Magazines

Solar sector in huge growth as buyers stream in

The attraction of solar lanterns, for instance, is driven by the fact that they offer significant savings in the long term for home lighting solutions compared to the use of lamps running on kerosene. Photo/FILE
The attraction of solar lanterns, for instance, is driven by the fact that they offer significant savings in the long term for home lighting solutions compared to the use of lamps running on kerosene. Photo/FILE 

The slow penetration of electricity in Kenyan homes has opened a niche market for solar energy solutions.

In the past few years, a number of entrepreneurs have joined the green business, mainly targeting low-income homes that have remained on the sidelines of electricity connections for decades.

Less than 20 per cent of Kenya’s households are connected to the national grid, forcing them to rely on a mix of relatively costly, inefficient and unhealthy alternatives to light their homes and power their home appliances.

The products include solar mobile chargers, torches, water heating systems, inverters, and lanterns.

“The potential market for solar lanterns in Kenya is very huge,” says Andrew Amadi, chief operations officer at Renewable Energy Ventures Ltd.

Amadi says the firm started selling solar lanterns in the second half of this year and says that sales have been growing at over 200 per cent month on month.

“We expect to hit profitability in mid-2010 based on our sales projections. We are currently more focused on introducing the solar lanterns into the market then expanding our market share.”

A recent study by the international finance corporation (IFC) estimates the national market for solar lighting products at over one million units per year.

The global bottom-of-the-pyramid (BOP) energy market is estimated to be worth $433 billion, with low-income households spending an average of seven per cent of their earnings on energy.

Mr Anthony Mwangi, general manager of Green Planet and Natural Light, said that the firm that started selling products in 2006 has seen a growth in monthly turnover from Sh50,000 to Sh3 million.

“We project a triple growth in turnover over the next two years,” he said.

The huge demand for solar products, players said, comes from rural areas and informal urban settlements.

The attraction of solar lanterns, for instance, is driven by the fact that they offer significant savings in the long term for home lighting solutions compared to the use of lamps running on kerosene.

According to statistics from the Petroleum Institute of East Africa, average annual sales of kerosene over the last eight years stands at about 250,000 cubic metres (worth Sh15 billion), most of which is used for illumination in homes and small businesses.

Players told Business Daily that solar lanterns, starting from about Sh2,000, are a one-off investment that can last for years, with the only other expense being battery replacement that may be done at least once a year for a cost of about Sh300.

Despite the high demand for solar products, a number of challenges could slow down uptake of the products.

“Lack of trust is the major threat to the industry,” said John Mwenda, sales and marketing manager at Deutrex Trading, a firm that deals in solar lanterns and mobile chargers.

As the sector rises, standardisation issues are still a challenge; with low-quality imports making their entry into the market.

Most of the retailers are offering guarantees of up to three years for the products.

However, some of the products do not last as long and their performance is disappointing to buyers.

Some solar lanterns, for instance, end up issuing dim lights.

Those that use lead and acid batteries get drained quickly compared to rechargeable dry cells.

“There are no standards for solar lanterns based on objective criteria such as the amount of light output and the durability of the lamps. Many substandard and fake lanterns in the market dissuade users and fuel the notion that ‘solar does not work’,” Amadi said.

Mr Mwangi said that sub-standard solar products have slowed down confidence in the market.

IFC, in a newspaper advertisement, last week invited players in the solar products industry for a meeting meant to boost the development of the green business.

The IFC, in conjunction with the World Bank, is running a project called Lighting Africa “that seeks to support the global lighting industry in developing affordable, clean, and efficient modern lighting and energy solutions for millions of Sub-Saharan Africans who currently live without access to the electricity grid.”

With a budget of about Sh912 million, the project intends to assist the sector by sharing market information, developing quality assurance, business linkages, and consumer awareness.

Low profile

The sector has kept a low profile, a fact that has slowed down consumer awareness.

Analysts say that innovative solar products are likely to fill the medium term gap in energy needs as the country struggles to rope in more homes and businesses to the national grid.

The rural electrification programme that started in the 70’s has been facing financing challenges, with the government saying it needs about Sh74 billion over the next 10 years to make 853,000 new connections.

“Indications are that the 20 per cent connectivity target by the end of next year will not be realised given that current connectivity in rural areas is about 10 per cent,” Energy Minister, Kiraitu Murungi, told donors a few months ago.