Localizing the solar value chain in Kenya?

ABSTRACT

The debate on the benefits of renewable electrification in late industrializing economies has mostly focused on improved electricity access and climate mitigation arguments. The literature pays less attention to understanding the opportunities for sustainable industrialization. This paper contributes to the latter with insights from a case study of Solinc East Africa, a Kenyan solar module manufacturer that has remained in the market, despite intense competition from imports of low-cost solar panels. Drawing on in-depth fieldwork in the solar energy sector in Kenya, we apply a global value chain framework to explore how and why Solinc has been able to sustain its business. Our findings highlight the challenges of localizing solar manufacturing in Kenya and suggest it may only be possible in rare instances. Specifically, a unique combination of circumstances and factors were revealed that enabled Solinc to gain several advantages including (i) initial access to knowledge and materials from upstream linkages; (ii) downstream integration and partnerships with key distributors and customers; (iii) close proximity to customers; and (iv) provision of complementary and increasingly high value-added services. Our findings present a more positive perspective on the localization of related services, which we argue deserves more attention in the sustainable industrialization debate.

KEYWORDS:

• Global value chains
• solar PV manufacturing
• Kenya
• renewable energy
• sustainable industrial development

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 In this paper we use the terms ‘local’ and ‘localisation’ to refer to the location in which various value-adding activities are conducted, rather than the origin of ownership. For instance, a firm located in Kenya is considered a local firm regardless of ownership. In the same way, we view localising value chain activities in terms of where the activities are carried out irrespective of whether the firm is foreign or locally owned.

2 Kaisen is a business philosophy originating in Japan. It centres on continual improvement involving all employees within an organisation and aims to increase performance by eliminating waste and reducing redundancy.

3 Compared to residential customers.

4 Tiers one, two and three are categories used to describe manufacturers that have met certain criteria. Tier one describes suppliers that, among other criteria, have been producing solar cells for five years or more, have fully automated production and a high degree of vertical integration.

5 Procurement involved an import agreement with Trina Solar.