BoP Multi-Sector study and BoP Product Incubation

Introduction and project overview

28 February 2013

About SPF
Overview
Establisehd in 1986, by the endowment from the Nippon Foundation Nippon Foundation Gourp Foundations (Nippon Foundation, Tokyo Foundation, etc. Activities Surveys and Research Human Resources Development Inviting/Dispatching Personnel Organize International Conferences & Forums Collecting Information Other activities fostering international understanding, exchange, and cooperation General Fund and Special Funds ( Pan Asia Fund, Middle East Islam Fund, Japan-China Friendship Fund)

Mission and Programs

Mission: Contribute to the welfare of humankind and the sound development of the international community, and thus to world peace Programs

1. International Peace and Security 1-1.Peace Building and Security Issues 1-2.Non-Traditional Security Issue 2. Globalization 2-1. Market and Disparities Issues 2-2. Demographic Changes and Population Movement 2-3. Science, Technology, and Society 3. Promotion of Mutual Understanding between priority regions and Japan Exchange programs between Japan and the US
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Project context and objectives

Context
4 billion people constitute the base of the economic pyramid representing a market of $5 trillion Several global corporations and local enterprises are finding innovative ways to tap this market in the areas of clean water and clean energy . Eg: Unilever (water purification systems for households) Schneider (solar lanterns and home systems), Shell (fuel-efficient, clean cook stoves) Companies are benefiting in many ways: Discovering new markets Meeting sustainability goals Finding new growth avenues through a BoP focus Their focus is driving innovation, commercialization and scale-up of BoP focused business models. In recognition of the role of global companies, UNDP and Sasakawa Foundation are supporting a three year project to identify high potential technologies, products and solutions to meet BoP needs in clean energy and water.

Objectives
Objectives of the project over a 3 year time frame:

Year 1: To identify sustainable technologies as well as inclusive business models on clean energy and water that are potential solutions to problems faced by the BoP (3 months: Jan 13 to Mar 13)
Year 2: To conduct multi-product feasibility studies through pilots and incorporate feedback from relevant stakeholders (1 year : Apr13 to Mar 14) Year 3: To further develop promising clean energy and water technologies through collaboration between Japanese and other manufacturers and other actors such as local social entrepreneurs/entrepreneurs and, To gain insight on right models to scale up and diffuse BoP technologies and facilitate resource mobilization for the most promising technologies (1 year : Apr 14 to Mar 15)) Currently being executed by Dalberg

In Clean Water, the project analyzes performance of technologies in household and community level water purification
From traditional to improved solutions

Methods include: Boiling, cloth filters, storage in earthen containers: Ineffective against many biological and chemical contaminants Results in high disease burden Highly energy-intensive (boiling)

Improved solutions analyzed: household and community-level water purification systems based on a range of technologies
Chlorine Ceramic filters Activated carbon Coagulants Reverse Osmosis
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Nanotechnology UV radiation Micro filters Ultra filtration

Pictures courtesy Hydrologic, Cambodia

Sample analysis : Effectiveness of water treatment technologies depends on capacity to remove various contaminants; RO is currently most effective technology
Comparison of effectiveness of technologies over biological and chemical contaminants
Effectiveness of removing biological contaminants High

Nanotechnology filtration Ultra Violet filtration Boiling Reverse osmosis Ultra-filtration Chlorine Disinfection Solar disinfection Micro-filtration Coagulants / flocculants Ceramic filtration

Only commercially available technology that can treat high levels of salinity

Next most-effective technology compared to RO

Pre-treatment filters Low

Activated carbon filtration High

Effectiveness of removing chemical contaminants

In general, quality of water at the regional level needs to be examined before selecting the technology for treatment. The industry view is that in the absence of salinity as the major contamination issue, use of Reverse Osmosis as a solution may be avoided
Note: This is not a technical comparison of technologies. This is meant to indicate the effectiveness on a broad range of low to high. Source: http://www.cdc.gov/healthywater/pdf/drinking/Household_Water_Treatment.pdf, http://iaspub.epa.gov/tdb/pages/treatment/treatmentOverview.do?treatmentProcessId=2074826383, interviews with industry experts, Dalberg analysis
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Sample analysis : 5 year cost of ownership of household-level solutions is largely driven by upfront cost of acquisition, highest for RO-based systems
Comparison of 5 year cumulative cost of ownership across household technologies, US $
350 300 250 Cost of ownership, US $ 200 150 100 50 0 Year 1 Year 2 Year 3 Year 4 Year of usage
Note : Total cost of ownership includes upfront cost of the device, maintenance costs and energy costs over 5 years based on the following assumptions : An average BoP household has 5 members who consume 2 litres of clean water everyday. Inflation has not been taken into account.
Source: Dalberg analysis

Reverse Osmosis

UV

Chlorination(household filters) Ultrafiltration Coagulants / flocculants Nanotechnology Ceramic filtration Chlorine disinfection Year 5 Year 6

Sample case: Unilever ensured device remained low-cost and aspirational while serving consumers without access to running water and electricity
Model Hindustan Unilever (HUL) is the largest FMCG company in India. It entered the water market in 2005 with its Pureit brand of water purifiers. HUL decided to target the BoP market in 2010 and launched the BoP targeted Compact model, with half the capacity but the same functionality. The approach was a long-term one with investments in the BoP markets would be cross-subsidized by the margins made in the higher income segments. Cost to consumers The cost of the device is US$ 25 for the BoP targeted Classic 14 litres model and goes up to $145 for an advanced Marvella model. The lifespan of the device is estimated at 5 years. The cost to consumer comes up to US cents 0.71 per litre of purified drinking water. Technology used Pureit has the ability to treat surface water (biological contaminants) and function without running water or electricity. It is a chlorination based product and the purification process involves four levels of filtration : i) Pre-filtration, ii) carbon trapping, iii) chlorination and iv) carbon block polishing. Innovation The product has been adapted to suit the local needs of BoP population low pricing, high durability, ability to function without running water and electricity. A clear colour indicator alerts the user that the components must be replaced to maintain system effectiveness. The product has been marketed as aspirational, given the strong brand of HUL and same quality across the product range. There has been a multi-channel approach to reach the user segments establishing the product in mid-level user segments before targeting the low or high income segments. Challenges The product requires regular cleaning of the different chambers and parts and requires training for users replacement of the germ kill component twice a year.
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Scale As of November 2011, over 5 million devices had been sold making Pureit the No. 1 water purifier in India by volume. Today, Pureit is being sold in 8 countries in Asia and Africa.
Source: Dalberg analysis

In Clean Lighting, the project analyzes performance of composite illumination devices at household level and rural electrification technologies at community level
From traditional to improved solutions

Methods include: Firewood, kerosene lanterns, candles Contribute to indoor air pollution and poor respiratory health especially of women and children Hazardous can cause fire-related injuries Fuel costs are a significant burden on household income
Pictures courtesy Greenlight Planet, India/Africa

Improved solutions analyzed: household devices and electrification solutions for offgrid communities
Solar Lanterns Solar Home Systems Wind-based mini grids Biomass-based mini grids Biodiesel-based mini grids
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Solar mini-grids Hydro-power mini grids

In Clean Cooking, the project analyzes performance of a range of improved and advanced cook stove solutions
From traditional to improved solutions

Methods include: Three-stone fires, coal/charcoal stoves Contribute to indoor air pollution and poor respiratory health especially of women and children Hazardous can cause fire-related injuries Fuel costs are a significant burden on household income
Pictures courtesy Grameen Greenway, India

Improved solutions analyzed: cook stoves based on both traditional solid fuels, modern fuels and renewable fuels
Portable wood rocket Built-in rocket chimney Electricity stove Kerosene stove

Natural draft gasifier (TLUD Biofuel/ethanol stove or side load) Solar cook stove LPG stove Natural gas stove
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Significant opportunities exist to contribute to the growth of innovative, BoP-focused products and solutions

For more information on the BoP Multi-sector study and BoP Product Incubation project please contact:

Ms.Mari Kogiso Deputy Director, Program Department, The Sasakawa Peace Foundation Add: The Nippon Foundation BLDG.4th F, 1-2-2 Akasaka Minato-ku, Tokyo 107-8523, Japan Tel: 81-3-6229-5443 Fax: 81-3-6229-5473

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