Kenyan businesses turn to solar

From the newsletter

Mabati Rolling Mills (MRM), a leading building solutions company in Kenya, is installing a 727 kilowatt-peak (kWp) solar power system to reduce its energy costs & carbon footprint. This is a growing trend among Kenyan businesses. It joins other manufacturers like Bidco & Simba Cement who have already adopted solar.

• GridX Africa Development Limited will develop the project. GridX specialises in developing and financing solar and renewable energy solutions for commercial and industrial companies across Africa.

• The solar panels will be installed at two MRM industrial facilities. A 592 kWp system will be mounted on the roof of the Nairobi facility, and a 135 kWp system will be installed at the Athi River facility.

More details

• Kenya's grid electricity has become increasingly expensive, with commercial and industrial (C&I) customer tariffs rising by an average of 25.16% in the last five years.  Energy costs can account for up to a third of a company's operating expenses, impacting profitability.

• The grid has also become unreliable, with frequent and lengthy blackouts. C&I businesses in Kenya lose an estimated 5.4% of their annual sales due to power outages.  While 65.6% rely on backup generators, rising fossil fuel prices make this solution costly, especially for smaller businesses.

• Captive power generation—energy generated for a company's own use—is a growing market in Kenya. Over 400 companies have adopted self-generation, with a total capacity exceeding 532.6 MW as of June 2024, a growth of 18.5% from 2023. Solar and bioenergy are the most popular sources, with 229.2 MW and 161.8 MW of installed capacity, respectively. Other sources include waste heat recovery (83.5 MW), hydro (33 MW), thermal (21.3 MW), and geothermal (3.7 MW).

• The potential market for captive power generation remains large. Over 400,000 small and 3,000 large C&I customers in Kenya could potentially switch to captive generation, but the high upfront cost of solar installation is a significant barrier.

• Kenya’s captive power market is projected to reach 1 GW capacity and $1 billion in market value by 2030, with solar taking the lead. The sector is attracting a growing number of players. According to the Energy and Petroleum Regulatory Authority (EPRA) records, 355 solar contractors, manufacturers, and importers obtained production permits in the year to June 2024, and more are entering the market. Neosun is the latest to announce its entry into the Kenyan market, targeting commercial and industrial customers.

Our take

• Falling solar panel prices and improved technology, combined with rising grid electricity costs, are making off-grid solar power increasingly competitive. More businesses are likely to adopt solar, but high initial costs demand more financing options.

• Growing consumer demand for sustainability is pushing companies to adopt clean energy sources like solar.  Businesses need reliable and affordable alternatives to appeal to environmentally conscious consumers.

• Growing competition in the solar sector, coupled with streamlined policies like in the Power Purchase Agreements (PPAs), are driving growth and making solar more accessible to businesses.