While charcoal remains among the primary cooking fuels in many developing countries, it is carbon intensive and can cause respiratory problems. Kenyan climate tech start-up Koko Networks aims to tackle this problem by distributing ethanol as a cheaper and cleaner alternative.

“We’re very focused on destroying demand for charcoal and replacing it,” Greg Murray, Koko Networks’ co-founder and CEO, tells fDi. A 2018 study found that transitioning households to ethanol cooking fuel in Kenya’s capital Nairobi could reduce emissions by up to 2.4m tonnes per year, as well as avoid at least 1500 deaths from indoor air pollution.

Through a network of “fuel ATMs in mom-and-pop stores” across Nairobi, Mr Murray says Koko Networks’ is able to deliver liquid ethanol that is 40% cheaper than charcoal. He says that for fast-moving consumer goods such as ethanol to succeed in urban Africa, businesses need “really close proximity” to households and the foot-based retail economy. 

Koko Networks, which also produces ethanol stoves at two factories in the Indian city of Ahmedabad, saw the number of Kenyan households using its service grow by 450% in 2021 to reach 330,000. The start-up, which was founded in 2013, recently started in the port city of Mombasa and hopes to expand into other countries across Africa, south-east Asia and Latin America.

Expansion hurdles

Mr Murray believes energy is “the least free market sector” globally. Despite renewable sources like ethanol being favoured through subsidies and taxes, he says translating them into operating licences is “easier said than done”.

While approximately 300m households in 60 countries could afford to use Koko Network’s solution, Mr Murray says government policies — including taxes and import tariffs — can be inhibitive.

“The deciding issue for us are tollgate taxes, which inflate the effective cost of our products and services versus the baseline of charcoal,” he says. Regulations often do not exist either, says Mr Murray, who notes the two years of working directly with the Kenyan government it took to implement national standards on Koko’s ethanol stoves.

“We’ve had to get dozens of individual operating licenses across the different ministries,” says Mr Murray. Despite wanting to invest into neighbouring African countries, such as Uganda and Tanzania, Mr Murray says Koko needs assurances from the government around tax and tariff removal.

“We need pre-investment agreements, similar to a power plant developer, which enables us to decide about investing in one country over another,” explains Mr Murray. Koko Networks estimates it would take between $1bn and $2bn of investment to enter those 60 countries where consumers could afford their ethanol cooking fuel. Currently the majority of Koko Network's ethanol is produced from molasses, a by-product of sugar refining in east Africa.

Policy is key

Despite governments being committed to reducing charcoal use, Mr Murray says liquified petroleum gas (LPG) is widely viewed as the best alternative. But LPG is far more expensive than ethanol, he says, requiring about 18 times more capital expenditure (capex).

“Ethanol is an uncompressed liquid versus LPG being a compressed gas, which means the capex is less across the entire supply chain,” he explains, adding that Koko stores its ethanol under existing petrol station infrastructure in Africa as part of a partnership with Vivo Energy. 

Koko is also able to sell its ethanol cheaper to consumers, thanks to selling carbon credits to a subsidiary of South Korean utility Korea Electric Power Corporation.

“We are selling to industrial and utility companies, but have also got some of the poorest people on the planet as my household customers,” says Mr Murray, who notes their interests aligning will help accelerate uptake of ethanol as a solution.

While a lot of focus is put on climate financing, Mr Murray says multilateral institutions would have more impact by creating enabling business environments.

“The most impactful thing they can do is work with governments to remove the tollgate taxes that enable private investment to flow,” he says. “All the rest is a distraction.”

This article first appeared in the February/March 2022 print edition of fDi Intelligence.