By Jesse Moore
The Kenya National Electrification Strategy is the Government’s blue print and road map to achieving universal energy access to all Kenyans by 2022. At M-KOPA, there is a genuine sense of excitement about it.
We think it will trigger a new wave of off-grid power innovation that will have far reaching implications for citizens, the industry and investors.
The formal recognition of off-grid solar systems as part of Kenya’s energy mix is key. Previously we did not have formal recognition within the national energy strategy. Getting this now gives us a framework to work with different Ministries and Agencies to resolve far-reaching technical and funding issues.
The Government has published in the Strategy that there are already 700,000 homes and businesses in Kenya that have invested in off-grid solar power. We have connected the majority of these. This means that over three million Kenyans are already accessing power and appliances through our platform.
At a time when Kenya’s power institutions didn’t formally recognise our role in universal electrification, our customers made a bold decision to build an off-grid future for their family or business.
They wouldn’t seek it and don’t need it, but the Strategy gives these families validation of their investment decision. They will be far more interested in how they can keep upgrading their lives through power and appliances. On that they can sleep easy.
At the off-grid industry panel during the launch of the Strategy in Nairobi on 6 December 2018, the industry confirmed its commitment to Kenya. In the next five years US $457 million will be invested in the private sector by government and funding partners to reach a total of 1.96 million households.
We know from recent experience that it is no longer enough for homes or businesses to simply be connected to power. They need finance and access to quality appliances that can help them be healthier, wealthier and more connected.
The Government Strategy recognises the success of Kenya’s off-grid pay-as-you-go solar sector in being able to provide a range of useful appliances and services bundled with a power connection. But in the 2018/19 budget import duties and VAT were levied on these items.
We will keep talking to the Government to make sure that productive solar-powered appliances – lights, fridges, TVs, radios and internet-enabled devices – are not being put out of reach of low-income Kenyans through punitive taxation. If we want all Kenyans – not just the few – to have middle-income style homes and appliances, then these are staple items that need to be kept as affordable as possible.
The National Electrification Strategy gives a clear signal and real financial incentive for the industry to keep investing in market expansion and product development. But this also needs to go hand in hand with a progressive tax regime.
The Strategy also gives a clear signal to global energy renewable energy investors that Kenya is open for business. We believe that the subsidies can also unlock cheaper debt for the whole industry. This can be done by providing credit enhancement tools, such as first-loss capital. This will certainly encourage new investors and greater incentives to provide cheaper debt.
This will bring down costs for customers and ensure that investment is spread among the quality and proven operators. It will certainly help us connect more new customers and grow our range of affordable upgrades for existing customers.
The great news for citizens, government and investors is that off-grid solar connectivity still presents massive value for money… as well as usability and proven productive use. If we look at the Strategy’s projections, then it shows that an investment in Grid of US $2.25 billion will lead to 3 million households connected, which works out at US $750 per connection.
A US $33 million investment in mini-grids will lead to 35,000 HHs connected, which works out at US $950 per connection. Whereas solar home systems only cost US$235 per connection, with the US $460 million investment connecting 1.96 million households.
We certainly see the need for the grid when it comes to large power users. But for millions of small homes and businesses it is just a wire. We believe the home system is much more useful because of the appliances that we can bundle with it.
We see a near future where millions of off-grid Kenyan homes are ‘connected’. They are using clean energy to power a range of smart pay-as-you-go appliances. These smart appliances will be connected to the Internet of Things with their working condition designed and tailored for a specific home of business.
Indeed we think this smart home will be more accessible to the mass market in Kenya, than it will be in the US or Asia, where smart homes are the preserve of the wealthy. The Kenya Electrification Strategy is a well-timed Government intervention that makes this future closer than you think.
(Jesse Moore is the CEO and co-founder of M-Kopa Solar).