Asoko Insight: Kenya Solar Power Players
High costs of on-grid electricity and a lack of access to electricity has spurred growth in the solar power space, encouraging businesses to innovate to capture the unserved market. Digitalisation and the strong penetration of mobile money has been crucial in enabling innovation in Kenya. M-kopa, a pioneer of the pay-as-you-go business model for solar power, allows customers to pay small amounts through their mobile phone for a home solar system or solar products. The model has been adopted by a number of companies, though M-kopa remains a market leader. Penetration of solar products such as rechargeable lamps, solar radios, solar torches, solar water heating systems and solar panels for households has also deepened due to mobile money enabling payments and credit scoring. Mobile technology allows companies to determine a payment schedule for customers who need this facility, offered in rural areas.
The take up of small-scale off-grid solar solutions has had a significant impact on the level of solar generation in the country. Kenya’s installed capacity of solar photovoltaics (PV) power totals 93 MW, of which 56.25 MW is connected to the grid, meaning 40% of solar power comes from off-grid sources. Increasing use of off-grid solar power by businesses will help the sector scale up, though securing private sector investment has challenges. Not least among these is the ongoing negotiations to implement regulations on net-metering for non-commercial and industrial projects which have been under discussion for two years.
Market Map
Asoko has identified 56 leading companies in Kenya’s off-grid solar ecosystem. We have categorised these firms by the goods and/or services they provide, of which there are four types:
Solar products such as lamps, batteries, pumps, televisions and refrigerators.
Solar systems, including payment structures
Advisory services
Engineering, procurement and construction (EPC) services for contracts involving small-scale solar installations of up to 20 MW.
The majority of players (71.42%) produce solar products, with 35% of these firms also involved in another activity, largely the provision of solar systems in which to plug their goods. The solar systems segment is the second-largest space, with a total of 26 companies operating in this space, most alongside other activities.
Almost all the leading companies operate out of Nairobi, with just one headquartered in Mombasa and one from Kiambu. The rapid development of the market has seen the entrance of a number of new competitors in a relatively small space of time, diluting the earning potential of individual players. Thus the majority (75%) of companies mapped earn annual revenues under $1 million. At the other end of the spectrum, a smaller number (15%) of firms have revenues above $10 million, with a majority of these players earning between $10 million to $25 million.
Investment
Asoko has tracked investment activity across Africa between 2015 and 2018 and found 29 investment deals among the identified solar companies in Kenya during this period. Of these, the value was disclosed for 24 deals, which were collectively worth $684 million. The investments listed include financing directed to Kenyan operations, parent companies and subsidiaries elsewhere in Africa.
In total, ten companies approached the market for financing during the period. While most signed a single deal, the top number of deals undertaken by an individual firm was eight. BBoxx and d.Light are among the companies that signed multiple deals, receiving $93 million and $183 million across four and six deals, respectively.
Investors in this space are mainly strategic investors with a focus on sustainable energy solutions. Two Kenyan-based firms specialising in clean energy financing participated in six deals. KawiSafi Ventures, for example, made capital investments in both BBOXX and d.light, while SunFunder was active in two of d.light’s funding rounds as well as that of another solar operator.
International bodies and development funds from several European countries are also active investors in the space. The Dutch Development Bank, for example, was involved in three deals and the IFC in four, while Norway’s Norfund took part in two of d.light’s funding round.
Content provided by our partners, Asoko Insight. Learn more at https://asokoinsight.com/.
