Higher solar costs loom in Kenya and SA

From the newsletter

The cost of solar panels in Nigeria, Kenya, Egypt, and South Africa remained unchanged in May, according to the Renewables Rising data. However, several policy developments in Kenya and South Africa are likely to affect pricing. Kenya is proposing a 16% VAT and South Africa a 10-30% import duty on products used in the renewables value chain.

• Kenya is raising taxes to generate revenue for its cash-strapped government. South Africa is doing so to promote its growing local manufacturing of renewable energy products.

• Nigerian solar panel prices have remained stable, even despite the government's controversial announcement that it is considering banning solar imports. This was later clarified by the Ministry of Energy, which stated that there is no such plan.

More details

• The Renewables Rising data tracks prices for solar panels, lithium-ion batteries, solar home systems, and inverters in select stores in Kenya, Nigeria, Egypt, and South Africa. The data is updated every month. It also tracks the prices of the same products for select companies.

• The difference in solar panel sales prices between China and African countries is quite small. In China, the cost is approximately $0.15 per watt, while in South Africa, the most expensive market locally, sees prices around $0.23 per watt. This is expected given South Africa's introduction of a 10% import fee for solar products last year. The current proposal suggests a 10-30% increase in import duties for various products used in the renewable energy value chain, and will push prices even higher. For instance, imported silicon will face a 10% fee, and aluminium and copper will attract a 15% fee.

• For lithium-ion batteries, there's a huge disparity between Chinese and local country-specific prices. A 5 kW inverter costs about $525 in China, and some countries charge as much as three times more.

• Inverter prices face the highest price difference. A 5 kW inverter costs about $90 in China and costs up to 10 times locally. For example, in Kenya, it costs an average of $924. Industry experts, though, expect that the recent tariffs imposed on China by the US and some European countries will lead to China market overflow and a decline in general renewable energy product prices.

• Solar home system prices have remained unchanged for three consecutive months. These product markets have matured and continue to attract customers. Generally, there is a market move toward bigger solar home systems bundled with appliances like televisions as consumers seek to enjoy energy service and stay updated.

Our take

• Proposed policy changes in Kenya and South Africa could reduce investment in renewable energy. This is concerning because the growth of renewable energy in both countries has relied on supportive policies, and these new proposals risk undoing that progress.

• However, South Africa has an opportunity. If it increases its ability to produce renewable energy components locally, using its available mineral resources, it could benefit by growing its economy, creating jobs, and strengthening its energy security.

• The recent increase in tariffs in US-China trade could prompt other nations to implement similar measures, jeopardising global trade and production. If China reduces its output as a result, many African countries might be negatively affected. However, if China maintains its production and these tariffs lead to decreased demand from developed nations, China might shift its focus to Africa and offer products at lower prices, potentially benefiting African countries.