Shedding (sun)light on risks : Perceived risks and access to finance on the off-grid solar market in Kenya

• Main Authors: Svenaeus, Agaton, Rosvall, Max
• Format: Others
• Language: English
• Published: Uppsala universitet, Företagsekonomiska institutionen 2018
• Subjects: Off-grid Market; Renewable Energy Finance; Perceived Risks; Solar Technology; Risk; Social Sciences; Samhällsvetenskap
• Online Access: http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-356339

The market for off-grid solar solutions in Kenya has developed rapidly the recent years. The growth has required capital and access to finance, which has been mainly provided by foreign investors. This thesis examines the perceived risks on the market for off-grid solar solutions in Kenya through a series of interviews with actors engaged in the market. The purpose of the thesis is to investigate the access to capital and highlight the perceived risks that might constrain a continued positive development of the market in Kenya. The findings of this thesis categorize the perceived risks on the market as political, economic, social, technological, legal and environmental (see full report table 2 in section 8 for sub categories). The companies engaged in the market for off-grid solar solutions should be differentiated based on their business model. This since their different value chains entails specific in risks. This study uses two modified value chains to highlight the differences in retail and distribution between the two defined market segments: product and utility. The product segment includes small-scale solar products often referred to as PICO-products and Solar-Home-Systems (SHS), which by being sold on installment now provides basic electricity to a growing number of people in Kenya. The utility segment includes minigrids with solar energy as power supply. This segment is subject to specific regulations regarding installations and operations, which is one of the main contributing factors to the difference in risks compared to the product segment. The other main factor is the way the respective segment distributes and retails their products/electricity. The distribution for the product segment is done by regular land transportation and customer interaction through sales agents, providing basic access to electricity. While the minigrids uses a local distribution grid to provide access to electricity. This leads to specific risks within the categorizes social, technological and legal risk. This study shows that the lack of understanding of the different market segments and their context specific risks, pose a risk to the market reputation and the local actors access to finance. The absence of knowledge about the difference in risks causes generalizations to be done, both from financiers who might place their funding elsewhere, and the customers who might choose other solutions than solar to fulfill their energy needs. The uncertainty of the future development and the position of the national regulations on the market together with the two segments creates barriers for future access to finance. Access that is required to build and boost the market even further.