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Step 2 - Preliminary market analysis

Experience has shown that changes in market systems are more sustainable and more likely to have impact at scale when the identification of the market barriers and interventions for overcoming them have been designed and delivered by the energy market actors themselves. However, after identifying and categorising all the energy market actors it is important for the facilitation team to carry out some preliminary analysis to pre-empt the issues that the energy market actors are most likely to be interested in to ensure they can be effectively facilitated during the next steps of the roadmap.

This preliminary analysis should not form the basis for the design of firm and inflexible interventions, but should instead focus on trying to identify the market barriers that are limiting the growth of the selected energy market system, and which the market actors are most likely to choose to take action around. This preliminary market analysis should be kept as open and flexible as possible so that it can be updated with input from further discussions with the market actors, but can provide a useful baseline for facilitating these discussions.

Such barriers may include corruption and abuse of power arising from incoherent or inadequate regulation (e.g. in the charcoal market), or a lack of technological or institutional capacity that keeps the system operating in a dysfunctional way. Another example is a lack of quality control regulations to ensure that poor quality products do not damage a market or too few forestry officials, who are unable to control illegal logging for informal charcoal production.

The facilitation team should use the preliminary market map developed in Annex 1, including all its market actors, to highlight where in the energy market system the main barriers and opportunities occur, using a marker composed of a letter and number, as per the following key:

Key

The letter refers to which of the 3 levels of the energy market system the identified barrier sits within, as follows:


M: refers to the energy market chain – Level 1

S: refers to the inputs, service and finance – Level 2


E: refers to the enabling environment factors – Level 3

The numbers refer to the number of the identified supporting intervention. Each intervention can be separately identified, starting with 1 and ending with the last identified intervention.

 

The facilitation team can use the template in Annex 3 to carry out preliminary market system analysis to identify some of the most important potential market blockages and opportunities that occur within the selected energy system. These will be investigated more fully throughout the next roadmap steps. It is important to remember that each specific barrier or opportunity can impact one or more market actors in one or more of the three market levels of the system.

Systemic Blockages: These are the constraints or bottlenecks in the selected energy system that hamper the ability of the market actors to increase access to the energy products or services in a more inclusive, efficient and productive manner.

Systemic Opportunities: These are a combination of favourable circumstances that create a market opening or leverage point that the market actors can use to achieve their business goals resulting in increased access to the energy products or services.

Systemic Risks: These are potential negative consequences of circumstances and events, which negatively impact the efficiency, inclusiveness or productivity of the selected energy market system.

Experience has shown that many barriers that occur in energy markets are often due to the lack of capacity of particular market actor, as briefly outlined in Box 2.

Market Actors Capacity


Within many energy market systems in developing countries there is a general lack of capacity. This often includes government departments, as well as the energy companies and the supporting services and financial institutions. To overcome this lack of capacity, a range of capacity development activities need to be designed and delivered to address each specific problem, from the development of specific regulatory documents to training companies on how to produce sustainable business models. This lack
 of capacity can be viewed as a cross-cutting barrier which needs to be addressed within most levels of energy market systems.

 

Note: It is important for the facilitators to not worry too much about trying to work out solutions to the blockages, or how to take advantage of the opportunities at this stage. This should only be tackled during the next steps of the roadmap, through the facilitation of the market actors in a participatory process. The energy market actors have the best understanding of their interests and motivation and need to lead the process to ensure its sustainability!

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