Kenya
Forest Working Group (KFWG), and the Centre for Environment and Renewable Energy
Studies (CERES) under the DFID Charcoal project implemented by ESDA.
14
1.1.2 Competitive contracting of experts to carry out policy audits and lead legislative
development processes including drafting of legislation for discussion
1.1.3 Biomass energy audits of forestry, agriculture, environment, industry, health, education
and energy policies
1.1.4 Four meetings of interministerial policy group each year to discuss outcomes of biomass
energy studies / audits and analysis.
1.1.5 Drafting of legislation for discussion during taskforce meetings
1.1.6 Ongoing monitoring of and advocacy in legislative process to enact legislation
Output 1.2: Coordination and strengthening of parliamentary support for biomass energy
legislation
While there are a number of parliamentary members who support progressive legislation on
biomass energy, significant benefits could be achieved through better co-ordination. Based on
best practice from the UK (the Parliamentary Renewable and Sustainable Energy Group
PRASEG – see www.praseg.org.uk – the UK group has over 100 parliamentary members and
250 industry members), the Kenya Biomass Energy Parliamentary Group will promote
sustainable biomass energy issues in Parliament and the wider political community by
discussing policy barriers to the development of the market for sustainable biomass energy.
Kenya already works with parliamentary groupings such as the existing Parliamentary Group
on Infrastructure and within this output it is envisioned to strengthen knowledge and support
for biomass of this grouping, potentially supporting the formation of a sub-group here. Under
this output it is intended that the Parliamentary interest group of biomass supporters, will
communicate regularly, with a robust, sustainable governance structure, and knowledge
communication approaches including the distribution of 16 newsletter updates and 8
parliamentarian meetings.
The parliamentary meetings will be organized to coincide with relevant project meetings and
international events taking place in Kenya or the region, such as consultation meetings under
the EU Energy Initiative (EUEI), Renewable Energy and Energy Efficiency Partnership
(REEEP), Global Village Energy Partnership (GVEP), and the HEDON Household Energy
Network.
Indicative activities:
1.2.1 Bi-lateral meetings with sympathetic members of parliament to discuss operation
modalities of parliamentary biomass interest group and integration with existing structures
1.2.2 Planning meeting of parliamentary interest group, and agreement on plans and approach.
1.2.3 Regular meetings of interest group (approximately every 6 months during project)
15
These meetings will be organized to coincide with relevant project meetings and international
events taking place in Kenya or the region.
1.2.4 Discussions and communications with international policy initiatives including
PRASEG, EUEI, GVEP, REEEP, HEDON, etc.
1.2.5 Preparation of newsletter and circulation to members of parliamentary interest group
Outcome 2: Supply chains for both products and financing are strengthened and
expanded
Outcome 2 focuses on business and management skills as well as market oriented supply
chains, revenue structures, delivery infrastructure, and identification of appropriate incentives.
Under this outcome the project will tackle barriers to the market for the supply of tree
seedlings, including efficient delivery infrastructures, activities aimed at increasing liquidity in
the stove market, and reducing product and supply chain costs. Ultimately the outcome aims to
improve business models and replicate successful approaches to reach a significant larger
market.
End-term outcome level indicators are:
 Improved supply chain efficiency allows for a reduction in stove cost + delivery of
40% against start of project baseline
 Business model replicated in at least 2 other regions
 At least 10 private sector small nurseries established and running on 100% commercial
basis under the programme
Output 2.1: Delivery infrastructure for seedling supply established with appropriate revenue
and financing structures (mini-nursery pilots for seedling sales)
A major barrier to the establishment of sustainable and well-managed wood-lots is the high
costs of delivery of seedlings and training to remote rural communities. This means that
seedlings are costly and usually delivered only to the near location of the nurseries. Increasing
the supply volume and reducing costs requires a more efficient decentralized delivery
infrastructure. The company Tree Biotechnology Project (TBP) is a partnership between the
Forest Department of the Ministry of Environment and Natural Resources in collaboration
with the Kenya Forestry Research Institute and Mondi Forests, South Africa, and aims to
establish decentralized commercially operated nurseries throughout Kenya. A small modern
nursery costs about 10 000 USD (including all equipment and labour to produce annually
about 100 000 seedlings), not counting capacity building and other support services. In
partnership with TBP the project will provide revolving fund loans (using existing
mechanisms operated by RETAP) to facilitate the establishment of nurseries.
The intention under this output is to establish least 10 private sector small nurseries running on
100% commercial basis under the programme by the end of the project. The mid-term target is
for at least 8 private sector small nurseries to be established or under development to run on
commercial basis.
Indicative activities:
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2.1.1 Competitive contracting of sustainable wood-lot management experts to carry out
surveys, business development, and training.
2.1.2 Carry out baseline survey / situation analysis
2.1.3 Facilitate coordination and planning, between TBP, FD and KEFRI and other
stakeholders involved in forest extension
2.1.4 Identify potential entrepreneurs for regional nurseries in key regions
2.1.5 Training and capacity building for nursery establishment and management.
2.1.6 Support for entrepreneurs in business plan development and securing funding for nursery
establishment
2.1.7 Provide ongoing technical assistance for diverse needs of new nurseries
2.1.8 Monitor extent of adoption of practical knowledge and techniques, and achievement of
targets
Output 2.2: Increased liquidity in the institutional, SME and formal household stove
markets
RETAP/RTE have proven a successful model for selling institutional stoves to institutions.
The fund however is currently fully committed, and lack of resources is currently a limiting
factor for further growth. Ultimately competitive commercial loans from local sources are a
key to long-term sustainability, so activities under this output focus on enabling increased
access to these sources of financing. Costs of local financing will be reduced through a
number of mechanisms including the establishment of a short-term credit line of 200,000 USD
for larger stove producers that are providing hire-purchase facilities. This credit line is
intended to provide credit for a maximum of 6 months for the repayment of commercial bank
loans so as to match institutional repayment patterns better and at a lower cost. The credit
facility will be managed by RETAP who are registered in Kenya and experienced in the
provision of micro-finance to institutions and SMEs (see the letter from the Government NGO
co-ordination board given in Annex D), and are currently managing an end-user revolving
fund of USD 50,000 within the same sector. It should also be noted that that the Shell
Foundation is in the process of establishing a revolving fund of 2 million USD (50% from the
Shell Foundation, and the remaining amount from commercial sources), which may be
relevant to stove producers as well as end-users.
The project end-term target for this output is "Commercial loans to companies providing stove
production, hire-purchase and marketing services increased by a factor of 10 over start of
project baseline".
Indicative activities:
2.2.1 Establish criteria for creating a shortlist of qualified producers
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The shortlisted producers will have access to market-based support activities under Output 2.2,
2.3 and 2.4. This shortlist will be based on minimum quality and service standards (eg
company should be legally registered, stove quality and efficiency, undertaking marketing,
after sales service and maintenance, letters of reference etc.).
This activity will include the establishment of a small multistakeholder selection committee to
insure impartial shortlisting of competent companies. Attention will be given to the issue of
conflict of interest and ensuring a level playing field. The selection committee must include at
least one international participant, being either from the UNDP regional office or an
international project expert contracted under other project activities.
2.2.2 Creation and maintenance of shortlist of qualified producers
A call for applications will be launched, and selection of the shortlist made. The shortlist will
be required to include a minimum of 5 companies and will be open for ongoing applications
throughout the project.
2.2.3 Design of short term credit line based on needs analysis (this focuses addressing
mismatch of bank and institutional repayment schedules)
2.2.4 Competitive contracting of experts to support survey work, workshops, and financial
facilitation
2.2.5 Carry out survey of businesses supplying improved institutional stoves, including data on
past use of commercial loans, marketing activities and provision of hire-purchase facilities
2.2.6 Business workshops on financing and facilitated discussions with banking sector
2.2.7 Support larger stove producers and 'integrator' companies (which do marketing, and
operate hire-purchase schemes such as RTE, Botto Solar and PDS) to secure commercial loans
based on orders
2.2.8 Promotion, establishment and operation of credit line for producers
2.2.9 Mid-term review, survey, and adjustment
2.2.10 Sustainability planning to identify ongoing needs for support, and if necessary to secure
funding from other sources
2.2.11 End of project impact survey
Output 2.3: Reduced product and service cost
Highly efficient quality improved stoves currently have simple payback rates of between 1 and
3 years. To expand the market and improve overall sustainability of the business, cost
reductions for production, delivery and installation must be made. Institutional stoves
developed in other regions of Africa (for example those under ProBEC – www.probec.org),
may offer some innovative approaches to cost reduction (improved stoves cost approximately
18
5 times less) although their approach is substantially different and the stoves are much simpler
in design and lower in quality.
A detailed analysis of costs will form the basis of the work under this output. Using
international methods of High Performance Manufacturing Cost Strategies which includes
analysis of issues such as financial, competitive and managerial costing, improving production
effectiveness, reducing production cycle times, flow production, quality management tools,
reducing total material acquisition costs, reducing material content and real material cost,
replacing procurement transaction costs with annualized agreements, defining logistics cost
elements, identifying cost trade-offs in logistics, and issues of price and cost relationships in
logistics.
Companies to be involved in the activities of this output are those shortlisted under output 2.2
(activities 2.2.1 and 2.2.2)
Under this output the end term target is for the cost to consumers of stoves delivered through
the project to have reduced by 20% with no loss of efficiency or quality, with an additional
20% used to cover cost of seedlings (total cost reduction of stove + delivery reduced by 40%).
Indicative activities:
2.3.1 Contracting of expert for manufacturing and delivery cost reduction strategy work
2.3.2 Analysis of real product costs
2.3.3 Analysis of cost reductions based on bulk purchasing (material acquisition costs), mass
production of components, tooling, production location and cost of logistics, and design
improvements
2.3.4 Two regional workshops on institutional stove best practice together with GTZ ProBEC
Regional lessons will be learned through workshops aimed at sharing of information between
projects supporting institutional / SME stove producers. ProBEC is working with UNDP to
develop a GEF supported project on improved institutional and SME stoves in 6 countries of
the Southern African Development Community (SADC), and a major improved stove
programme in 9 countries in the region.
2.3.5 Cooperation with local and international universities for industrial engineering support
Output 2.4: Business models improved and replicated
The business model used will be further refined through an analytical evaluation, and ongoing
feedback to improve performance. The successes will be captured in a detailed case study
which will form the basis of work to replicate the business model in other regions of Kenya
and other sectors.
Issues which will be addressed by the PMU during this output, and which are of key
importance to enhance fair market competition and eliminate anticompetitive support, include:
19




ensuring the role of the donor supported PMU activities focus on awareness raising and
when supporting marketing provides equal access to all market players offering good
quality products, so as not to distort competitive forces through donor funded marketing
accessible only by one commercial player,
ensuring that the private sector shares market risk and doesn't have this covered entirely by
grants from donors,
ensuring equal access of competent private sector players to donor risk sharing,
ensuring that interest rates adequately reflect risk and that this is not simply covered by the
donor in a sinking and unsustainable fund.
Indicative activities:
2.4.1 Contracting on a competitive basis of a business development expert to support activities
under this output
2.4.2 Analysis and evaluation of business models used and areas for improvement
2.4.3 Institutional incentives for household market piloted
2.4.4 Preparation of case study reports for dissemination to business and policy communities
2.4.5 Support to larger stove producers and 'integrator' companies to improve delivery models
2.4.6 Formation of trade stove producers association to ensure quality and service standards,
and stove certification
This activity will focus on the grouping of companies (shortlist) developed under output 2.2
(activities 2.2.1 and 2.2.2).
Outcome 3: Policy makers, financial sector, suppliers and end-users are convinced of
benefits and market opportunities for improved stoves
There appears to be a significant lack of awareness and knowledge of policy makers in energy
and related sectors (environment, industry, employment, rural development, health,
education). Potential local and global benefits from improved stoves and tree seedlings are not
well known amongst those responsible for the development of enabling policies. Tackling this
barrier will form the basis of the activities under outcome 3. In addition awareness of endusers of the availability, costs and benefits of improves stoves and managed wood-lots is low
will be raised and efforts to empower suppliers to identify and capitalize on homogenous
market sectors (eg. the tea production industry) for their products, which can be used to drive
market growth.
Finally where tree seedlings are in high demand in rural areas where wood resources have
been depleted, and are seen as a profitable long-term investment for farms, schools etc.,
sustainable integrated forest management is required. Capacity building will focus on
appropriate knowledge, skills and supervision, with, for example, correct decisions made on
the location of wood-lots, species selection and management practice, to minimise any adverse
effects on neighbouring farms, water table levels, and biodiversity.
20
This outcome has an end-term target indicator based on survey results showing high level of
awareness of energy saving techniques and sustainable forest management (see output 3.2 for
details of proposed indicators for awareness raising and output 3.3. for details of proposed
indicator for improved user capacity building).
Output 3.1: Exploitation of applications to drive market growth and create volume
Under this output the project end-term target is for minimum orders under the project of 100
improved stoves from at least four market sectors, with a mid-term target to have a growing
market for improved stoves in the tea industry, World Food Programme schools feeding
schemes, bakeries, restaurants, and other homogeneous markets and minimum orders of 100
improved stoves from at least two sectors.
Indicative activities:
3.1.1 Contracting of expert supporting work on market development
3.1.2 Review of potential key markets sectors / data collection, including tea industry, WFP,
bakeries, restaurants, etc.
3.1.3 Meetings between private sector companies and potential customers to understand
opportunities and design needs
3.1.4 Wide dissemination of results and findings of reviews and meetings to stove producers.
3.1.5 Preparation of product brochures and marketing material for selected markets
3.1.6 Exhibiting at appropriate meetings / conferences / associations and demonstrations for
stove producers on a shared cost / competitive basis
Output 3.2: Information on costs and benefits of technologies well known
Output 3.2 will support awareness raising and provision of information to enable market
decisions by end users (institutions and SMEs), households, all stakeholders throughout the
supply chain, those in the financing chain, as well as policy makers.
Under output 3.2 the following end-term indicators will be used:
 All relevant government policy papers under development through the project period from
year 2 refer to results of the cost benefit case studies
 Suppliers use reports in marketing of relevant products
 Survey shows average level of awareness tripled amongst supply, finance and policy
stakeholders (using “cost benefit awareness score”).
The system for scoring, including weighting of factors, will be determined during project
execution (activity 3.2.2). Scores will be assigned based on results of the start of project
survey, and compared to that in the end-term survey. Factors that are likely to be used include:
 Copies of cost benefit analysis received (yes=1, no=0)
 Stakeholder has passed on the information they have used (yes=1, no=0)
21


Stakeholder can cite cases where they personally have used the data (yes=2, no=0)
Stakeholder can cite cases where they have implemented lessons in their day to day
activities (yes=3, no=0)
Thus, per surveyed stakeholder, if the first three factors have been met but not the fourth then
the score for that stakeholder would be 4 (1 + 1 + 2).
Indicative activities:
3.2.1 Contracting on competitive basis of survey and social marketing expert, technical expert
for case studies, emissions monitoring expert for analysis of improved stove and baseline
emissions, and training / capacity building expert
3.2.2 Prepare awareness survey and scoring system
3.2.3 Survey awareness levels at start of project
3.2.4 Design overall marketing strategy including establishing information paths (email
addresses, web page, telephone numbers), and ‘corporate’ brand for the programme
3.2.5 Preparation of analytical case studies of costs and benefits of improved institutional
stoves and wood-lots
3.2.6 Preparation of awareness materials targeted at various audiences: end-users, suppliers,
financial sector, and policy makers
3.2.7 Implementation of awareness raising campaign
3.2.8 Survey awareness levels at end of project
Output 3.3: Users trained in biomass energy saving techniques and forest management
Users of systems will be trained in energy saving techniques (stove users) and forest
management (wood-lot managers). The training of wood-lot managers will include training in
sensitising of the local community (through school children, community meetings, and field
days) in sustainable forest management.
End-term targets: Average “biomass energy saving awareness score” tripled in project area.
Mid-term targets: Average “biomass energy saving awareness score” doubled in project area
As for Output 3.2 the system for scoring, including weighting of factors, is to be determined
during execution. Factors which are likely to be used include:
 Training material about energy saving and forest management received (yes=1, no=0)
 User has received direct training (yes=1, no=0)
 User has received indirect training (yes=1, no=0)
 Evidence of application of lessons learned from training (yes=2, no=0)
 User has implemented local awareness raising plan for general population (yes=2,
no=0)
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Indicative activities:
3.3.1 Competitive contracting of training expert
3.3.2 Prepare awareness survey and scoring system
3.3.3 Survey awareness levels of sample of potential end-users at start of project (or before
supply of product)
3.3.4 Review existing training material on efficient use of stoves and forest management, and
make necessary improvements
3.3.5 Prepare brochures for end-user awareness, carry out field trials, and make improvements
3.3.6 Prepare course module on preparing and implementing local awareness raising for user
training in wood-lot management
3.3.7 Conduct training together with supply of stoves and trees, including capacity building for
users trained in wood-lot management to carry out local awareness raising with government
extension officers and managers of agroforestry centres.
3.3.8 Survey awareness levels at mid-term and end of project
Project risks
Table 1: Overview of project risks
Risks
1. Lack of ongoing, long
term political and
government support for
improved energy efficiency
in the biomass sector
Type
Exogenous
Likelihood
Low
2. Poor cooperation between
government stakeholders
Endogenous
Medium
3. Inadequate project
implementation
Endogenous
Medium
4. Use of inappropriate
technologies
Endogenous
Low
Remedial actions
Government commitments in this area has
been confirmed on the highest level and they
have been committed over some time to
biomass energy although financial resources
have been limited. Ongoing consultations and
ownership of project development and
implementation, with key government
stakeholders will take place throughout the
project.
Highly participatory project development and
implementation strategy, with specific
incentives to key institutions
Careful selection of project team members
and the M&E to be put in place is required.
The project design aims to minimise
institutional bureaucracy through careful
apportionment of activities between
government and private sector.
Utilizing technologies with a satisfactory
track record and use of experienced
contractors will be required. Local
stakeholders – private and NGO – have over
10 years experience in this market sector so
technologies are well proven. The project
focus on market forces and no use of GEF
technology subsidies aims to ensure that
rational choices are made for investments.
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2b iii) Global environmental benefits of project.
Results of the Incremental Cost Analysis given in Annex A are summarized below:
Baseline
In the presence of barriers to a functioning market in biomass energy efficiency in Institutions
and Small and Medium Sized Enterprises, significant investment in improved stoves would
not take place. Overall CO2 emissions for the country will continue to grow, and for the
sectors identified above will grow at a modest rate as a result of a growth in the proportion of
unsustainable supply meaning a reducing absorption (biomass deficit of 20 million tonnes per
year for 2000, increasing to 34 million tonnes in 2020). The growth in CO2 emissions is an
estimated annual 50 000 tonnes by 2020 over 2006 levels.
Alternative
The proposed GEF activities tackle the identified barriers to the widespread and market-based
growth of the Institutional and Small Business biomass energy sectors. These activities
contribute to the following project outcomes:

Outcome 1: Supportive policies and legal framework for sustainable biomass energy
businesses developed and strengthened

Outcome 2: Supply chains for both products and financing are strengthened and
expanded

Outcome 3: Policy makers, financial sector, suppliers and end-users are convinced of
benefits and market opportunities for improved stoves
The project impact on the baseline under the alternative has been estimated and details of
calculations are given in Annex A. Market barriers are substantially reduced, resulting in
increased uptake of improved stoves in institutions and small businesses and reduced GHG
emissions from the stoves. From year 5, sustainably managed wood-lots mean zero net
emissions.
Benefits
Significant GHG emission reductions are attained. CO2 equivalent emission reductions over a
15 year period as a result of this project are projected to be between 400 000 and 960 000
tonnes.
Domestic benefits include reduced deforestation and forest degradation, reduced air pollution
indoors (and outdoors), improved respiratory and general health of cooks, reduced cooking
times, less time spent gathering fuel, cleaner kitchens, protection for community forests,
reduced fuel costs, income generation for stove producers.
2b iv) Project cost to be financed by the GEF.
The total project cost to be financed by the GEF is 975 000 USD.
24
c) Sustainability (including financial sustainability)
Overall sustainability; Participation of multiple stakeholders including beneficiaries will be
ensured at all levels to provide buy-in (support for the program). Training provided at all
stakeholder levels will also ensure that after the end of the project, the project objectives and
benefits are owned and internalized by stakeholders and that stakeholders have the capacity to
sustain the project objectives. Awareness campaigns will be conducted on both the supply and
demand side to catalyse demand so as to achieve significant and long term market
transformation process, which will sustain demand and supply dynamics of the energy
efficiency products and processes in the post-project period. Diversifying the product portfolio
for producers of efficient biomass energy technologies will help improve their profit margins
and will trigger an influx of efficient biomass energy technologies, thereby making available a
critical mass of technologies on the market, which will then result in technology cost
reductions.
Financial sustainability; Demonstrating commercial benefits and developing bankable
business plans will help negative perceptions of financing institutions towards energy
efficiency investment loans and improve local financing opportunities.
d) Replicability
Various scenarios including the IPCC scenario indicate that biomass fuel usage in the
Southern and Eastern African region will continue to increase. In addition, the macro
economic environment is such that SME growth and public institutions will continue to grow
and play an important role in economic development. To maximize resources, the project will
start of with specific SME and public institution sectors, in Kenya. The benefits realized in
these sectors will trigger demand in other sectors and geographical areas that are not part of
the project as well as in new SMEs and public institutions within the selected SMEs and
geographical areas. This will provide continual long term replication opportunities.
Also important are the existing links that project stakeholders (RETAP, RTE and other
Kenyan organisations) have within the SADC, IGAD and EAC regions. RETAP is a member
of the East Africa Energy Technology Development Network, and the HEDON Household
Energy Network, which offer opportunities for information dissemination and replication.
e) Stakeholder Involvement
2e i)
Describe briefly how stakeholders have been involved in project development.
Numerous stakeholders have been involved in project development through individual
meetings as well as in multistakeholder planning meetings. The PDF-A process was supported
through a Technical Advisory Committee comprised of members from civil society, research,
private sector, and government, and all members were encouraged to make inputs to project
development. Individual meetings and discussions were held with the following stakeholders:
 Ministry of Energy - policy & institutional support
 Ministry of Environment, Natural Resources & Wildlife – policy & institutional
support policy
 Ministry of Education - policy & institutional support
 Central Bureau of Statistics – data collection/analysis/reporting
 Meteorological Department – climate change issues
 African Centre for Technology Studies (ACTS) – policy research & capacity building
25







Kenya Bureau of Standards – development/enforcement of standards & codes of
practice
Kenyatta University, Appropriate Technology Centre – Stove testing
UNDP/GEF Small Grants Programme - institutional support
UNDP/GEF country office - institutional support
National Environmental Management Authority (NEMA) - policy & institutional
support
Tree Biotechnology Project – for biomass production & supply, capacity building
Other private companies & entrepreneurs
2e ii) Describe briefly the roles and responsibilities of relevant stakeholders in project
implementation.
Various stakeholders will be involved throughout the project. Outcome 1 requires the
involvement of government and business stakeholders, while outcome 2 focuses more on work
in partnership with the business sector. Outcome 3 involves civil society, communities and the
business sector.
The project will be implemented using an NGO execution modality from UNDP in Nairobi,
and will be implemented according to standard procedures. Detailed implementation
arrangements will be defined during project inception.
A Project Management Unit will be established within the NGO RETAP, and will be
responsible for overall project co-ordination. Expert and political guidance will come from a
Technical Advisory Group made up of members from civil society, research, private sector,
and government, UNDP and other relevant stakeholders. This group, under the joint
chairmanship of the UNDP and the Ministry of Energy, will give advice to the Project
Manager, thus supporting the decision-making process. Ultimate responsibility for day-to-day
decisions lies with the PMU, which will equally carry the responsibility for delivery of project
outputs.
Indicative activities
A) Participation in seminars /
business meetings, access to
government lobbying channels,
leadership in producer groups
B) Access to market data, project
information, project planning
materials
C) Advertising / marketing support
D) Assistance to reduce product
costs
Procedure
Open to all organisations active in the promotion of
sustainable biomass energy in Kenya
Open to all. Project resources will be placed in the public
domain with the exception of bidding documents and similar
confidential communication between private companies and
the project management unit.
In these activities the project PMU will deal directly with the
private sector on core issues to do with competitiveness
and thus special efforts will be required by the Project
26
E) Access to credit line and funding
facilitation
Manager to ensure fair access and a level playing field for
the private sector. This will be done on the basis of a
shortlist of qualified producers to be developed under output
2.2. This shortlist will be based on minimum quality and
service standards (eg company should be legally
registered, stove quality and efficiency, undertaking
marketing, after sales service and maintenance, letters of
reference etc.) and will be required to include a minimum of
5 companies and be open for ongoing applications
throughout the project.
Qualifying companies on the shortlist will then have access
to participate in C, D and E under relevant competitive
criteria such as cost sharing for C and D, and credit
decisions based on investment cash-flow / financial criteria
for E.
F) Provision of consultant / expert
services to project
The PMU has an obligation to prove fairness over the entire
scheme
Consultant services will be contracted on a competitive
tender basis as per usual UNDP procedures. For large
contracts the selection committee will including the regional
UNDP office based in Pretoria, and international expert)
This structure is shown diagrammatically in Figure 2 below.
Technical Advisory Group (TAG)
Government, UNDP, civil society, research, private sector
Tree
Biotechnology
Project
Seedling
producers
Project Management Unit
based at RETAP
Ensures project management and delivery of all outputs
through direct actions and subcontracting to national and
international experts
Stove producers
Local and
international
experts
Users
Institutions and SMEs
Figure 2: Basic project implementation structure
27
Overall project management will be carried out by RETAP. The organization has other
projects and financial and administrative support staff. The arrangement of the project
management unit is shown diagrammatically below:
Board
Executive Chair
Administrative assistant
GEF Project
Management Unit
Project Manager
GEF MSP
Financial and Administrative
Manager
Technical assistant
Drivers
Accounts
assistant
Other RETAP
projects
3 credit
officers
Other stakeholders will be involved in the project as follows:
Stakeholder
Government
(Energy, Forestry,
Environment, Health,
Education, Industry,
Agriculture etc.)
Role
The Ministry of Energy and other key stakeholders will be represented on the project
Technical Steering Committee
Ministry of Energy will lead output 1.1 and be heavily involved in activities under output
1.2. Through information dissemination activities the government will be fully informed of
all other project activities.
The Ministry will be co-chair of the Technical Advisory Group together with the UNDP.
The UNDP country office will provide logistical support to the project and will monitor
project progress, ensuring that targets are met and the project is soundly managed.
UNDP
The UNDP will also be co-chair of the Technical Advisory Group together with the
Kenyan Ministry of Energy.
Consultants
Consultants will be subcontracted under the project to carry out analyses and reviews for
most of the project outputs
NGOs
NGOs will be represented in the project Technical Advisory Group. Wherever possible
the Project Manager will look at opportunities of giving NGOs a voice in policy and
business. The project manager RETAP is an NGO
Entrepreneurs
Stove makers
Traders
Entrepreneurs will be involved throughout the project and in particular in work on scaleup and delivery under outcome 2. Under outcome 2 a shortlist of a minimum of five
qualified producers will be developed so as to ensure that the project supports a broad
28
base of stove producers in a market-oriented way.
Tree Biotechnology
KEFRI
Tree Biotechnology will take the lead in ensuring the delivery of output 2.1, and in training
and awareness raising under outcome 3.
Local banks
The local financial sector will be the target of some awareness raising activities, and will
be invited to give input in project consultations under Output 1.1 and output 2.2.
Ultimately it is hoped that local financial sector will become investors in the sector on
competitive and commercial basis
Micro-credit
providers
f) Monitoring and Evaluation
The project will be monitored and evaluated in line with UNDP rules and procedures, and the
GEF guidelines for monitoring and evaluation. The report formats to be used are those given
in the UNDP/GEF Information Kit on Monitoring and Evaluation. The project indicators along
with mid-term and final targets, as given in the Project Planning Matrix in Annex B are the
benchmark against which Monitoring and Evaluation will take place and a number of specific
Monitoring and Evaluation activities are also explicitly identified.
The planned Monitoring and Evaluation activities include preparation of an Annual Project
Work Plan which will describe in detail the provision of inputs, activities, and expected results
for the project in a given year or for the life of the project, indicating schedules and the
persons or institutions responsible for providing the inputs and producing results. The work
plan will be updated and revised each year by the Project Manager in the Annual Project
Report (APR).
A yearly tripartite review (TPR), which, although not mandatory is deemed to be useful for the
implementation of this project, is the highest policy-level meeting of the parties directly
involved in the implementation of a project and will include the Ministry of Energy, the Kenya
Office of the UNDP, and the project management unit (PMU).
The reviews of financial status, procurement data, impact achievement and progress in
implementation will be reported in an annual Project Implementation Review (PIR).
Independent consultants will carry out mid-term and final evaluations to assess effectiveness,
efficiency and timeliness of project implementation and highlighting issues requiring decisions
and actions. An annual project audit will be provided by the Project Management Unit
containing certified annual financial statements relating to the status of UNDP/GEF funds,
including an independent annual audit of these financial statements, according to the
procedures of the UNDP. The audit will be conducted by the legally recognised commercial
auditor. During the course of the project there are three audits (in the second quarter of years
2, 3 and 4), and a fourth to be conducted after the close of the project.
All outputs are designed in such as way as to support overall M&E, with activities included in
each output to develop mechanisms for determining baseline and output level impacts. This
includes emission monitoring from traditional stoves and the improved stoves under output
3.2, which will provide much needed data for the project and internationally.
29
3 – FINANCING
a) Financing Plan
3a i)
Project cost
Outcome / Output
Outcome 1: Supportive policies and legal framework for sustainable
biomass energy businesses developed and strengthened
Output 1.1: Policy dialogue facilitated for increased co-ordination
between government sectors
Output 1.2: Coordination and strengthening of parliamentary support
for biomass energy legislation
Subtotal Outcome 1:
Outcome 2: Supply chains for both products and financing are
strengthened and expanded
Output 2.1: Delivery infrastructure for seedling supply established with
appropriate revenue and financing structures (mini-nursery pilots for
seedling sales)
Output 2.2: Increased liquidity in the institutional, SME and formal
household stove markets
Output 2.3: Reduced product and service costs
GEF
Output 2.4: Business models improved and replicated
100,000
Subtotal Outcome 2:
Outcome 3:Policy makers, financial sector, suppliers and end-users are
convinced of benefits and market opportunities for improved stoves
Output 3.1: Exploitation of niche applications to drive market growth
and create volume
Output 3.2: Information on costs and benefits of technologies well
known, supporting market decisions
Output 3.3: Users trained in biomass energy saving techniques and
forest management
Subtotal Outcome 3:
Investments in improved stoves by institutions and SMEs
600,000
PDF-A
Total
70,000
Contributions (in USD) - 1USD = 76 Ksh
MOE
TBP
RTE
End users
Total
65,789
135,789
50,000
50,000
120,000
65,789
-
100,000
26,316
159,739
-
-
286,055
300,000
300,000
100,000
960,527
1,060,527
100,000
26,316
159,739
960,527
-
75,000
1,746,582
75,000
100,000
65,789
80,000
35,191
83,116
255,000
100,980
83,116
165,789
198,307
-
4,250,000
25,000
1,000,000
185,789
439,096
4,250,000
25,000
193,085
242,855
960,527
4,250,000
30
6,646,467
3a ii) Financing plan, including commitments by co-financiers
Name of co-financier (Source)
Government
Private sector - RTE
Private sector – Tree Biotechnology Project
End users
Total
Type
In kind
Cash
In kind
Cash
Cash
Amount
(US$)
193,085
789,474
171,053
242,855
4,250,000
Status
letter attached
letter attached
letter attached
to be committed
during project
execution
5,646,467
In addition to co-financing, associated financing from the Shell Foundation (1,000,000 USD)
for a revolving rural energy fund and GTZ/BMZ (approx. 1,300,000 USD) for a new Rural
Stove programme has been identified.
b) Cost-effectiveness
For a GEF expenditure of US$ 975 000 an estimated 400 000 to 960 000 tonnes of CO2 will be
reduced over 15 years. This equates to a cost per tonne of CO2 of between US$ 2.5 and $1.
Details of how CO2 offsets were determined are given in Annex A.
31
4 – INSTITUTIONAL COORDINATION AND SUPPORT
a) Core commitments and linkages
Describe how the proposed project is located within the IA’s:
3 a i. Country/regional/global/sector programs.
The proposed Project is fully consistent with the United Nations Development Assistance
Framework (UNDAF) in Kenya (area of cooperation 4: Contribute to sustainable livelihoods
and environment), and supports the UNDP aims for expanded opportunities and sustained
development (developing appropriate policies, technical and governance tools to improve
sustainable management of energy, environment and natural resources particularly for the poor
and for jobs). The 2004-2008 Country Programme Action Plan's (CPAP)sustainable
development component aims at enhancing the contribution of natural resource and
environmental management to poverty alleviation and sustainable growth by integrating
environmental issues into national development planning, promoting effective community
based management of natural resources and expanding opportunities for sustainable
production and income diversification. The CPAP specifically aims at the facilitation and
support for the development of sustainable energy strategies, action plans and pilots that
support broader development goals and objectives. In addition the programme aims at the
development of appropriate standards and regulations that support sustainable technologies
and their markets, including the removal of technological, financial, and information barriers
to increased energy efficiency and conservation during production and use. The project is also
fully consistent with the UNDP's aims under Millennium Development Goal 7 "Ensuring
environmental sustainability" with target areas of strengthened national planning processes,
land management and forest cover, biodiversity, energy access and use, and antipollution
measures. Under global conventions the UNDP within frameworks such as the Global Village
Energy Partnership aim to mitigate carbon dioxide emissions in Kenya and promote
sustainable management of biodiversity. The expected output of this programme is the
development of sustainable energy strategies, action plans and pilots.
The UNDP Country Office therefore welcomes the improvement of biomass energy efficiency
in institutions and small businesses and the increased use of renewable biomass through the
creation of sustainably managed wood-lots providing renewable biomass. UNDP has ongoing
initiatives with clear linkages to this project including charcoal policy dialogues with the
company Energy for Sustainable Development – Africa (ESDA) under a DFID funded project,
charcoaling activities for invasive species (Gallmann Memorial Foundation using retort kilns
etc.), ITDG activities under their sustainable livelihoods programmes, trainings under GEF
energy efficiency projects.
3 a ii. GEF activities with potential influence on the proposed project (design and
implementation).
Projects supported by GEF on small scale biomass energy are not common. However a
number of GEF projects with relevant energy components exist, including:
 The UNEP/UNDP biodiversity project "Management of Indigenous Vegetation for the
Rehabilitation of Degraded Rangelands in the Arid Zone of Africa" (GEF project ID
504), due to finish in 2006, takes place in place in Mali, Botswana and Kenya, and
includes an aim to demonstrate appropriate energy saving technologies to conserve
woody vegetation from being overexploited for fuel, the establishment of woodlots of
32







quick growing bushy woodland for providing fuel wood, and energy saving devices
will be developed and adapted to local conditions. The current institutional and small
business stove project will build on the successes of this regional project.
The project "Reducing Biodiversity Loss at Cross Border Sites in East Africa" (GEF
project ID 541) looked at "balancing resources demand and supply through the
development of resource management plans, alternative economic activities, sources
and management regimes" as its secondary objective towards reducing the rate of
biodiversity loss at four crossboarder sites of global biodiversity significance in East
Africa." The primary objective looked at creating an environment in which local
communities and district development agencies can work in partnership with national
forestry, wildlife and environmental agencies on both sides of the boarders (KenyaTanzani, Kenya, Uganda) to promote the sustainable use of biodiversity resources.
Under economic activities, the project activities involved mainly community training
on energy saving technologies, setting up revolving fund to support communities
acquire energy saving technologies and surveys on woodfuel use in the target
communities.
The full-scale project in Kenya "Removal of Barriers to Energy Conservation and
Energy Efficiency in Small and Medium Scale Enterprises" (GEF-KAM) implemented
since July 1998 included a number of relevant energy audits included energy audits in
6 tea factories with energy savings of up to 20 % deemed possible.
2001-2004: GEF/SGP (COMPACT Initiative) funded project (US$45,000) towards
installation of energy efficient stoves (demand-management) and growing of woodlots
(supply-management) in 20 schools within Mt. Kenya Region
UNEP is currently developing the "Greening the Tea Industry in East Africa" (PDF-B)
project, up for council endorsement in June 2005, to be implemented in Burundi,
Kenya, Malawi, Mozambique, Rwanda, Tanzania, Uganda, Zambia, Zimbabwe
focuses on hydro power in the tea industry to offset diesel use.
The UNEP "Mt Kenya East Pilot Project for Natural Resources Management
(MKEPP)" under GEF OP Integrated Ecosystem Management (OP12) with an
estimated March 2005 start, includes components on "Ecosystem management"
(including charcoal and biomass use) and "Rural Livelihoods" with activities on the
adoption of energy efficient technologies.
The UNDP MSP "Developing Incentives for Community Participation in Forest
Conservation Through the Use of Commercial Insects in Kenya" (GEF Project ID
2237) approved in August 2004 under Forest Ecosystems (OP3) includes efforts on
tree nursery support, training for Forest Associations (FA), study tours, cross visits,
site-training workshops, FAs promote on farm tree use, fuel wood surveys, pole use
surveys, and promotion of improved energy stoves on farms.
GTZ under the SADC Programme for Biomass Energy Conservation (ProBEC) is
currently working with UNDP to develop a regional project "Removing barriers to
Biomass Energy Conservation in small and medium sized enterprises (SMEs) and
institutions in the Southern African Development Community (SADC)". It is
envisioned that this project will run in parallel with the Kenya project providing
opportunities for joint learning. The SADC project aims to remove market barriers to
the adoption of sustainable biomass energy practices and technologies by institutions
(schools, hospitals and prisons) and small businesses (restaurants, hotels, bakeries,
tobacco curing) by promoting improved, highly efficient biomass-burning improved
stoves.
33
b) Consultation, coordination and collaboration between and among implementing
agencies
4 b i. Describe how the proposed project relates to activities of other IAs (and relevant EAs)
in the country/region.
No specific initiatives from the World Bank or UNEP have been planned for design and/or
development for biomass energy saving in institutions or small businesses in Kenya. The
project manager will work to ensure effective collaboration with the UNEP under their
biodiversity projects implemented in the region.
4 b ii. Describe planned/agreed coordination, collaboration between IAs in project
implementation.
No explicit collaboration is envisioned with the World Bank or the UNEP under the scope of
this project. Through the co-operation between UNDP and UNEP in biodiversity activities the
project activities dealing with forest management and biodiversity will benefit from the
knowledge and experience of UNEP in this field.
34
5 - RESPONSE TO REVIEWS
[this section is filled in during project proposal review]
a) GEF Secretariat
Respond to upstream comments from GEFSEC, if applicable.
b) Convention Secretariat
Respond to upstream comments from Convention Secretariat, if applicable.
c) Other IAs and relevant EAs.
Respond to upstream comments by other IAs and relevant EAs, if applicable.
35
Annex A: IC Matrix and Baseline Calculation
System Boundary
The geographical boundary of the proposed project is the national territory of Kenya.
The Baseline
In the presence of barriers to a functioning market in biomass energy efficiency in Institutions and
Small and Medium Sized Enterprises, significant investment in improved stoves would not take
place. This baseline would be characterised by:

The number of institutions and small businesses relying on the inefficient combustion of
biomass will remain at present levels for the foreseeable future. These have been estimated
based on data from the Kenyan Central Bureau of Statistics (Statistical Abstract 2004), and are
given in Table 2 below. Within all these sectors, the number of consumers is not expected to
change appreciably over the next 15 years.
Table 2: Institutional and small business sectors and number using biomass
Sector
Number
using
biomass
% biomass Estimations of number of
usage
entities using biomass
2006
2010
2020
Restaurants
6,000
50%
3000
3000
3000
Hotels, Lodgings
7,000
50%
3500
3500
3500
Schools Primary
19,000
95%
18050
18050
18050
Schools Secondary
4,000
95%
3800
3800
3800
Health institutions
4,000
50%
2000
2000
2000

A proportion of institutions and small businesses currently make use of improved stoves, while
the majority use traditional stoves – either the three-stone fire with efficiencies of between 10
and 15%, or stoves such as the "traditional Alpha" which has even lower efficiency (See
Kituyi 2000, which gives daily per capita fuel consumption based on measurements in schools
for the Alpha stove of 1.42 ± 0.71 kg and 0.85 ± 0.51 kg for the three-stone fire).

Estimations of use of traditional stoves and improved stoves by sector under the baseline are
given in Table 3 below. The use of improved stoves in primary and secondary schools is
already quite developed, and a number of market actors address this sector. The other sectors
currently have virtually no use of improved stoves although some growth in these sectors is
expected as a result of rising wood-fuel prices.
Table 3: Baseline estimations of use of traditional and improved stoves
Restaurants
Hotels, Lodgings
Schools – Primary
Schools – Secondary
Health institutions
Traditional stoves
2006
2010
2020
100%
95%
90%
100%
95%
90%
80%
75%
70%
50%
45%
40%
100%
95%
90%
Improved stoves
2006
2010
2020
0%
5%
10%
0%
5%
10%
20%
25%
30%
50%
55%
60%
0%
5%
10%
36

Local capacity for energy efficiency in institutional and small business biomass sectors is
limited and due to the various market barriers, investments will not grow significantly. As a
result, the scale and experience base of technology development will remain low.

Overall CO2 emissions for the country will continue to grow, and for the sectors identified
above will grow at a modest rate as a result of a growth in the proportion of unsustainable
supply meaning a reducing absorption (biomass deficit of 20 million tonnes per year for 2000,
increasing to 34 million tonnes in 2020). Further detail is given in the section 'Baseline and
Emission Calculations' under the Incremental Cost Matrix.

Limited tree planting, without further incentives like organised woodfuel markets, and
implementable legislation against logging in forests.
The baseline emissions for the institutional and small business biomass sectors is given in Figure 3
below.
Baseline
800000
700000
600000
CO2 emissions
500000
400000
300000
200000
100000
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Year
Figure 3: Growth in CO2 emissions
The GEF Alternative
The proposed GEF activities tackle the identified barriers to the widespread and market-based
growth of the improved stove sector for institutions and small businesses, through the
implementation of the following outcomes and outputs:

Outcome 1: Supportive policies and legal framework for sustainable biomass energy
businesses developed and strengthened: Output 1.1: Policy dialogue facilitated for increased
co-ordination between government sectors, Output 1.2: Coordination and strengthening of
parliamentary support for biomass energy legislation

Outcome 2: Supply chains for both products and financing are strengthened and expanded:
Output 2.1: Delivery infrastructure for seedling supply established with appropriate revenue
and financing structures (mini-nursery pilots for seedling sales), Output 2.2: Increased
37
liquidity in the institutional, SME and formal household stove markets, Output 2.3: Reduced
product and service costs, Output 2.4: Business models improved and replicated

Outcome 3: Policy makers, financial sector, suppliers and end-users are convinced of benefits
and market opportunities for improved stoves: Output 3.1: Exploitation of applications to drive
market growth and create volume, Output 3.2: Information on costs and benefits of
technologies well known, Output 3.3: Users trained in biomass energy saving techniques and
forest management
Table 4: Alternative estimations of use of traditional and improved stoves
Traditional stoves
2006
2010
2020
100%
90%
70%
100%
90%
70%
80%
60%
20%
50%
30%
10%
100%
90%
70%
Restaurants
Hotels, Lodgings
Schools – Primary
Schools – Secondary
Health institutions
Improved stoves
2006
2010
2020
0%
10%
30%
0%
10%
30%
20%
40%
80%
50%
70%
90%
0%
10%
30%
Under the alternative, 5000 improved stoves will be sold during the 4-year project period (against
1500 under the baseline) – this represents a penetration rate of the technology of 16% against 5%
under the baseline. The project impact on the baseline under the alternative is shown in Figure 4
below. The impact equates to 26% reduction compared to 2006 levels in 2020. On a cumulative
basis this represents a 15% reduction.
Baseline and alternative
800000
700000
600000
CO2 emissions
500000
Baseline
Alternative
400000
300000
200000
100000
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Year
Figure 4: Project impact on baseline
Market barriers are substantially reduced in the alternative, resulting in increased energy efficiency
and use of renewable biomass and consequent reduced GHG emissions.
Global Benefits
38
The project activities result in a reduction of approximately 100 000 tonnes of CO 2 equivalent
during the four year project period. In 2020 cumulative indirect and direct emission reductions
from the project have been estimated to lie between 400 000 and 960 000 tonnes of CO 2. The
reader is referred to the detailed “baseline and emission calculations” which follows the
incremental cost matrix below for more details on the calculation methodology used.
Additional benefits
This project will bring many additional domestic benefits to Kenya. Improved stoves have been
shown to have multiple local benefits. Coupled with establishment of wood-lots these benefits are
substantial. These include
Environmental benefits:
Social benefits:
Economic benefits:
Reduced deforestation and forest degradation, increased trees on farms
Reduced air pollution indoors (and outdoors)
Improved school / SME environments through proximity of wood-lots
Improved respiratory and general health of cooks
Reduced eye irritation of cooks
Reduced cooking times
Less time spent gathering fuel, more time available for cooking
Cleaner kitchens
Protection for community forests
Reduced fuel costs
Income generation for stove producers and tree producers
Increased time for income generating activities for stove users
Costs
Under the baseline approximately 1500 improved institutional and small business improved stoves
will be sold during the project period. At an average cost of 1500 USD per stove this represents a
baseline investment by end-users of 2.25 million USD. Baseline activities by the government and
private sector are estimated at 1.4 million USD. The total baseline cost is thus 3.65 million USD
for the four-year project period.
Under the alternative it is believed that approximately 5000 improved stoves will be sold. With an
average stove cost of 1300 USD (as a result of project activities the aim is to reduce average cost
of a delivered stove by 20% by the end of the project, which would mean an average cost of 1300
USD), and an alternative cost of 6.5 million USD. The GEF alternative costs have been estimated
at 975 000 USD. Added to this are government and private sector investments of 1.4 million USD,
making the total 4 year alternative cost of 8.876 million USD.
The total cost of the alternative is estimated at USD 8.875 million, with a baseline cost of USD
3.65 million and an incremental cost of US$ 5.2 million.
Note that the government and private sector investments are essential to the successful execution
of the project and have thus been counted as cofinancing.
39
Simplified Incremental Cost Matrix
Component
Global
Environmental
Benefits
Baseline
Barriers limit investment of institutions and
small businesses in improved stoves. In the
baseline CO2 emissions for these sectors
increase from the present level of 660 000
tonnes to 710 000 by 2020.
Alternative
Market barriers are substantially reduced,
resulting in increased uptake of improved
stoves in institutions and small businesses and
reduced GHG emissions from the stoves.
From year 5, sustainably managed wood-lots
mean zero net emissions. In the GEF
alternative, CO2 emissions in 2020 reduce to
an estimated 490 000 tonnes.
Increment
Significant GHG emission reductions are
attained.
CO2 equivalent emission reductions over
a 15 year period as a result of this project
are projected to be between 400 000 and
960 000 tonnes.
Domestic
Benefits
Under the baseline domestic benefits are
limited
Domestic benefits include reduced
deforestation and forest degradation, reduced
air pollution indoors (and outdoors), improved
respiratory and general health of cooks,
reduced cooking times, less time spent
gathering fuel, cleaner kitchens, protection for
community forests, reduced fuel costs, income
generation for stove producers.
TOTAL
Cost
Total baseline costs:
USD 3.65 million
Total project costs:
USD 8.876 million
Domestic benefits include reduced
deforestation and forest degradation,
reduced air pollution indoors (and
outdoors), improved respiratory and
general health of cooks, reduced cooking
times, less time spent gathering fuel,
cleaner kitchens, protection for
community forests, reduced fuel costs,
income generation for stove producers.
Total Incremental costs:
USD 5.2 million, of which:
USD 975 000 requested from GEF (18%)
USD 4.25 million local sources (82%)
BASELINE AND EMISSION CALCULATIONS
Background
This calculation is based on the project- level calculation formula provided by the GEF for direct,
direct post-project, and indirect CO2 reductions. The field data was gathered during
implementation of the PDF-A project.
Emission factors have been based on measurements of institutional stoves by Kituyi 2000 (Kituyi
E.N. 2000 Atmospheric emission budgets for domestic biomass burning in Kenya Ph.D Thesis,
University of Nairobi, Kenya). GHG emissions from products of incomplete combustion such as
methane have been excluded from this calculation since, although they may be expected to be
high for low efficiency devices and lower in the high-efficiency, clean burning improved stoves,
the available data on levels is insufficiently well established.
For biomass, emissions of CO2 are substantially different depending on whether the biomass fuel
comes from renewable or non-renewable sources: - for biomass harvested sustainably, the CO2
emissions are completely reabsorbed through biomass regrowth, and emissions are thus zero
(excluding products of incomplete combustion which can add substantially to overall GHG
emissions, but have been excluded from this calculations as explained above).
A ratio expressing the amount of biomass unsustainably used has been calculated to account for
whether CO2 is absorbed or not. This is the ratio of biomass deficit to the sustainable rate of
biomass production as described by Avis (2004). Since this is a national programme, data of the
supply and consumption nationally can be used. The procedure is as follows:
unsustainability ratio =
biomass deficit / total wood consumption
where:
biomass deficit = total biomass consumption – sustainable supply
total biomass consumption includes all biomass uses & loss of biomass through land
clearing etc.
Based on data from Kamfor (2002) we have:
Sustainable rate of biomass production
What is the total wood consumption
Deficit
'Unsustainability' ratio
2000
(million
tonnes/yr)
15
35
20
0.57
2020
(million
tonnes/yr)
19
53
34
0.64
This ratio has been used to correct CO2 emissions under the baseline scenario using a linear
interpolation for the intervening years. This is likely to lead to an underestimation of emission
reduction potential since according to UNEP studies the ecological impact of fuelwood
demand by institutions is much higher than households because, while the latter depend on
twigs and branches, the former require regular supply of huge logs leading to felling of
mature trees11.
11
UNEP, 1989, Technology, markets and people: the use and misuse of fuelsaving stoves, A project case study
by UNEP & Bellerive Foundation, Energy Report series, Vol 18, Nairobi.
Under the alternative scenario active efforts are made to establish wood-lots at each location thus
ensuring sustainability of supply 5 years after planting. Since not all wood-lots will be
successfully established, a correction ratio of 75% is used. Thus, 5 years following the start of the
project, CO2 emissions for the new improved stoves implemented through this project are
counted as zero. In addition to the 75% correction ratio, we also make use of the GEF causality
factor of 60% to attribute project impact to non-project impact. The total correction is thus 45%.
Direct reductions
The direct reductions that can be attributed as a result of this project are expected to be 100 000
tonnes (cumulative over the 4 year project period) as a result of increased uptake of improved
stoves in institutions and small businesses. There are no Direct Post Project investments
anticipated (no substantial revolving fund or guarantee fund is created).
Indirect emission reductions – top down
Starting from resources, and based on assessments carried out in preparation for the project a
conservative minimum impact on the energy consumption and GHG emissions has been
developed. The GHG emission reduction is estimated to reach a cumulative 15% by 2020. The
indirect cumulative CO2 reductions between the end of the project and 2020 are 1.4 million
tonnes. Using a GEF causality factor of 60% since the project impact is considered to be
“substantial but modest”, the attributable indirect emission reduction impact is 860 000 tonnes
CO2.
Indirect emission reductions – bottom up
Based on a replication factor of 3 and the direct impact of 100 000 we expect an additional
indirect reduction of 300 000 tonnes.
Calculations
The outcome of calculations are shown in the following table:
Sources of
reduction
Direct (4 years)
Indirect – top
down (10 yrs)
Indirect – bottom
up (10 yrs)
TOTAL
Emission
reductions
(tonnes CO2)
GEF Contribution factor
Total (tons CO2)
100 000
1
100 000
1 400 000
0.6
860 000
300 000
1
300 000
400 000 to 960 000
Note: in the above table the indirect emission calculations do not include the project period.
42
Annex B: Project planning matrix
Project Strategy
Project goal
GHG emissions sustainably reduced through
a transformation of the institutional and SME
wood-stove market, and related household
sectors
Objectively Verifiable Indicators
Sources of Verification
Long-term target:
CO2 equivalent emissions are reduced by an
accumulated total of between 400 000 and 960 000
tonnes by 2020 years. This represents the selling of
approximately 15000 improved stoves over 15
years (baseline is 3000 stoves during the same
period).
Assumptions
Yearly reports giving reductions in tonnes Fuelwood prices remain stable or
CO2 submitted to UNDP office prepared by continue to rise and act as an incentive
the Project Management Unit
for SMEs and public institutions to
invest in fuelwood saving and
Impact report submitted to UNDP by
woodlots.
RETAP 10 years after project completion
Scale-up of appropriate business
Annual reports from PMU (giving number models to other regions in Kenya is
End-term targets:
100 000 tonnes of CO2 avoided by 2010, from the of systems sold and reductions in tonnes
viable and introduces additional
selling of 5000 improved stoves (against a baseline CO2 derived from improved combustion
competition into the market.
of 1500 stoves during the project period) – a
reported by end users) submitted to UNDP
penetration rate of 16% against a baseline of 5%. office.
15 million tree seedlings planted within the project
Mid term and terminal evaluations of usage
undertaken via user survey to assess
Mid-term targets:
50 000 tonnes of CO2 avoided by 2008, from the
experience and technology performance
selling of 2500 improved stoves in 2 years
(baseline 750 stoves during the same period).
7.5 million tree seedlings planted within the project
43
Project Strategy
Outcomes
Outcome 1:
Supportive policies and legal framework for
sustainable biomass energy businesses
developed and strengthened
Objectively Verifiable Indicators
Sources of Verification
End-term targets:
Integrated biomass energy policy bringing together Copy of adopted policies, Cabinet minutes
forestry, energy, environment, and industry sectors showing items under debate and
adopted
agreements.
Mid-term targets:
Integrated biomass energy policy draft bringing
together forestry, energy, environment, and
industry sectors under discussion
Outcome 2:
End-term targets:
Supply chains for both products and Improved supply chain efficiency allows for a
financing are strengthened and expanded
reduction in stove cost + delivery of 40% against
start of project baseline
Business model replicated in at least 2 other
regions
Copy of draft legislation, Cabinet minutes
showing item under debate
PMU reports
PMU reports
PMU reports
At least 8 private sector small nurseries established PMU reports
or under development to run on commercial basis
44
Ongoing support from government
and concerned stakeholders
Regulations developed by
stakeholders are adopted by
government
At least 10 private sector small nurseries
PMU reports
established and running on 100% commercial basis
under the programme
Mid-term targets:
Improved supply chain efficiency allows for a
reduction in stove cost + delivery of 20% against
start of project baseline, and used to cover cost of
seedlings
Assumptions
Project Strategy
Outcome 3:
Policy makers, financial sector, suppliers and
end-users are convinced of benefits and
market opportunities for improved stoves
Objectively Verifiable Indicators
Sources of Verification
End-term target:
Survey shows high level of awareness of energy
Survey results
saving techniques and sustainable forest
management (see output 3.2 for details of proposed
indicators for awareness raising and output 3.3. for
details of proposed indicator for user capacity
building)
Mid-term target:
Survey shows capacities of users built (see output
3.3. for details of proposed indicator for user
capacity building assessment)
45
Survey results
Assumptions
Project Strategy
Objectively Verifiable Indicators
Sources of Verification
Outputs
Output 1.1: Policy dialogue facilitated for End-term targets:
increased co-ordination between government Integrated biomass energy policy bringing together Copy of policy
sectors
forestry, energy, environment, and industry sectors
adopted
Cabinet minutes
Mid-term targets:
Integrated biomass energy policy bringing together Copies of draft legislation documents
forestry, energy, environment, and industry sectors Copies of minutes from meetings
under discussion in Ministries.
Output 1.2: Coordination and strengthening End-term targets:
of parliamentary support for biomass energy Parliamentary interest group of biomass supporters Copies of news updates
legislation
established, communicating regularly, and with
Press releases
robust, sustainable governance structure:
Notes from meetings
- 16 newsletter updates
- 8 parliamentarian meetings
Mid-term targets:
Parliamentary interest group of biomass supporters Copies of news updates
established (including definition of governance
Press releases
structure), and communicating regularly:
Notes from meetings
- 8 newsletter updates
- 4 parliamentarian meetings
46
Assumptions
Government support for action on
biomass energy conservation and
integrated management of natural
resources continues
Regulations developed by
stakeholders are adopted by
government
Output 2.1: Delivery infrastructure for
seedling supply established with appropriate
revenue and financing structures (mininursery pilots for seedling sales)
End-term targets:
At least 10 private sector small nurseries
PMU reports
established and running on 100% commercial basis
under the programme
Mid-term targets:
At least 8 private sector small nurseries established PMU reports
or under development to run on commercial basis
Output 2.2: Increased liquidity in the
institutional, SME and formal household
stove markets
End-term targets:
Commercial loans to companies providing stove
production, hire-purchase and marketing services
increased by a factor of 10 over start of project
baseline
Mid-term targets:
Commercial loans to companies providing stove
production, hire-purchase and marketing services
increased by a factor of 2 over start of project
baseline
Output 2.3: Reduced product and service
costs
- bulk purchasing
- mass component production
- tooling
- design
End-term sector survey compared to data
from start of project
Mid-term sector survey compared to data
from start of project
End-term targets:
The cost to consumers of stoves delivered through PMU reports
the project have reduced by 20% with no loss of
efficiency or quality, with an additional 20% used
to cover cost of seedlings (total cost reduction of
stove + delivery reduced by 40%)
Mid-term targets:
Stove production and delivery costs reduced by
20% allowing stoves plus seedlings to be sold for
the same price as the stove price at the start of the
project
Output 2.4: Business models improved and End-term targets:
replicated
Business model replicated in at least 2 other
regions
47
PMU reports
PMU reports
Output 3.1: Exploitation of applications to
drive market growth and create volume
Output 3.2: Information on costs and
benefits of technologies well known,
supporting market decisions by:
- end users (institutions and SMEs)
- households
- supply chain
- financing chain
- policy makers
- emissions and climate
Mid-term targets:
Institutional incentives for household market
created
PMU reports
End-term targets:
Minimum orders of 100 improved stoves from at
least four market sectors.
PMU reports
Mid-term targets:
Growing market for improved stoves in the tea
PMU reports
industry, World Food Programme schools feeding
schemes, bakeries, restaurants, and other key
markets groupings. Minimum orders of 100
improved stoves from at least two market sectors.
End-term targets:
All relevant government policy papers under
PMU reports
development through the project period from year
2 refer to results of the cost benefit case studies
Suppliers use reports in marketing of relevant
products
PMU reports
Survey shows average level of awareness tripled
amongst supply, finance and policy stakeholders
(using “cost benefit awareness score12”).
Results of survey and comparison with start
of project survey results
Mid-term targets:
Analytical case studies on costs and benefits of
institutional stoves widely available
12
PMU reports
The system for scoring, including weighting of factors, is to be determined during execution. Scores will be assigned based on results of the start of project survey, and compared to
that in the end-term survey. Factors which are likely to be used include:
· Copies of cost benefit analysis received (yes=1, no=0)
· Stakeholder has passed on the information they have used (yes=1, no=0)
· Stakeholder can cite cases where they personally have used the data (yes=2, no=0)
· Stakeholder can cite cases where they have implemented lessons in their day to day activities (yes=3, no=0)
48
Output 3.3: Users trained in biomass energy End-term targets:
saving techniques and forest management
Average “biomass energy saving
score13” tripled in project area
awareness Results of survey
Mid-term targets:
Average “biomass energy saving awareness score” Results of survey
doubled in project area
13
The system for scoring, including weighting of factors, is to be determined during execution. Scores will be assigned based on results of the start of project survey, and compared to
that in mid-term and end-term surveys. Factors which are likely to be used include:
· Training material about energy saving and forest management received (yes=1, no=0)
· User has received direct training (yes=1, no=0)
· User has received indirect training (yes=1, no=0)
· Evidence of application of lessons learned from training (yes=2, no=0)
User has implemented local awareness raising plan for general population (yes=2, no=0)
49
Annex C: Letters of commitment
This annex contains letters of co-financing from the following organisations:
 Government of Kenya
 Tree Biotechnology Project
 Rural Technology Enterprises
50
51
52
53
Annex D: Letter confirming RETAP’s registration for provision of micro-finance to
institutions and SMEs
54
Annex E: Endorsement by GEF Operational Focal Point
55