Corporate

Solar power scarce despite plenty of sunshine

There is a ready market for solar energy since all of the five East African countries—Kenya, Uganda, Rwanda, Tanzania and Burundi—have a power deficit. Photo/FILE
There is a ready market for solar energy since all of the five East African countries—Kenya, Uganda, Rwanda, Tanzania and Burundi—have a power deficit. Photo/FILE 

Athuman Ndoro, a small business owner in Kwale County used to walk for 15km to charge his mobile phone because his neighbourhood is not connected to electricity.

Lack of affordable energy supply in his Mlola village also means that the residents have to rely on expensive paraffin to light their houses.

With the help of the Global Village Energy Partnership (GVEP), which runs a project that trains entrepreneurs in the East Africa and gives them a guarantee of upto 70 per cent on credit, some entrepreneurs in rural areas obtain loans to secure solar power equipment.
The organisation, a UK registered not-for-profit NGO, aims to increase access to modern energy to reduce poverty in developing countries.

However, it is likely to have a minimal impact if much is not done to allow mass ownership of the project through policy change.

With a loan of loan of Sh20,000 from the Kenya Women’s Finance Trust in March this year, he purchased a 40W panel and solar battery of 50amps.

Mr Athuman has invested in leasing of solar lamps and charging mobile phones.

His returns on the mobile phone charging business have grown from Sh2,000 a month to Sh7,000 a month from April handling an average of 360 phones monthly.

According to GVEP business development coordinator, Samuel Kitula, the solar panel not only fulfils the electricity needs of a household, by replacing kerosene and petrol fuelled generators, but it provides new streams of income.

Despite a drop in solar power costs by 60 per cent in the past five years in the international market due to technological advances, manufacturing efficiency, the uptake of the technology remains subdued in the country.

Polysilicon, the main raw material in solar panels, has plunged a further 33 per cent to about $50 a kilogramme in the world market during the second quarter of this year.

This has lowered production costs in the $35 billion global market for the photovoltaic devices, according Bloomberg Energy Finance data.

Investors in the solar energy market claim that even though the government has put in place policies to grow the sector, much remains to be done.

The government waiver of duty on imported solar equipment in the Budget is yet to be felt with dealers blaming the weak shilling for the high prices.

The penetration of the solar energy products remains a meagre three per cent of energy consumption in the country.

High pre-shipment inspection fees on imported inputs have been blamed for discouraging investment in the manufacturing of solar products.

Therefore, it is cheaper to import finished solar equipment as opposed to importing intermediate parts for local assembly lines. Finished products attract less inspection fee normally at five per cent of the product cost.

“We pay between 2.5 and five per cent to import solar equipment, one would therefore save more importing finished products,” said the managing director SolarWorks Ltd, Mr Dickson Muchiri, whose firm deals in imported solar equipment.

He says importing a finished solar pack consisting of a solar panel, batteries and an inverter at a cost of Sh80,000 attracts an inspection fee of Sh4,000, but importing components used to make each of these products raises the cost of the imported products significantly above market prices.

Imports are normally subjected to pre-shipment inspection to establish their quality attracting an additional cost.

Mr Muchiri says that manufacturing the equipment in the local market could help to increase employment opportunities and reduce costs.

Over the past three years the NGO has raised $10 million, which has stimulated the growth of 750 small businesses in East African. However, these efforts only have an impact on entrepreneurs only. For instance a 140W solar panel, which cost Sh50,000 last year should be currently going for Sh28,000.

This has boosted interest in investors looking for the dealership to import and sell the solar equipment.

The market players spoke last week during the second National Energy Conference held in Nairobi after the Energy PS Patrick Nyoike announced a Sh3.9 billion revolving fund to finance renewable energy projects. The CFC Stanbic Bank will administer the funds, which the French government provided, as loans at less than market rates.

The investors say their companies remain procurement entities rather than manufacturers of the solar power equipment.

Dealers in the sector have, however, increased their presence countrywide helping to increase awareness in the products and fight counterfeits.

“There is need for a reduction of value added tax on this products since income levels in rural Kenya are still too low,” said Ashfak Makrani, sales director at Dreampower Engineering, an Italian firm that distributes of solar products in Kenya.

An interaction with solar energy dealers, however, shows that their prices vary by large margins. Again inadequate consumer awareness of the going prices in the market is among the factors that keep them away from the products.

The Energy PS told entrepreneurs in the sector to form an organisation help them resolve challenges they face.

“Let the investors come together then the government can consider their plight,” he said. Some of the products that investors said could be made locally include solar panels, light emitting diode lamps and inverters to help create jobs.

The investors also asked the government to develop a feed-in tariff that would allow traders to sell solar power to the national grid. The government currently has feed-in tariffs for wind, thermal and other power sources.

According to the Financial Times a feed-in tariff policy set up by the UK government spurred substantial investments in solar panels by home owners with more than 6,660 solar panel installations in four months last year amounting to a generating capacity of 16 megawatts from UK homes.

A good subsidy system sparked the rapid change in small-scale renewable energy generation, which took effect on April 1 last year.
Under the regime, electricity suppliers pay householders a feed-in tariff for the power they produce.

The move could easily help the government in its push to have property developers mount solar panels on every house they build.

This tariff is set well above the standard rate for electricity, giving homeowners a healthy profit on their investment.

Chinese solar panel manufacturers, who are churning out cheaper equipment than those made in Europe and the US, have exerted pressure on global prices.

Mr Muchiri said households and industries would be encouraged to invest in solar energy if they can sell part of it to the government. At the moment, large-scale investors in solar energy do not have a ready market to dispose of extra power they generate.

Investors, who are seeking to install solar panels in schools such as Mr Muchiri, said there is no clear policy that would encourage such as investments.

Other targets for power generations are public institutions like health centres and industries. Insufficient research and investment in alternative renewable energy is also one of the reasons for lack of alternative energy sources.

The government has over the year focused on electricity as a source of energy and ignored investment in other alternatives like solar power.

This has hindered growth of other sources of power increasing over reliance on fossil fuels whose prices have been rising making them no-longer unaffordable.

An initiative by the Rural Electrification Authority and the Japanese International Cooperation Agency to have institutions in rural areas generate renewable energy for sale is yet to take root.

The project seeks to start with 10 pilot schemes in which local institutions will set up a community solar system for electricity generation.

rotini@ke.nationmedia.com