Growth of industrial parks is poised to be a windfall for local solar companies, with a global trade body citing panel module assembly to be a lucrative area for investment.
The United Nations Conference on Trade and Development (UNCTAD) says solar power hold the potential of increasing access to electricity - though the sector needs skilling and training.
A report by the agency says that much of the Kenyan solar market is held by foreign companies, while local firms operate in services, offering project-development services, consultancy and after-sales services.
“A few companies also focus on product sale and distribution, often using informal sales and distribution channels, such as churches, local retail stores or supermarket chains,” the report says.
It adds that the participation of domestic companies is particularly high in the installation of commercial and industrial rooftop systems and mini-grids.
This is because this market requires an in-depth engagement with customers and local skills, such as language and cultural knowledge.
According to the report titled Economic Development in Africa Report 2023 – The Potential of Africa to Capture Technology Intensive Global Supply Chains, Kenya has made great strides in securing access to electricity.
It cites World Bank data, which shows the share of population with access to electricity having increased from 19.2 per cent in 2010 to 71.4 per cent in 2020.
“Yet, this still lags behind the government’s goal outlined in a national electrification strategy to achieve universal access to electricity by 2022.”
The report points out the dismal contribution, standing at six per cent, solar power gives to renewable energy in the country. This is while geothermal and hydropower each contribute 36 per cent.
“It (solar) therefore has promising potential to accelerate access to electricity, owing to its high horizontal irradiation levels,” the report says.
UNCTAD states that growth in the solar panel market provides a vast opportunity for the economy through private sector development and job creation.
However, much of the market is held by internationally owned companies, it says.
“Future expansion in industrial parks promises to grow business opportunities for domestic companies and employment in the solar panel supply chain.”
Stay informed. Subscribe to our newsletter
President William Ruto’s administration has outlined an elaborate plan to set up industrial parks in each of the 47 counties.
Each county is set to get a budget of Sh100 million towards this initiative that is also projected to be complete by August next year.
The report says solar panel module assembly is a lucrative area for investment given the high growth of the renewable energy sector on the continent.
For example, between 2000 and 2020, the level of renewables investment in Africa rose at an annual average rate of 96 per cent, owing to the region’s vast solar energy potential.
“Yet, the continent continues to suffer from significant investment gaps, receiving about two per cent of global investments in renewable energy,” the report says.
“The production of solar photovoltaic panels is limited, with some opportunities materialising in Egypt, Morocco and South Africa.”
And despite the rapid growth of solar home systems, in Africa they are tiny compared with their counterparts in developed countries and require batteries and charge controllers to ensure stable output.
“Assembly of the solar field, which must be performed at the site, offers significant local manufacturing potential.
“As many component inputs, such as ball joints, bearings and cables, are used by other industries, these parts offer opportunities for already established companies to achieve lateral diversification of customers.”
UNCTAD notes that not all countries in Africa might be able to produce solar panels for their market but the additional employment generation through project development and advisory services, installation and repair services can be substantial and should attract greater attention throughout Africa.
“Local entrepreneurs are keenly aware of specific local needs, including language and culture, that are essential for the implementation of large-scale investment projects in renewable energy,” it adds.
UNCTAD sees the investment in solar power beyond just connecting businesses and individuals to electricity in the country.
In the report, it cites United Nations Economic Commission for Africa, which documents that for every megawatt of mini-grid capacity developed, approximately 800 full-time-equivalent job-years are created in Kenya.
It also cites the government’s efforts to maximise the benefits from increased investment for domestic employment and supply chain participation.
This is through the Kenya Vision 2030 development plan that aims to promote local manufacturing through the Energy (Local Content) Regulations, 2014.
“However, skills development must be promoted,” the report states.
“This can be done, on one hand, through mentoring programmes between large experienced and new domestic companies, and on the other, through organised training.”
For instance, it lists Renewable Energy Solutions for Africa, which has established a micro-grid academy with local partners to develop skills needed for the sector.
“Further, vocational training and university curricula in energy offer courses in business, finance and technology,” the report says.