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Kenya: High Fuel Prices to Benefit Dealers in Solar Products
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Business Daily (Nairobi)
15 April 2008
Posted to the web 15 April 2008
Emmanuel Were
Dealers in solar products are positioning themselves to exploit opportunities presented by rising energy costs.
Electricity costs have risen by a third over the last few months as power generators and distributors pass on the costs of record oil prices to electricity users.
The Energy Regulatory Commission has also put consumers on notice that electricity tariffs may rise by at least 60 per cent from July, following an application by the main power producer, KenGen, and distributor KPLC.
"The increase in tariffs is going to overburden both domestic and commercial power users, prompting a look into alternative sources like solar and other energy saving solutions," says Norman Chege, solar manager at Davis and Shirtliff.
The water and solar equipment provider has signalled its intention of improving prospects in its business by seeking to raise Sh100 million for its working capital, through a commercial paper.
A commercial paper allows companies to borrow money from investors at prescribed terms usually for less than a year. Some solar product dealers, like Kilo Joules Ltd, have already recorded an increase in the number of enquiries.
"We used to receive an enquiry a day, now we receive about two enquires," said Mr Anthony Gakuru, the sales and marketing manager.
With the initial cost implications of installing solar remaining a barrier for most, the company is looking into options of a financing programme with Savings and Credit Co-operatives (Saccos) and banks for would be purchasers Davis and Shirtliff expansion is targeting urban areas where no clear policy exists on investments in solar energy.
In most urban areas, solar energy is mainly used to power back up and hot water systems.
"In the urban areas there is little business apart from the business of power back up systems and solar hot water," says Mr Joe Kihiu co-owner of a start up solar company, Think Solar Technics.
According to most solar companies, the water heaters save up to 60 per cent on the electricity bill. On average, the solar hot water installation to cater for a household of up to four people costs about Sh110,000.
The initial costs have acted as a barrier for a number people interested in the solar water heaters.
Most solar companies expect their business to thrive in rural areas.
"As the cost of power becomes more expensive we expect business to pick up in the rural areas," says Mr Kihiu. Rural electrification initiatives such as Umeme Pamoja, where neighbours come together to instal a grid in their locality, exit but long delays have tended to push customers into despair.
The expected increase in demand for solar solutions has attracted more retailers of solar products. Most electronics outlets in downtown Nairobi now stock solar products.
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Given the initial capital outlay required - a minimum of Sh20,000 depending on requirements - the retailers undercut most of the bigger players in the industry.
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