Trade in Environmental Goods &
Services
Solar Energy in Kenya
Dr. Moses Ikiara
Kenya Institute for Public Policy Research and Analysis
WTO Workshop, Geneva, Switzerland
September 23 – 25, 2009
Outline
?
Introduction
?
International Outlook: Global Solar Energy Industry
?
Overview of Energy Sector in Kenya
?
Solar Energy in Kenya: Market Outlook and Potential
?
Trade and Production
?
Tariff and Non-Tariff Barriers
?
Policy Recommendations / Options
Introduction
? Presentation looks at Tariff and non-tariff barriers to trade
in solar energy goods and services in Kenya
? Although the country is well endowed with solar energy,
only 5% of rural and 51% of urban areas have electricity
? Thus, great potential for solar energy contribution
? But, more supportive policies and incentives are required
1. Global Solar Energy Industry
? Global Solar energy industry accounts for only 0.1% of energy
demand
? However, over the past 15 years, global production of solar PV
cells has grown at annual average of 25%.
? Germany has limited solar insolation but is the global Solar PV
market leader; with installed capacity of over 5,337 MW in 2008
? Leading players in solar thermal power: US, Spain, China,
France, Italy, Australia, Egypt, Morocco, South Africa, Mexico
? Manufacturing of solar PV cells is dominated by 5 companies:
Sharp Electronics Corporation, Kyocera Solar, BP Solar, Shell
Solar Industries, and Sanyo Electric Company.
Global Solar Energy Industry
? Japan accounts for 50% of the world’s solar-cell production
and exports, followed by the USA and the EU;
? World market for PV modules and systems is currently heavily
influenced by government policies, mainly subsidies, exports
as aid, directed credit
? Tied aid distorts competition in favour of the exporter whose
products are given preference (OECD, 2005).
2. Overview of Energy Sector in Kenya
? Energy consumption more or less equal to production from all
sources.
? Characterized by heavy reliance on biomass, frequent power
outage, low access to modern energy, over-reliance on
hydroelectricity and high dependence on imported oil.
? Renewable energy (RE) considered one of the potential sources.
? Located astride the Equator, Kenya is endowed with vast RE
such as solar, wind, biomass, bio-fuel, geothermal and
hydropower among others.
? Large potential of RE but limited utilization.
? However, interest growing due to unmet electricity demand,
increasing global oil and gas prices & environmental pressure.
Overview of Energy Sector in Kenya
? Modern energy consumption/capita: 84 KgoE
? Electricity consumption/capita: 128 kWh
? National electrification level: 9%
? Rural electrification level: 5%
? Current Total Electricity Production (Hydro, Thermal,
Geothermal, Wind, Solar, Biomass (co-generation): 1245.65 MW
? Distribution of electricity installed capacity: hydro 57.6%; thermal
31.5%; geothermal 10.9%.
? Share of RE in total electricity consumption: 70.31%
? Share of solar energy in total electricity consumption: 0.32%
Overview of Energy Sector in Kenya
? The GoK is promoting RE technologies through a number of
policies and programmes (Sessional Paper No. 4 on Energy
of 2004 and the Energy Act 2006).
? Meeting Kenya’s future energy needs requires a clear, long-
term policy framework which provides incentives.
Energy Source
Potential
Installations
Wind
3 - 10m/s (wind speeds)
300 - 360 Units (0.55MW)
Solar
4 - 6 kWh/m2/day (solar insolation)
3600 kWp
Biomass
38.1 million Tons
38MW
Small hydro
1000 – 1200 MW
28 MW
Geothermal
3000 MW
128 MW
Technical Potential for Renewable Energy Technologies in Kenya, 2003
3. Solar Energy in Kenya
? Kenya has the largest private sector dominated solar PV home
systems in a developing nation, with annual growth rates of 10-
20% in recent years
? Country is the driver of regional trade in solar energy goods
? There are 25 - 40 players (of which 5 are main players) in trade in
solar energy goods and service
? Main products in the market: Solar PV modules; Solar batteries;
solar charge controllers; solar lighting kits (d.c. filament and
fluorescent lights, torches, rechargeable lanterns); solar powered
mobile phones; Solar-powered pumps (d.c. powered submersible
water pumps); Solar-powered fridges; solar cooking ovens
? 200,000 to 300,000 Solar PV home systems currently in use;
Majority are 14-20 Watts panels for domestic usage
? Comprise an installed capacity of 4MW and generates 9GWh of
electricity annually
Solar Energy in Kenya
? Demand for electricity generated from home-based PV
systems is projected to reach 22GWh annually by 2020
? Number of solar water heating units currently in use estimated
at over 140,000 units (equivalent to 19,000 ToE annually)
? Projected demand for solar water heating to grow to 400,000
units by 2020 equivalent to 150,000 ToE.
? Kenya has been able to expand access to poor rural
households through unsubsidized, market-based sales.
? Solar energy is underutilized due to a number of factors –
relative cost of systems; lack of standards
4. Trade & Production
Main Imports and Exports:
? Solar PV modules; Solar batteries; solar charge controllers;
solar lighting kits; Solar-powered water pumps; d.c.-a.c.
power converters; Solar cooking ovens
Import Sources:
? Main sources: mainly, India, Taiwan, China, Australia;
? Others: France, Germany, Hongkong
? 5 leading importers and distributors of solar energy equipment
Export Destinations:
? Main destinations: The greater East and Central African
countries including Southern Sudan, Uganda, Tanzania,
Rwanda, Burundi, Malawi; minimal exports to Somalia due to
insecurity.
Trade & Production
Mean (2004 – 2008)
Number
Number
Number
Number
Number
Number
Number
Units
Short Description
Imports
Production Exports
Consumption
Instantaneous or storage water
heaters, Non-electric - other
[
e.g. Solar Water Heaters]
2,813
-
1,321
1,492
Reciprocating positive displacement
pumps, n.e.s. [
d.c. powered
water pumps]
54,421
-
4,585
49,836
Centrifugal displacement pumps,
n.e.s. [
d.c. powered
submersible water pumps]
64,117
-
1,003
63,114
Static converters [e.g. rectifiers and
inductors
and inverters for
converting dc power to ac
power]
305,995
-
305
305,690
Photovoltaic system controller
[
charge controller for voltage
not exceeding 1000V]
185,171
-
71,058
114,113
Photovoltaic cells, Modules &
Panels
118,322
-
5,414
112,908
Other lead-acid accumulators [
Deep
Discharge (solar) Battery]
173,740
>50,000
111,725
112,015
Trade & Production
Manufacturing:
? Solar PV modules – not being produced locally yet, due to the high
technology and raw materials required
? Solar water heaters: 3 companies producing for domestic and
regional market
? Solar batteries: mainly produced by one company –which also
produces an average of 350,000 lead-acid batteries for motor
vehicle usage
? Charge controllers – produced by a few small and medium
enterprises
? Solar d.c. – a.c. power Inverters: – produced by a few small and
medium enterprises
? Lighting kits – Assembled by a few small and medium enterprises
? The Kenya Bureau of Standards has put in place policy guidelines to
enhance quality standards In the sector
Import Sources and Export Destinations
Solar Energy Product
Key Import Sources
Key Export Destinations
Instantaneous or storage water heaters,
Non-electric – other [
e.g., Solar
water heaters]
Australia; China; Germany; India; Israel; South
Africa; USA; China; France; Japan
Rwanda; Tanzania; Uganda; Burundi
Reciprocating positive displacement
pumps, n.e.s. [
d.c. powered water
pumps]
China; Germany; India; Italy; Japan; Thailand;
UAE; UK; USA
Sudan; Tanzania; Uganda
Centrifugal displacement pumps, n.e.s.
[
d.c. powered submersible water
pumps]
China; Denmark; Germany; India; Italy; Japan;
Malaysia; Netherlands; South Africa;
Taiwan; Thailand; UAE; UK; USA
Sudan; Tanzania; Uganda
Static converters [e.g. rectifiers and
inductors
and inverters for
converting d.c power to a.c power]
Australia; Belgium; Canada; China; France;
Hong Kong; India; Indonesia; Ireland; Italy;
Japan; Netherlands; Norway; Singapore;
South Africa; Taiwan; Thailand; UAE; UK;
USA
Rwanda; Somalia; Sudan; Tanzania;
Uganda; UAE; Burundi
Photovoltaic system controller [
charge
controller for voltage not exceeding
1000V]
Australia; Belgium; Canada; China; Egypt;
France; Germany; India; Israel; Italy;
Japan; Korea; Malaysia; Netherlands;
Taiwan
Rwanda; Somalia; Sudan; Tanzania;
Uganda
Photovoltaic cells, Modules & Panels
Australia; China; Egypt; France; Germany;
Hongkong; India; Israel; Italy; Japan;
Korea; Malaysia; Netherlands; Singapore;
South Africa; Taiwan; UAE; UK; USA
Rwanda; Somalia; Tanzania; Uganda;
Sudan
Other lead-acid accumulators [
Deep
Discharge (solar) Battery]
Belgium; China; Germany; France; Hong Kong;
India; Italy; Japan; Korea; Netherlands;
South Africa; UAE; UK; USA
Somalia; Sudan; Tanzania; Uganda;
UAE; Malawi; Burundi
5. Tariff and Non-Tariff Barriers
? In Kenya, Solar PV panels, solar water heaters and solar pumps are
zero-rated (0% import duty) but attract a 16% Value Added Tax (VAT)
HS Code
Solar Energy Product
Applicable Tariffs
84.19
Instantaneous or storage water heaters, Non-electric - other
[
e.g. Solar Water Heaters]
0% Import Duty; 16% VAT
84.13.50.00
Reciprocating positive displacement pumps, n.e.s. [
d.c. powered
water pumps]
0% Import Duty; 16% VAT
84.13.70.00
Centrifugal displacement pumps, n.e.s. [
d.c. powered
submersible water pumps]
0% Import Duty; 16% VAT
85.04.40.00
Static converters [e.g. rectifiers and inductors
and inverters for
converting dc power to ac power]
0% Import Duty; 16% VAT
85.37.10.00
Photovoltaic system controller [charge controller for voltage not
exceeding 1000V]
10% Import Duty; 16% VAT
85.41.40.10
Photovoltaic cells, Modules & Panels
0% Import Duty; 16% VAT
85.07.20.00
Other lead-acid accumulators [Deep Discharge (solar) Battery]
25% Import Duty; 16% VAT
Kenya Revenue Authority: Import Duties as at June 2009
Non-Tariff Barriers
? Lengthy procedures related to valuation of goods at customs
? Quality of inspection procedures: poor quality solar energy
equipments find their way into the market
? Transiting procedures
? Business licensing and registration
? Immigration procedures:- Obstacles to exporting
labour/services to the region – requires work permit;
requirement to hire/subcontract local persons/labour force
(e.g., in Uganda); Remuneration for services offered in the
countries in the region is subject to taxes in that country;
Bureaucracy at point of entry into the country
? Red-tape
Institutional, Policy and Regulatory Challenges
? Inadequate legislative and planning frameworks governing
energy sub-sectors
? No specific law to regulate the management of renewable
energy sub-sectors; specifically solar energy
? The Energy Regulatory Commission is still young and is not
yet functioning well
? Inadequate credit and financing mechanisms to facilitate
acquisition of solar technology
6. Policy Recommendations
? Introduction of a feed-in tariff (FIT) for Solar Energy; Section
103 of Energy Act No.12 of 2006 provides FIT for Wind,
Biomass & Small-hydro generated Electricity only.
? Elimination of tariffs on PV cells and modules and other solar
energy goods; (is in place but NTBs exist).
? Incentives like reduced VAT.
? Developed countries could offer financial assistance to
purchase renewable energy equipment and to also carry out
R&D.
? Enhancing quality control for imported goods and services
? As part of the fight against pollution, developed countries could
transfer solar technology to countries like Kenya. Double
dividend: fight against poverty.
Asante Sana
Thank You
