Kenya: Solar Sector in Huge Growth as Buyers Stream In

Monday, December 28, 2009

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.

Source: Business Daily (link opens in a new window)