ELECTRICITY COSTS

Why solar power is cheaper than grid

When you use grid power from a monopoly distributor you support a gargantuan edifice.

In Summary

• Heck, you even cushion this edifice from exchange rates and inflation.

Workers fix power lines.
Workers fix power lines.
Image: FILE

When Mama Sofi came to my office, she seemed to me like any walk-in client interested in a solar appliance. Her nonchalance and calm demeanour did not attract the attention of most client service officers in the showroom.

When I met her, her calmness was instantly replaced with a monologue of one angry woman pissed off by a system. I was already preparing a standard response to a client with a faulty solar system and when she paused, I asked her what her system code was. Mama Sofi explained she was not our client, she was complaining about her prepaid power from the grid.

"I loaded Sh500 token and it lasted for only three days, before it used to last for 10 days. I feel I am being robbed. In fact, I have taken measures to minimise my energy usage, but the cost keep going up in spite and despite."

Mama Sofi was literally making a sales pitch on my behalf, as a marketer. I needed to give her more information on alternative energy source and debunk the myths surrounding the acquisition of a solar system and the inefficiency of the grid system.

When you use grid power from a monopoly distributor you support a gargantuan edifice that consists of more than 10 companies and organisations. Key among them are government (through VAT), fuel importers, thermal independent power suppliers, GDC, KenGen, Ketraco, ERC, Rural Electrification, Warma, Kenya Power and a gamut of Power contractors.

Heck, you even cushion this edifice from exchange rates and inflation. For your Sh23 per kilowatt-hour, all these organisations have tentacles sucking it.

The future of energy is renewable. The government deserves praise for working on this through various energy mix models (geothermal, wind power, solar plants), but for Mama Sofi, the trickle-down is not being felt. Her recourse was to take a solar system that covers her energy needs.

Monopolies by structure and system are the only entities that can make what economists call supernormal profits. A businessperson can occasionally make losses, but not so with monopolies. They pass on inefficiencies in the system to the consumer; that’s why they have the audacity to charge you on inflation and foreign exchange fluctuations when these affect you as a consumer as well.

For every Sh100 you pay for power your token worth is about Sh70, the rest is gobbled up by the government (Sh13), fuel levy (Sh12) and a plethora of other levies. Sh70 affords you three kilowatt units of power. If you happen to have a fridge (65W/h), a TV (100W/h), a music system (50W/h), five light points (energy saving) and a laptop, you use approximately three kilowatts in a day. So we can say you spend Sh100 for grid energy in a day. 

These are the appliances that Mama Sofi had and it finally made sense how Sh500 could last only three days, everything held constant. The cost of power is definitely going to rise, come rain or shine. Independent power producers who use thermal diesel generators are paid when producing and even when on stand by, they are paid for their idle capacity.

The future of energy is renewable. The government deserves praise for working on this through various energy mix models (geothermal, wind power, solar plants), but for Mama Sofi, the trickle-down is not being felt. Her recourse was to take a solar system that covers her energy needs.

The economic cost per unit of energy produced by an efficient solar system is conservatively Sh2 per KWh (Total cost of a 1-kW the system divided by total KWh produced by the system in its lifetime).

The challenge has always been the upfront cost of system acquisition. But this is being addressed by innovative financial engineering where financial institutions and saccos design packages for a client to pay in instalments.

Mama Sofi took a 1-kilowatt system, she will be getting her power at Sh6 per per day for the next 25 years, with no blackouts.