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Why Kenya’s solar power market is growing rapidly

By Alberto Leny
Friday, November 20th, 2020
Solar panel. Photo/Courtesy
In summary
    • More companies are embracing the transition to renewable forms of energy than ever before. Commercial consumers (malls, lodges, safari camp sites, cargo facilities, airports, warehouses, office buildings, food processing units and petrol stations have 29 per cent of the installed capacity.
    • A World Bank report based on a study of 1,001 firms found nearly 4.3 per cent of reported lost sales were due to power outages, leading to reductions in competitiveness and efficiency.
    • Solar PV has rapidly emerged as a viable source to complement the grid, switch from diesel generation or adopt fully off-grid solutions complemented by battery storage. Other than generating electricity for their own consumption, they may export to the national distribution network.
     

  The heightened pace of industrialisation in Africa has led to a rapid growth in energy demand, yet many governments still face the massive challenge of supplying adequate electricity. 

Inadequate energy supply has compromised domestic electricity consumption and prevented the full realisation of public, commercial and industrial services to spur social and economic growth. 

Africa has the richest solar resources in the world but has only installed five gigawatts (GW) of solar photovoltaics (PV), which is less than one per cent of the global total. 

PV is the conversion of light into electricity using semiconducting materials that exhibit the photovoltaic effects. A study on renewable sources of energy has revealed how clean captive generation through solar PV has rapidly evolved for the business market in Kenya. 

Most commercial and industrial businesses have for a long time had to contend with unreliable electricity supply, expensive grid tariffs and diesel back-up systems, which impedes their efficiency, sales and competitiveness.

Kenya is among the few countries in Africa that have experienced the highest growth in captive PV instalments, according to a report released recently by the United Nations Environment Programme and the Technical University of Denmark (UNEP-DTU) partnership.

The groundbreaking work examines the key drivers, barriers and risks as well as how PV firms have leveraged on the market.

The report covers data on the captive PV installations in Kenya totalling nearly 40 megawatts (MW).

Captive solar PV systems are rapidly emerging as an alternative for self-generation for commercial and industrial consumers to complement the grid, switch from diesel generation or adoption of fully off-grid solutions with battery storage.

Rapidly falling global PV prices, increasing energy demand and available financing have enabled the rapid growth trend in Kenya.

The demand stems from high-energy intensive consumers in the industrial sector (14.2MW), commercial businesses (11.5MW), horticulture sector (7.9MW) and institutions (5.7MW).

Cost savings

A major driving factor behind power consumers’ investment in captive solar PV has been energy cost savings.

“By investing in solar, they are not just eliminating their diesel generator expenses but also reducing their high grid tariffs burden,” says the report’s lead author Dr Padmasai Lakshmi.

Over 50 per cent of the power consumers have self-financed their PV systems. “Our data indicates that the total capacity for captive PV installations currently in Kenya is 40MW.

This is likely to be higher in reality, assuming this data is not fully comprehensive,” notes Dr Lakshmi. 

“The majority of these systems have been installed by industrial consumers (39 projects, 14MW). Given that there are 1,200 manufacturing companies in Kenya (960), there still seems to be a potential for further market expansion.”

According to the national utility, Kenya Power, nearly 3,900 power consumers fall into the commercial and industrial category.

Interviewees in the study reported that they do not perceive any reduction in future grid tariffs, which has prompted them to explore alternative opportunities for cost reductions.

Industrial power consumers (SMEs, rolling mills, steel pipes, glassware, plastics, salt, distillers and oil refineries) consume 36 per cent of the installed solar PV power capacity – the highest.