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.

The cost of electricity has more than doubled in the past 12 months, forcing policy makers to fast-track the roll-out of alternative energy regulations to help increase supply and arrest pricing turbulence.

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.

Property developers say the high cost of building materials, land, and lack of social amenities have continued to push up the cost of construction, making it hard for them to absorb additional costs such as installation of solar panels.

“Installing the systems is an expensive affair, especially when one is developing small housing units as opposed to a big project where one can spread the costs,” said Mr James Ruitha, the managing director at the National Housing Corporation.

“The only viable option would be for the government to subsidise the cost of solar heaters to reduce pressure on developers,” said Mr Ruitha.

The public has 40 days to comment on the proposed regulations, after before they are gazetted for implementation.

ERC says owners of complete buildings will have a five-year grace period to comply with the new regulations but new developments will have to be fitted with the panels during construction.

“All premises shall have a minimum annual solar contribution of 60 per cent of the hot water demand,” say the regulations published on Friday.

Full implementation

Full implementation of the solar heating rules and their subsequent roll out in other sectors could boost Kenya’s standing as a clean energy economy –– a fete most countries are fighting for globally.

Installation of solar heating systems is, in the long term, expected to reduce the weight of power bills on domestic electricity consumers, increase supply on the national grid and reduce costs for industrial users.

“On average, heating and cooking constitute more than 75 per cent of each household’s power bills,” said Mr Ruitha. “Using solar heaters, although costly initially, could significantly bring down average monthly bills in the coming years,” he said.

Enforcement of the regulations is also expected to immediately enlarge the solar heaters market, offering a big boost for entrepreneurs who are currently waging the alternative energy campaign with little support from the government.

“This is a sure business avenue that should deliver increased revenues for us,” said Mr Charles Rioba, the managing director at Solar World, a solar technology firm.

Mr Rioba however warns that hasty implementation of the regulations could expose consumers to the risk of being sold sub-standard solar systems in the rush to comply.

A solar heating system with the capacity to heat water for a four-storey apartment costs as much as Sh500,000.

Mr Rioba says smaller solar units cost an average of between Sh100,000 to 200,000.

The proposed regulations come with heavy penalties for non-compliance.

Any building plan that does not comply with the new requirements on solar heating will not be approved.

ERC wants property owners made liable to a fine not exceeding Sh2 million or a jail term of two years or both for non-compliance.

Property managers said the installation of such a system could raise the cost of construction by as much as 20 per cent although it is a worthwhile investment in the long-term.