Retailers of solar panels are feeling the heat from the government-sponsored rural electrification programme that has hooked more than 120,000 people to the national grid in the past 12 months.

Industry statistics indicate that sales of solar units for lighting have dropped by more than 40 per cent during the period forcing retailers to turn to alternative products such as solar heaters to prop up their sales.

"Before the programme sale of solar panels was on a steady growth path helped by continued expansion of the rural consumers who could not raise the connection fees demanded by power distributor Kenya Power and Lighting Company," said Margaret Mutia, deputy managing director of Solagen, a locally owned solar supplier.

It is estimated that Kenya gets nearly 3,000 million megawatts of power from the sun every day. Energy experts estimate that harnessing just 10 per cent of that potential to the national grid would culminated into an oversupplied of the country's electricity needs more than 25 times. Growing demand for electricity compelled a number of foreign solar power firms to begin operations in Kenya.

"Market dynamics have changed dramatically. A number of smaller companies have wound up while the remaining are struggling to stay afloat," said Ms Mutia.

In the last quarter of the 1990s, solar power firms sold up to 20,000 units a year in a market that grew at the rate of 30 per cent per year. Now the retailers say sales have dropped by a margin of 40 per cent in the last 12 months.

More than 100,000 rural Kenyan homes rely on solar energy for their energy needs. The majority of these families use small solar power units that can power one television and four light sources and whose market value stands at Sh20,000.

Sales of solar panels are expected to drop even further this year with the planned expenditure of Sh8 billion into more than 1,000 power projects that are expected to hook more people to the national power grid. Solar power firms are however hoping to get a piece of the Sh300 million that the government has set aside to install solar power in secondary schools in arid and semi-arid lands in North Eastern, Eastern, Rift Valley and Coast Provinces.

Chloride Exide, the solar power firm that has been in the Kenyan market for more than 44 years is expected to be among the big winners. The company won the initial tender to supply power to 30 schools in the three provinces.

"Installation is ongoing. The tender was awarded after a competitive bidding process and is sponsored by the Ministry of Energy," said the company in a statement. Chloride Exide is said to be reaping the benefits of a shift in business from providing batteries to renewable energy solutions, which has seen the firm manage growth even as its competitors close shop.

Smaller solar firm Solagen believes that diversification into new products and markets will save it and other firms from perishing in a shrinking market.

Despite registering a dip in sales of power units to rural customers the smaller firms are seeing increased sales of water heating implements to urban consumers who can enjoy savings of up to 60 per cent on power bills.

Even so, the firm's fortunes may once again be altered by the entry of Chinese investors, who are reportedly searching for local partners to start a solar panel factory in the country. "We are looking at how we can manufacture the products in the country," said potential investor Michael Munyao.