Destined To Disrupt: Free Home Solar Kits Could Wreck Kenya’s Off-Grid Market
Plans by SkyPower, the world’s largest developer and owner of utility-scale solar projects, to donate two million free home solar kits in Kenya is likely to send shock waves in the off-grid market in the East African nation.
In July, during the Global Entrepreneurship Summit (GES) attended by US President Barack Obama, the photovoltaic energy company signed a land mark $2.2 billion agreement with the Kenyan government to develop a 1 gigawatt solar project.
Kerry Adler, president and chief executive of SkyPower said in a statement that the grant marked “the largest single commitment in history, which provides an unprecedented solar solution to give power to the people of Kenya and communities without access to basic power.”
“We are proud to help empower Kenya to harness the abundant power of the sun to improve the lives and economic prospects of its people, ultimately positioning Kenya to become a renewable energy hub for Africa,” he added.
Kenya, where over 87 percent of households are not connected to the national electric grid that’s monopolized by a state-run power company, has become one of the beacons of off-grid connections with companies like M-Kopa Solar, a social-entrepreneurship startup that uses solar to reach the remote places with electricity, making considerable headway.
While solar has been donated in the country of about 45 million people by relief agencies before, analysts say SkyPower’s bulk donations program could wreck havoc to solar startups as it would change customer’s perception of solar.
According to Daniel Tomlinson, an access to energy entrepreneur and a 2012 Echoing Green fellow, donation of 2 million solar kits to Kenyan households would compromise the after-sales service component of the off-grid solar concept, which he thinks could leave “customers with either inferior products or, over time, faulty products that stop working and spoil the market concept of solar in general.”
“Systematic reductions on retail prices, and especially free give-aways, signal to consumers that they do not need to pay full retail price — or pay at all — for these goods, and consumers will accordingly hold out for reduced-cost or free goods in the future, regardless of whether they will ever come,” the Global Off-Grid Lighting Association said in a recent issue of the Opinion Brief.
“While there may be a short-term benefit for selected users, these reductions or giveaways will result in such adoption being less likely to be sustained and broader adoption of solar off-grid lighting being significantly hampered,” it added.
SkyPower, a company started by a Lehman Brothers survivor, Adler, is his plan to build a $12 billion solar empire across the world, and Africa, where most people are not connected, fit perfectly into his jigsaw.
Bloomberg estimates that the company will have more renewable energy projects in the world than any other operator if all its planned initiatives come to fruition. It currently has23 projects with a total capacity of 300 megawatts.
Africa’s off-grid revolution has attracted of companies, both local and foreign, with initiatives such as ‘Power Africa’ by President Obama and ‘Lighting Africa’ by Senegalese-American R&B music singer and songwriter Akon, jumping on to the bandwagon.
“Power Africa supports bringing increased electricity access to Kenya through a market-based approach,” President Obama said in his speech during the GES in Nairobi.
The International Finance Corporation (IFC), which has invested in Akon’s Lighting Africa initiative said that while free solar products “can assist people that may not otherwise purchase a solar product, but, if not managed well, they can harm the entire supply chain and the market.”
Sign up for the AFKInsider newsletter — the most compelling business news you need to know from Africa and the African diaspora, delivered straight to your inbox.