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New Taxes Could Dim Kenya’s Solar Energy Future

By Seliphar Machoni
Solar energy has been crucial in transforming Kenya's economy and improving the lives of its
citizens.
The country's success in deploying solar energy has made it a world leader in this field,
significantly boosting electricity access in rural areas.
Government support has fostered robust solar companies and installers industry, delivering solar
power even to the most remote and underserved off-grid locations.
In the past four years, off-grid solar companies have distributed over 6 million products, reaching
more than 15 million Kenyans across 3 million households. This remarkable achievement has
significantly boosted Kenya's electrification rate, with over 30% of the progress attributed to off-
grid solar lanterns and solar home systems (KEREA, 2024).
However, this progress is now at risk due to the Finance Bill set to be presented in Parliament
this week. The bill proposes reintroducing Value Added Tax (VAT), which threatens to raise the
retail price of basic solar energy products by 15% or more.
Alongside other suggested taxes, such as an “eco-levy” on rechargeable batteries, some products
could see price hikes of up to 40%. These measures jeopardize Kenya's growing solar industry
and make solar products unaffordable for many low-income and off-grid families and businesses.
If the bill passes, the cost of a basic solar home system for lighting and phone charging—now
common in Kenyan villages and farms—would rise by at least 15%, adding approximately 2,300
shillings to the price of essential energy systems that many families already struggle to afford.
These price hikes could prevent about a quarter of families who currently afford solar energy
from accessing the technology, leaving millions in darkness drawing from data on a similar tax
increase in 2020. This would negatively impact education, livelihoods, health, and well-being for
those without electricity.
The off-grid solar sector has been a major driver of green jobs in Kenya, creating thousands of
office-based jobs and tens of thousands of indirect roles for agents who install, sell, and service
solar kits, according to KEREA.

However, solar companies expect to lay off full-time staff and cancel hiring plans if VAT is
applied to solar products. Many indirect roles, including solar installers, are at risk, endangering
the livelihoods of many in the industry. Over 10,000 green jobs are at risk nationwide,
particularly in rural areas with limited employment opportunities.
GOGLA, a global solar energy association, calculated that adding VAT to solar products would
undermine Kenya’s intended tax revenue generation. Companies in this sector currently
contribute significantly to government revenue, paying over SH 4.5 billion in taxes and levies in
2023 alone. GOGLA highlighted that a reduced supply of solar kits would result in losses of
corporate income taxes, employment taxes, and import duties currently generated by the solar
industry.
Kenya's leadership in off-grid solar is at risk. These proposed changes could destabilize solar
companies, leading to contractions and potential closures, while rural families would suffer.
Additionally, the unintended environmental consequences could lead to a resurgence in the use
of harmful and polluting energy sources, such as kerosene lamps and diesel generators,
counteracting progress towards a cleaner, sustainable future.
This week's decision by policymakers carries profound implications for Kenya's transition to
green energy, the accessibility of reliable electricity for families, and the nation’s economic
trajectory.

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