Solar energy gets big push from new building rules

Kenya’s property developers will have a new cost item in their books in the coming months as the government brings into force a law requiring families of more than four people, who use electricity to boil water, to install solar heaters.

The proposed regulations that also apply to public institutions such as schools and hospitals are Kenya’s first steps in the planned transition to use of alternative sources of energy to reduce demand for power from the national grid.

The Energy Regulatory Commission (ERC) estimates that water heating accounts for about 25 per cent of the power consumed by households.

Last year, this segment of consumers used 1,254 Ghw of electricity or 24 per cent of Kenya’s total power consumption of 5,155 Ghw.

This means that use of solar to heat water could therefore cut demand on the national grid by 314 Ghw, pushing the reserve margin closer to the internationally recommended level of 15 per cent.

Kenya has an installed power capacity of 1,480 mega watts, including temporary emergency power of 290MW against a peak demand of 1050 mega watts, leaving a reserve margin of only 4.5 per cent.

The energy sector regulator, the ERC last week published new guidelines that could make it mandatory for all new buildings in urban areas requiring hot water to be fitted with solar heaters.

Frequent power shortages and the accompanying price escalation erode about 1.5 per cent of Kenya’s GDP every year besides weakening the ability of the economy to attract fresh investments, according to the World Bank.

The publication of the new regulations has received mixed reactions in the real estate industry with some players saying it could come at a higher cost for home buyers and tenants.

“In the short-term, the regulations will come at a high cost to builders as well as buyers and tenants because of the cost implications of installing solar heaters,” said Reginald Okumu of Ark Consultants, a real estate firm.

“In the long-term, however, going solar is a sure way of saving on power costs that remain one of the biggest single expenses for tenants and house owners,” said Mr Okumu.

Property valuers said the regulations could kick-start upward price movement in the upper end of the residential housing market where prices have been stagnant and rents have been falling on increased supply and reduced demand from the middle class, whose disposable income has been hit by the recent economic slump.

Tenants could also come under intense pressure for higher rents as property owners pass on the additional costs to end users.

Household incomes grew at the rate of 6.4 per cent in 2005, 7.5 in 2006 and 8.7 per cent in 2007 before peaking at 8.4 in 2008, according to the Kenya National Bureau of Statistics, but high inflation that averaged 9.2 per cent in 2009 eroded much of the purchasing power gains.