Navigating the Complexities of Scaling Bioethanol: A Comparative Analysis of KOKO Networks and UNIDO Strategies (Blog #3 of the series)

By Dr Helen Osiolo

This blog is the last in a three-part series on “Breaking Barriers, Unlocking Potential: Scaling Bioethanol for a Sustainable Future.”

This article explores two major initiatives in East Africa: KOKO Networks and UNIDO, both of which focus on scaling bioethanol adoption. In this article, we compare their business models, financial strategies, policy engagements, distribution networks, and expansion efforts. It is the final part of the three-part blog series titled “Barriers, Unlocking Potential: Scaling Bioethanol for A Sustainable Future.” The first article examined how to unlock the potential of bioethanol by navigating consumer demand, supply chains, and policy frameworks. The second article explored the crucial role of multi-stakeholder collaboration in advancing bioethanol adoption in Tanzania.

For millions of families in East Africa, cooking with wood, charcoal, and kerosene is a daily reality. These fuels contribute to serious air pollution, health risks, and environmental degradation. The transition to cleaner alternatives like bioethanol, biogas, and electricity offers a solution to these challenges. Scaling bioethanol for clean cooking presents a chicken and egg challenge: fuel supply and stove adoption must grow together, yet consumers hesitate to buy stoves without a reliable, affordable fuel source, and vice versa. This dynamic influences the distinct approaches of KOKO Networks and the United Nations Industrial Development Organization (UNIDO), making direct comparisons complex. Both organizations aim to promote bioethanol as a cleaner, more sustainable cooking fuel, but their strategies differ significantly.

Business Expansion and Geographical Penetration

KOKO Networks and UNIDO are reshaping the cooking fuel landscape with contrasting business models and geographical expansion strategies, one thriving on a retail-driven approach, the other focusing on robust infrastructure development.

KOKO Networks has adopted a retail-integrated approach to bioethanol distribution in Kenya and Rwanda. By embedding around 3,000 KOKO Points (smart fuel dispensers) in neighbourhood shops across cities like Nairobi, Mombasa, Kisumu, and Nakuru, KOKO ensures that urban consumers can access bioethanol within a five-minute walk. This decentralized distribution model overcomes logistical barriers typically associated with centralized fuel stations. By April 2024, KOKO Networks had reached 1.2 million households in Kenya, with a goal of scaling to 3 million households by 2029. In 2022, KOKO expanded to Rwanda and plans to grow its customer base from 20,000 households in 2024 to 1 million by 2027.

KOKO’s expansion is made possible by its long-term partnership with Vivo Energy, which has allowed the company to leverage existing fuel distribution infrastructure to reduce capital expenditure and make bioethanol more affordable.

UNIDO’s approach in Tanzania has been more infrastructure-intensive, focusing on ethanol production and supply chain development. UNIDO started with an ethanol blending and bottling plant in Dar es Salaam, which has a batch capacity of 2.4 million litres per year . The initiative aimed to distribute ethanol cookstoves to 500,000 households, with Consumer’s Choice Limited (CCL) contracted to provide 160,000 stoves between 2019 and 2024. However, by September 2024, only 14,000 households had transitioned to ethanol cooking. This adoption rate indicates that an infrastructure-intensive approach may not lead to rapid consumer uptake unless supported by an efficient retail distribution network. Unlike KOKO, UNIDO relies on local ethanol production from Kilombero Sugar Company and TPC Limited, which reduces dependence on imports but requires a higher initial investment.

Financial Strategies and Scalability

The financial strategies of KOKO Networks and UNIDO play a significant role in their ability to scale bioethanol adoption.

KOKO Networks has leveraged private investments, carbon finance, and grants to build a self-sustaining business model. By issuing carbon credits, KOKO has been able to subsidize the cost of bioethanol and stoves by up to 40%, making both fuel and stove more affordable for low-income consumers. This has been possible through issuance of 2.45 million tons of carbon credit.  Additionally, KOKO uses a pay-as-you-go (PAYG) model integrated with mobile payments like M-Pesa, allowing consumers to purchase small amounts of bioethanol as they need it. This model ensures affordability for households with limited access to large sums of money upfront. In January 2024, KOKO secured substantial private investments of $125 million for Kenya and $10 million for Rwanda, demonstrating the scalability of its business model.

In contrast, UNIDO’s financial model relies heavily on donor funding. The initiative in Tanzania has been supported by organizations like the Global Environment Facility (GEF) and the United Nations Capital Development Fund (UNCDF). UNIDO’s Bioenergy Incentive Fund (BIF) aims to attract $100 million in private investments, with $1.1 million committed to local ethanol production and stove distribution as of 2023. This initiative holds significant potential for driving future investment and expanding the bioenergy sector. UNIDO has also teamed up with the Tanzania Development Bank to provide financial support and investment for scaling ethanol projects. Though progress has been made, efforts to introduce pay-as-you-go models in Tanzania have been slowed by limited adoption of digital payments, hindering consumer uptake.

Policy Support and Regulatory Challenges

Government policies play a crucial role in the competitiveness of bioethanol against traditional fuels. Kenya and Rwanda have implemented progressive policies that support bioethanol adoption, while Tanzania faces regulatory barriers that hinder market growth.

In Kenya, the Ethanol Cooking Fuel (ECF) Industry Masterplan (2021) institutionalized ethanol as a recognized cooking fuel and eliminated excise duties on ethanol imports, helping to enhance price competitiveness. However, the 25% import duty and 16% VAT on denatured bioethanol still increase its retail price, making it less competitive against LPG, which is tax-exempt. Despite these challenges, Kenya’s supportive policies have been instrumental in fostering the growth of the bioethanol market.

Rwanda has also taken proactive steps to support bioethanol adoption. In 2022, the Rwandan government partnered with KOKO Networks to launch the National Renewable Cooking Fuel Utility, eliminating VAT and import duties on ethanol fuel and equipment. This supportive policy framework ensures cost reductions directly benefit households, making bioethanol more affordable.

In Tanzania, however, regulatory challenges remain. The government imposes import duties and VAT on ethanol, which makes bioethanol more expensive than charcoal. Unlike Kenya and Rwanda.

Consumer Adoption and Market Growth

The success of bioethanol adoption is ultimately determined by its affordability, accessibility, and consumer awareness. KOKO Networks has adopted a consumer-first approach, resulting in rapid adoption, while UNIDO’s infrastructure-driven approach has experienced a more gradual uptake.

KOKO Networks has made bioethanol more accessible by embedding KOKO Points in neighbourhood shops and using pay-as-you-go (PAYG) systems with mobile payments. This model has allowed Kenya’s bioethanol market to grow from 50,000 households in 2020 to over 1.2 million households in 2024. In addition, KOKO’s expansion into Rwanda shows the effectiveness of its demand-driven model, with plans to reach 1 million households by 2027.

UNIDO’s infrastructure-driven approach in Tanzania has resulted in a more gradual adoption process. Despite targeting 160,000 households, only 14,000 households had transitioned to ethanol cooking by September 2024. High stove costs, limited awareness campaigns, and a lack of flexible financing options have slowed adoption. UNIDO has started exploring microfinance partnerships and instalment-based purchasing schemes, with promising potential for expanding access to ethanol stoves. These initiatives are expected to drive future growth and improve accessibility as they continue to develop. The Bakhresa Group in Tanzania, plans to distribute 10,000 ethanol cookstoves to women food vendors, though the initiative is still under review. By 2024, only 500 stoves had been donated, underscoring the need for more affordable solutions.

Technological Innovations in Bioethanol Distribution

Technological innovations are essential for improving bioethanol distribution. KOKO Networks has implemented KOKO Points, which function like “fuel ATMs” in local shops, allowing consumers to purchase bioethanol in small quantities. The company uses cloud-based monitoring systems to track sales and inventory, optimizing logistics and ensuring consistent supply.

Additionally, KOKO manufactures ethanol stoves to align stove availability with bioethanol supply growth. KOKO’s cookstoves and canisters are produced by SAARUS, a product design and manufacturing company based in India, which KOKO acquired in 2018. Additionally, KOKO enables pay-as-you-go bioethanol purchases through mobile platforms like M-Pesa, supporting financial inclusion for low-income households. (KOKO Networks, 2021).

In comparison, UNIDO’s in partnership Consumer Choice Company Limited technological efforts have focused on production infrastructure, including the ethanol blending and bottling plant in Dar es Salaam. While mobile vending solutions with a 2.4 million litres per year and ethanol sales at petrol stations have been tested, these methods have not yet achieved the same scale as KOKO’s retail distribution model. As a result, consumer access to bioethanol remains limited.

UNIDO and CCL have tested mobile vending and ethanol sales at petrol stations, aiming to increase convenience and accessibility for consumers in remote or underserved areas. However, these methods are limited in scale and do not provide widespread consumer access. Meanwhile, new players such as Multiplex Systems Limited and Bukona Agro Processors Limited are in the early stages of enhancing market supply.

Conclusion

KOKO Networks and UNIDO are both working to promote bioethanol as a cleaner cooking fuel in East Africa, but their approaches differ. KOKO Networks focuses on a consumer-centric retail model, leveraging private investment and digital payments to scale bioethanol distribution. UNIDO, on the other hand, emphasizes infrastructure development and donor-funded investments to build local production capacity.

The “chicken-and-egg” challenge of scaling both fuel supply and stove adoption shapes these strategies. KOKO’s model relies on simultaneous growth in supply and demand, while UNIDO ensures a steady fuel supply to build consumer trust.

By integrating KOKO’s market-driven approach with UNIDO’s infrastructure development, both organizations can address the supply and demand challenge, creating a more sustainable and accessible bioethanol market for East African households.

Previous blogs in this series

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Featured Image: H.E. President of United Republic of Tanzania Dr. Samia Suluhu Hassan visited UNIDO booth showcasing Bioethanol stove and fuel during the Clean Cooking Conference on 1 – 2 November, 2022, with the aim of developing a concrete roadmap towards achieving affordable clean and reliable cooking solutions in line with the National Energy Policy (NEP) of 2015, Sustainable Development Goal (SDG) 7 and Tanzania’s SEFORALL Action Agenda (2015). Photo Credits: UNIDO